foreign buyers; and with weakened offshore buying power, Canadians with money are forced to spend it at home. Life isn't all that bad.

Bill Clinton and Jean Chrétien, meanwhile, are faced with the potential dilemma of a rehabilitated Lucien Bouchard, basking in tender media sympathy, making political hay out of a meeting with the U.S. President when he visits Canada later in the month. After all, Lucien is Leader of Her Majesty's Official Opposition, whatever that means this week, and he is entitled by tradition to have a bull session with the U.S. Prez. But he is also a crusader for a busted-up Canada. Gosh. If Lucien does meet Billy does that mean we'll get a visit from peacebrokering envoy Jimmy Carter in a few months? Can you just see the retired Democrat doing shuttle diplomacy between Ottawa and Quebec City? How would Jimmy do as a marriage counsellor? This could be fun.

And speaking of Bill Clinton, that dauntless Democratic loner in the White House is surrounded by whooping and howling Republicans who are circling Billy's covered wagon as the U.S. budget debate season opens. Budgets for fiscal 1996, commencing October 1 of this year, are currently in the formative stages. Defence opens for discussion at $246 billion, but an uncommon post-Cold War phenomena has taken shape. The Republican (hawk) lawmakers want to increase defence spending, some say as high as $10 billion. Five is a more likely occurrence and the extra will go directly to procurement. The field is still much too hazy to decide what programmes will be favoured. Helicopter carriers are a looming possibility to boost the U.S. Marines rapid response capability and as a place to park V-22 Ospreys which are a strong bet for a healthy production future. Also don't be surprised to see Ronnie Reagan's `Star Wars' come alive with renewed interest in ballistic missile defences. U.S. intelligence is eyeing countries like Iran carefully, noting with thinly veiled alarm that the suggestion of a sudden, unexpected missile attack against continental U.S.A. is not an outrageous concept.

And that's how the news was shaping up at press time this week. -- Micheal J. O'Brien

PM REFUSES TO ACCEPT CDS RESIGNATION

Following the announcement that the Cana

Canada's Aerospace & Defence Weekly

Volume 9, Number 5 February 8, 1995


Comment:

`Nice to hear Maggie was in town at the start of this week. Thatcher's carefully worded potshot at Quebec separatists raised a few titters from a jam-packed audience at Toronto's slick Roy Thompson Hall. She had more than that to say, most of which was worth the price of admission, and then some.

The U.N. has failed to resolve recent crises around the globe, noted Thatcher. She believes that Canada, the U.S. and Britain have a responsibility as the guarantors of liberty in the next century. She may be right but we hope membership in the `liberty guarantor' team doesn't cost anything. We `ordinary-Canadian' taxpayers have big municipal, regional, provincial and federal governments to fund and can't afford them joining any more clubs.

Speaking of clubs, the CDS has cancelled the generals' annual Florida Golf conference after hearing that 25 sailors at CFB Esquimalt are on the dole to supplement their paltry ABS pay. Too bad. The generals likely did a better job of international public relations than any of our politicians. As for the 25 sailors, have you ever known one to turn down anything that was free?

Jacques Parizeau is also in the news with his travelling road show touring Quebec and selling separation, whatever that means this week. The more he opens his mouth, the lower the dollar goes. And the lower the dollar goes the better our products look to

Publisher and Editor In Chief: Micheal J. O'Brien

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Patrick McManus (Halifax)

William Kane (Washington DC)

John Reed (London, England)

Moshe Karem (Jerusalem, Israel)

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dian Airborne Regiment would be disbanded (See The Wednesday Report, January 25, 1995) there were some suggestions in the general media that the Chief of the Defence Staff, General John de Chastelain should resign on the grounds that his recommendation to keep the Regiment had been overruled. On January 31, General de Chastelain submitted his resignation, but Prime Minister Jean Chrétien refused to accept it saying that he had every confidence in the CDS.

MND VISITS WASHINGTON

David Collenette, Minister of National Defence, visited Washington last week to meet with his U.S. counterpart, Defence Secretary William Perry. Collenette was particularly concerned about current efforts of the U.S. Congress to reduce that nation's financial support of United Nations operations. Last month it was decided to cut the U.S. share of the U.N. peacekeeping budget from 31.7 percent to 25 percent. The Republican dominated House of Representatives is now considering further cuts that would reduce the U.N. peacekeeping budget by one-third. Collenette spoke with several Republican leaders about his concerns.

RCD EVACUATE PATIENTS TO SARAJEVO HOSPITAL

The weather in Bosnia over the last week in January was bad and while it tended to restrict military action it also prevented the air evacuation of 200 civilian patients from the Bosnian Muslim enclave at Gorazde. As a result a small convoy from the Royal Canadian Dragoons, consisting of four Bison ambulances, two AVGPs, a recovery vehicle and a British U.N. guide made the journey through many road blocks, via Sarajevo to Gorazde on January 31. Twenty-eight chronically ill civilian patients were successfully transported to hospital in Sarajevo in the day long operation nicknamed "Good Samaritan".

INTERNAL REPORT EXPOSES POVERTY IN THE RANKS

Last December, the Deputy Chief of Staff Personnel at Headquarters Land Forces Command, Colonel George Oehring, prepared a report on the state of morale in the command. That report, which cited instances of soldiers being forced to accept second jobs to make financial ends meet, was obtained by the media late in January and excerpts from it were published. It was followed by revelations that junior members of other branches of the service were also experiencing financial difficulties, particularly in such high housing cost areas as Victoria B.C., where some serving members were reported to be accepting welfare from local agencies.

One of the problems faced by CF members stems from the fact that the Department of National Defence has continued to raise the cost of married quarters while at the same time freezing the rates of pay. As a matter of policy, the charges for married quarters are tied to local housing costs whereas rates of pay are calculated on a force-wide basis.

HMCS PROVIDER TO GET REFIT

Although it was scheduled to be paid off in 1996, HMCS Provider (AOR 508) was given a new lease on life in the 1994 defence budget. Now the supply ship is about to go into dry dock in British Columbia for work on its exterior. The second phase of refit will take place between November 1995 and March 1996 at the Ship Repair Unit Pacific. Provider was commissioned in 1963 and this refit will extend its life past the year 2000.

NEW APPOINTMENTS TO THE ORDER OF MILITARY MERIT

Fifty-four members of the Canadian Forces have been appointed to the Order of Military Merit by His Excellency the Right Honourable Ramon John Hnatyshyn, Governor General, Chancellor of The Order and Commander-in-Chief of the Canadian Forces. The Order, which recognizes meritorious service and devotion to duty, has three grades of membership: Commander (CMM), Officer (OMM) and Member (MMM).The new appointments include three Commanders, sixteen Officers and thirty-five Members.

MARCOM TO GET NEW CHIEF

Chief Petty Officer 1st Class Terry Meloche will be appointed Maritime Command Chief Petty Officer this summer replacing Chief Petty Officer 1st Class "Buster" Brown who is retiring. CPO 1 Meloche is now serving as Chief Petty Officer, Maritime Forces Atlantic.

BOEING ADJUSTS FORECASTS TO `SOFT' AIRLINE MARKET

This year Boeing's total employment is expected to decrease by approximately 7,000, with a portion of the decline attributed to reduction of 737 and 767 production rates, accommodating recent changes in customer requirements.


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"These job reductions are higher than we anticipated just a few weeks ago," said Frank Shrontz, Boeing chairman and chief executive officer. "Since the beginning of the year, several customers came to us asking to postpone airplane deliveries because of the continued softness of the airline industry. Following a series of discussions with these customers, we decided yesterday to reduce production rates on the 737 and 767 airplanes."

As a result of the decision, production of the 737 will decline from the current rate of 8.5 airplanes per month to 7 per month starting in November of this year.

Production of the 767 will continue to increase, as the company planned, to the rate of 4 per month in April. Beginning in December 1995, however, the 767 production rate will decrease to 3.5 airplanes per month.

Based on Boeings current market information, Boeing also is planning to increase production of the 747 from today's rate of 2 aircraft per month to 3 per month in the second half of 1996.

These production rates, combined with previously planned decreases in company employment, will result in approximately 6,500 jobs being eliminated from the company's operations in Washington state this year. Total employment at the Helicopters Division in the Philadelphia area will be reduced by approximately 800 jobs, while employment in Wichita, Kansas is expected to decline by approximately 500.

Employment at other Boeing locations is expected to increase by approximately 800. Much of the growth at these other locations is associated with Boeing receiving a contract to supply communication support to NASA, work on the Space Station and the recent acquisition of Litton Precision Gear of Chicago by a Boeing subsidiary.

Total Boeing employment is made up of Boeing employees, employees at Boeing subsidiaries as well as contract labour.

The company's 1995 business plans will require some hiring of individuals with special skills even while Boeing is reducing jobs in other areas. "We will hire from outside the company only if we cannot fill these special jobs from inside the company, recall laid-off employees or retrain existing employees to meet our needs," Shrontz said.

The total Boeing employment for January 1, 1995 was 117,331 and the projected change by December 31, 1995 is minus 7,000.

JOINT VENTURE CONTRACT AWARDED FOR NORTH WARNING SYSTEM

A $288 million contract has been awarded to the joint venture of Frontec Logistics Corporation of Edmonton, and partner firm Pan Arctic Inuit Logistics Corporation of Yellowknife. The contract is for the operation and maintenance of the air defence surveillance system. The cost of the project is shared between Canada and the United States.

The North Warning System (NWS) consists of a chain of radar sites across the Yukon, Northwest Territories and down the east coast of Labrador.

In announcing the contract, Defence Minister David Collenette observed that, "The joint venture allows Canada to maintain the integrity of this vital defence system. The network of 47 radars will continue to protect Canada's sovereignty by providing surveillance of North American air space. The system also supports non-military activities such as monitoring of commercial air traffic, weather and atmospheric environment reporting, drug interdiction and search and rescue support."

ROCKWELL QUARTERLY DIVIDEND ($U.S.)

Rockwell International Corporation's board of directors last Wednesday declared quarterly dividends on the company's common and preferred stock. The board declared a quarterly dividend of 27 cents per share on both the common and the Class A common stock, payable March 6, 1995, to shareowners of record on Feb. 13, 1995. In addition, the board declared regular quarterly dividends of $1.1875 per share of Series A preferred stock and $.3375 per share of Series B preferred stock. Both preferred dividends are payable April 1, 1995, to shareowners of record March 1, 1995.

LOCKHEED's 1994 RESULTS ($U.S.)

As a dedicated defence industrial, Lockheed Corporation is a company to watch in the 1990s. The 13-billion giant has posted a significant five percent increase in earnings in 1994 on unchanged revenues.

Early this week Lockheed reported net earnings for 1994 of $445 million, or $7 a share, a 5-percent increase over 1993's earnings of $422 million, or $6.70 a share. Revenues in 1994 totalled $13.1 billion, unchanged


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year-over-year. Programme profits rose to $855 million from $844 million in 1993.

For the fourth quarter, Lockheed's net earnings were $137 million, or $2.14 a share, compared with $135 million, or $2.13 a share, in the same period of 1993. Included in the fourth-quarter results was a $25 million charge relating to a recent settlement of a federal indictment, partially offset by adjustment of previously provided income taxes. Fourth-quarter 1994 sales of $3.8 billion were 3 percent above 1993's $3.7 billion.

Daniel M. Tellep, chairman and chief executive officer, said in a release that 1994 was "another year of improved financial and operating performance" and significant achievements.

"We had solid profitability in our core defence and NASA programmes," Tellep added. "In addition, our commercial electronics' businesses showed dramatic improvement year-over-year. Significantly, we generated about $480 million of free cash flow before dividends, despite a $300 million federal tax payment for deferred taxes made in the fourth quarter.

"This excellent cash performance reflects our efforts to reduce capital expenditures and working capital requirements," he noted.

Lockheed's debt-to-capital ratio (net of cash balances of $452 million) was 35 percent at the end of 1994, down from 42 percent a year earlier.

In announcing the financial results from 1994, Tellep said the year reflected many significant programme achievements which strengthened the company's long-term earnings potential.

Highlights of the year include: 1) Singapore and Turkey placing orders for a total of 58 Lockheed F-16s. The number of firm orders for the multirole fighter was 487 at year-end 1994, apparently the largest backlog of any military aircraft programme in the world.

2) The Lockheed C-130J passed its critical design review and was selected by the United Kingdom Royal Air Force as the replacement transport for earlier-generation C-130s in a contract award valued at $1.25 billion. Deliveries will begin in 1996.

3) The U.S. Navy announced its plans to continue production of the Lockheed Trident II missiles through 2004 as it expands plans to retrofit the submarine fleet with the advanced ballistic missile.

4) Lockheed successfully launched the first Milstar military communications satellite, and it is performing all of its mission requirements. Lockheed received orders for two additional satellites in an Air Force contract worth $1.3 billion.

5) Lockheed received the first U.S. government license to commercially market one-meter, high-resolution images of Earth taken from space. A new company, Space Imaging Inc., was formed to enter the emerging commercial remote sensing market.

6) The first of eight P-3 maritime patrol aircraft to be delivered to South Korea in 1995 rolled off the assembly line and was test flown.

7) Lockheed and Martin Marietta Corporation announced on August 30, 1994 that their respective boards of directors had approved a definitive agreement to combine the two corporations as a merger of equals through a tax-free exchange of stock into new Lockheed Martin Corp. stock. On January 11, the U.S. Federal Trade Commission (FTC) announced it would not challenge the merger based upon a consent order reached between the FTC and Lockheed, Martin Marietta and Lockheed Martin Corp. Shareholders of the two companies are expected to vote on the merger next month. The transaction will close immediately upon shareholder approval.

At year-end, Lockheed's total backlog was $25.6 billion, down 11 percent from $28.9 billion at year-end 1993. Contributing to the backlog reduction was delivery of 146 F-16s during 1994. Funded sign-ups of new and follow-on orders were $12.1 billion in 1994, compared with $10.2 billion (excluding the effect of the Fort Worth Co. acquisition) in 1993. Funded backlog decreased to $12.2 billion at year-end 1994, from $13.2 billion the previous year.

The percentage of non-defence business was 36 percent in 1994. Included in this amount, sales to foreign governments accounted for 16 percent of total revenues. At the end of 1994, total Lockheed employment was 82, 500, down from 83,500 at the end of 1993. The 1994 number includes approximately 7,000 employees which joined Lockheed in the fourth quarter with the start of the INEL contract.

Lockheed's board of directors Monday declared a quarterly dividend of .57 a share to holders of the corporation's common stock. The dividend is payable March 6 to shareholders of record Feb. 20, 1995.

RR TRENT 700 GRANTED ETOPS

The Rolls-Royce Trent 700-powered Airbus A330 has been granted 90 minutes ETOPS (extended twin engine operations) clearance by the European Joint Aviation Authorities.

Last week, as reported in The Wednesday Report, the more powerful Trent 800 for the Boeing 777 airliner was awarded its airworthiness ticket by both the JAA and the U.S. Federal Aviation Administration. Certification at 90,000 pounds of thrust makes the Trent 800 the most powerful engine cleared for flight.


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The Trent 700 is the first Rolls-Royce engine to gain ETOPS approval ahead of airline operations, giving operators of the new Airbus twinjet and its 72,000 pound thrust Rolls-Royce powerplants the option of selecting more direct, cost saving over-water routes up to an hour and a half away from a diversionary airfield.

ETOPS clearance, which covers the event of a single engine failure, comes after the Trent 700 demonstrated required levels of engine reliability during both ground testing and in more than 500 hours of flight tests.

Cathay Pacific, which will begin passenger carrying services with the Trent-powered A330 within the next month, completed a 120 hour route proving exercise in the Asia Pacific region at the end of last year with no technical delays.

Factors taken into consideration by the airworthiness authorities included successful completion by the Trent of 2,000 simulated take-off and landing cycles and evidence of in-service reliability levels demonstrated by members of the RB221 engine family from which the Trent is derived. RB211-535E4 and -52411 engines both have the maximum 180 minute ETOPS rating.

COMAIR SAYS IT'S "THE QUIETEST COMMERCIAL JET IN THE WORLD"

In announcing its recent decision to initiate `jet service' between Manchester, New Hampshire and the Delta/COMAIR hub in Cincinnati, COMAIR's public relations gurus heaped hefty accolades upon "The Canadair Jet".

"The Canadair Jet," says COMAIR, "manufactured by the Canadair Group of Bombardier, Inc. of Canada, can cruise at 530 mph and up to 41,000 feet. This good neighbour jet aircraft — the quietest commercial jet in the world — is powered by two General Electric CF 34-3A1 turbofan engines."

COMAIR is one of the largest and most profitable airlines in the United States employing more than 2,500 aviation personnel. The airline operates 84 aircraft, including the Canadair Regional Jet which it intends to operate on the Manchester service running two daily flights from Manchester departing at 6:05 a.m. and 3:45 p.m. (You might want to let your travel department/agent know this if you are ever booking business travel in that region.)

LSI LOGIC SHELVES PLANS FOR LSI CANADA BUYOUT

California-based LSI Logic Corporation, which had announced in November 1994 its intention to privatize its LSI Canada subsidiary, suspended those plans last Friday.

The corporation, which owns 55 percent of LSI Canada, had previously said it expressed its desire to acquire the 11 million shares of LSI Canada it does not already own for approximately $3.30 per share.

The valuation information generated from an independent Canadian investment bank that was retained by the special committee of the board of directors of LSI Canada provides a range that the corpora

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tion found unacceptable.

"Based upon the valuation range that has been communicated to us, LSI Logic Corporation has decided to shelve any plans to privatize LSI Canada because of substantial differences of opinion regarding the value of LSI Canada shares," said Wilfred J. Corrigan, chairman and chief executive of LSI Logic Corp. "The corporation continues to believe its $3.30 (Canadian) proposed price is fair for shareholders."

LSI Logic Corp. is a Fortune 500 supplier of high-performance semiconductors, with operations worldwide. The company enables customers to build complete systems on a single chip with its `CoreWare' methodology, thereby increasing performance, lowering system costs and accelerating time to market.

SUPERGUN STILL ALIVE

Here's one you may not have heard. China has just leaked news of its 22-meter long supergun prototype, prompting rumours that Gerry Bull's legacy may not have died with Project Babylon, the Iraq fiasco. The contraption is 3.35 inches in diameter (85mm) and 72 feet long. In April 1982, Gerry Bull — the infamous Canadian murdered in Belgium in 1990 by assassins unknown — and his company Space Research Corporation, began an intensive three-year work detail for China, primarily related to the 155mm and 45 calibre artillery pieces, said to be remarkably accurate. Bull's dealings with the Chinese and the Iraqis overlapped chronologically. His zeal for self-importance likely spilled much of the Bull/Iraqi concepts for an alternative to ballistic missile launch vehicles into fertile Chinese minds. Today it appears possible the Chinese are developing a supergun product for sale to Third World customers, something Bejing is particularly good at doing. What its purpose is we don't know: high altitude launch device or specialized artillery, it is nonetheless an offspring of Gerry Bull's work.

SHL BAGS U.K. OUTSOURCING CONTRACT

SHL Systemshouse Inc. has received a three-year, contract by The Student Loans Company Limited of the United Kingdom to supply and provide computer outsourcing services.

"This contract win is a major step forward for us in the U.K. [market]," said Dennis B. Maloney, president, SHL Outsourcing Services. "This and other recent new business are fueling our growing momentum in the U.K."

The Student Loans Company Limited, wholly-owned by the U.K. government, was established in 1990 to respond to a need to provide more funding for students. Services include loan qualification, loan repayment and collections.

CALENDAR

February 15 — The winter meeting of the Industrial Benefits Association of Canada will be held at the Ottawa Congress Centre, 55 Colonel By Drive, Ottawa, Ontario. The meeting will deal with subjects relating to Canadian industrial regional benefit policy, international offset and government reorganization. The invited guest speaker is the Honourable John Manley, Minister, Industry Canada. The meeting is open to all who wish to attend, however pre-registration is a requirement. For further information contact Bob Brown at 1538 Featherstone Drive, Ottawa, K1H-6P2, telephone: 613-733-0704 or telefax: 813-945-3367.

August 9-13 — Airshow Canada's 1995 international aviation & aerospace tradeshow will be held at Abbotsford in British Columbia. The event incorporates the 1995 CBAA (Canadian Business Aircraft Association) trade show and aircraft display. For further information contact Airshow Canada at P.O. Box 6, Abbotsford, BC, Canada, V2S 4N9. Telephone: 604-852-4600. Telefax: 604-852-3704.

April 17-18, 1996 — AFCEA has announced Technet Canada '96, presented jointly by AFCEA Canada (Armed Forces Communication and Electronics Association) and the Ottawa Chapter, to be held at the Ottawa Congress Centre. The event will provide opportunities for exhibitors from within the information community to showcase their products and services in the fields of communications, electronics and intelligence. To book show space, call AFCEA's `show office' at 613-594-8788 or fax 613-236-4351.


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