Canada's aerospace industry just posted its latest scorecard, and the numbers point to a sector leaning harder into research and development than almost any other part of Canadian manufacturing.
The 2026 State of Canada's Aerospace Industry Report, released jointly by the Aerospace Industries Association of Canada (AIAC) and Innovation, Science and Economic Development Canada (ISED), shows the industry contributed $33.1 billion to GDP and supported 218,700 jobs in 2025. Exports reached $28.2 billion across more than 170 countries, with over half of manufacturing exports tied to global supply chains.
The standout figure for anyone building or funding aerospace technology is that the industry invested more than $1.8 billion in R&D last year, keeping aerospace at the top of Canadian manufacturing for R&D intensity at 4.5 times the manufacturing average, and 2.2 times more STEM-intensive than the average Canadian manufacturing sector.
A Sector Doubling Down on Innovation, and on Defence
While Canada holds its position among the top five countries globally in civil flight simulators, engines, and aircraft, the report points to a deliberate push to diversify into the defence aerospace segment. That shift lines up with a much bigger federal commitment in the form of Canada's Defence Industrial Strategy, backed by $6.6 billion over five years, which is directing new funding toward drone technology, aerospace platforms, and dual-use research through programs like the National Research Council's Drone Innovation Hub and its Industrial Research Assistance Program.
AIAC President and CEO Mike Mueller put it plainly: The industry's aerospace advantage "is not something to be taken for granted," and continued momentum depends on sustained investment in R&D, talent, and a coordinated national strategy.
For emerging aerospace and defence technology companies, that's the opportunity hiding in the headline numbers. Whether it's propulsion systems, avionics, autonomous flight, materials science, or manufacturing process innovation, the work driving Canada's aerospace R&D intensity is exactly the kind of technical, uncertain, systematic experimentation that qualifies for Canada's SR&ED tax credit program.
Why SR&ED Matters More for Aerospace Right Now
Aerospace R&D is capital-intensive by nature. Prototyping, test rigs, tooling, and specialized manufacturing equipment are core to how aerospace innovators validate new technology, and until recently, capital expenditures had been excluded from SR&ED eligibility entirely.
That changed with the 2026 SR&ED Enhancements, passed under Bill C-15. For property acquired after December 15, 2024, capital expenditure eligibility has been restored, a meaningful shift for a sector where equipment costs are often the biggest line item in an R&D program. Alongside that change, the federal government:
- Doubled the expenditure limit to $6 million for eligible Canadian-controlled private corporations (CCPCs)
- Increased the refundable credit ceiling to up to $2.1 million annually for eligible CCPCs
- Widened the phase-out thresholds to $15 million to $75 million in taxable capital, extending access to more scaling companies
- Introduced a new gross revenue election and expanded access for excluded CCPCs and public corporations
For an aerospace startup or scale-up investing in flight testing infrastructure, propulsion prototypes, or new materials qualification, that combination of restored capital eligibility and a higher refundable ceiling can meaningfully change the math on how much of that R&D spend comes back as non-dilutive funding.
SR&ED and Defence Funding: Two Different Programs, One Bigger Picture
It's worth being clear that SR&ED and the federal Defence Industrial Strategy programs referenced above, including NRC IRAP's Defence Industry Assist stream, are separate funding mechanisms with their own eligibility rules, and they aren't automatically stackable in the same way provincial programs like IDMTC are designed to complement SR&ED. What is accurate, and worth emphasizing, is that both tracks emphasize Canada is putting real money behind aerospace and defence innovation, and companies doing qualifying technical work have more than one door to walk through for non-dilutive capital.
The Takeaway for Aerospace and Defence Innovators
The 2026 State of Canada's Aerospace Industry Report tells a growth story, with rising R&D intensity, a $28.2 billion export engine, and a sector actively diversifying into defence with government backing behind it. For the CTOs and CFOs building the next generation of Canadian aerospace technology, the R&D work already happening on your shop floor, in your test labs, and in your engineering sprints may already qualify for one of the most significant non-dilutive funding tools available in Canada, and the 2026 SR&ED Enhancements just made that funding more accessible to capital-intensive sectors like aerospace.
Boast has helped more than 2,000 companies across North America secure over $900 million in R&D tax credits, with a 100% audit defense commitment on every claim. If your team is investing in aerospace or defence innovation, it's worth understanding exactly how much of that work already qualifies.
Talk to a Boast R&D tax credit specialist about your aerospace innovation work.
