Launch of New Horizons Aviation Report

Aviation has always captured the imagination. Even non-aviation people can be excited by warbirds at an airshow, the drama of big jets, or the amazing performance of helicopters.

As a business, aviation is equally exciting. The report I am releasing today details just how important the aviation industry is to New Zealand, and the prospects that it has. This year, aviation is responsible for $9.7 billion of revenue. More importantly, $3.8 billion of that amount is export revenue.

Equally impressive has been the growth of the industry over the past five years. You might think that aviation would have been hard-hit by the global economic downturn. In fact, total revenue has gone up by $3 billion in five years. Export revenue has increased by a billion dollars.

Where does this revenue come from? Airline operations are by far the largest contributor, making up nearly 60%. By contrast, sales of aircraft made here in New Zealand were much smaller, at $50 million. However, two-thirds of that was exports. Services, maintenance and repairs and supporting industries such as airport machinery were all significant export contributors.

The report has a mass of information. More importantly, it identifies aviation as having considerable growth prospects.

New Zealand is an aviation-minded country. Most New Zealanders have flown. We see aircraft in the skies around us. Aviation also appeals to the innovative mind of many local inventors. From topdressing to microlights, New Zealand has been at the forefront of many aviation developments.

But innovation isn't the only pathway to success. Aviation is an incredibly demanding industry. Safety standards are high. The regulatory environment is rigorous. Many customers are deeply conservative. They trust the tried and tested products of the world's major suppliers. Aviation has probably shattered more business dreams than any other sector.

Where, then, should New Zealand look for further success? Clearly we want our biggest businesses keep expanding. Air New Zealand has been an impressive performer. They have continued to lead with passenger-focused innovations such as skybeds. They are pioneering environmentally friendly practices. They have also diversified through engineering services and cabin installations. All of this has kept them growing at a time when many major carriers have faltered.

We have also been very successful in niche areas. The TIN 100 group comprises the majority of our hi-tech manufacturing and service industries. In the top twenty of the current report is Glidepath, who manufactures airport baggage handling and security systems in Auckland. They have installed equipment in major airports from South Africa to the Bahamas - and have a turnover of well over $100 million.

Further down the country, in Hamilton, Pacific Aerospace makes their world class PAC 750 XSTOL aircraft. This aircraft has unbelievable performance, and has recently made a big impact on the US military. We want to back that impact with a bulging order book.

Last year, from Mercury Island, Peter Beck and his Rocket Lab team put a rocket into the fringe of space. Not only did they achieve this - they actually did it on the day they said they would. It's hard to imagine that we actually have real "rocket scientists" in New Zealand. But we do.

These are just a few of our success stories. This report sets out what our aviation industry does, and where it does it, in considerable detail. It is proof positive that there is a solid future for aviation.

The next steps are important. What will be the catalysts for step-change growth, rather than incremental increase? What should industry do? What should Government do?

I want to tell you what I am doing as the soon-to-be "Minister of Science and Innovation".

This has been a big year for business-facing research support. This year in the Budget we announced $234 million of new funding over four years aimed squarely at building business growth through research and innovation. It was the biggest amount of new spending outside health and education.

The major initiatives are very simple - deliberately so.

First, there are the new Technology Development Grants. These will equal 20% of the R&D budgets of the most research-intensive companies in New Zealand, like those found in the TIN 100 group. The money is not tagged, because it goes to companies with a proven track record. Basically, it lifts their research spend. If they had five R&D projects running, they can now have seven. It's a three-year package, so compliance is kept down.

Second, we are introducing technology vouchers. These are co-funded 50/50 by the company. They are targeted at small and medium companies that do not have their own in-house research capability, but have a specific R&D project. The vouchers, which may typically be worth $200,000, will enable them to purchase R&D services from a research supplier - a CRI, university, ITP or private research provider.

We will also continue the current Tech NZ project-focused scheme. The name may change, but the intent will be similar. This is for sharply-focused research with a clear pathway to market. Grants vary in size, and are evaluated against the opportunity, the research and management expertise of the applicant, and their ability to successfully commercialise the project.

This is not all. We have also made funding available to support commercialisation of research within the system. The big institutions and CRIs have a wealth of knowledge and expertise that is under-utilised because it is not known. We want the research providers to work together and create a simple and accessible means for businesses to find the research answers to their business questions.

All of this will be introduced this year. We will look at what works best, and ensure that funding is put to where there is the most demand and the biggest impact.

We will also be analysing the results. We fund business-facing research specifically to grow our economy through innovative exports. I believe that the measures have put in place will deliver results. The best guarantee of more support is cast-iron proof that investing in innovation pays off in both the short and long term.

The research in the New Horizons report confirms the role that aviation can play in economic growth. It produces high-value products and services, and provides high-value jobs. This is exactly where this Government sees New Zealand's future.

In particular, the report identifies the need for an "NZ Inc" approach. Across my own portfolio responsibilities of research, defence and associate economic development I am promoting the benefits of getting in behind our innovative companies and supporting their expansion.

This is important. Often the first question a potential customer will ask is "Is this being used in your own country?" Our aviation industry produces many excellent products that have applications here in New Zealand with both civilian users and with the RNZAF. The endorsement of products and services by our own users can reap huge benefits internationally.

The report sets out the potential for the years ahead. I am confident that this industry can meet the challenge of the marketplace and build on its already impressive growth in the years ahead.