By 1959, five Arrows had been successfully test flown and the Iroquois-equipped prototype was being readied for its expected world speed record-breaking first flight. Avro had also managed to increase the range of the Arrow and reduce its cost to $7.8 million each by redesigning it to accommodate a US radar fire-control and missile system. However, though there was no doubt that the superb Arrow was state-of-the-art, Avro was forced to fight a losing battle against critics in and out of government who declared that the missile rendered the manned interceptor obsolete. Meanwhile Pearkes made a last-ditch attempt to sell the Arrow to Britain and the US - and failed.
On February 20, 1959, Diefenbaker announced the immediate termination of the Arrow and Iroquois programmes and his intention to acquire nuclear warheads for the Bomarc-B and other weapons systems. Cancellation charges brought the total development costs of the Arrow programme to $470 million. In the furore that followed nationalists and the Opposition publlicly vilified the Diefenbaker government for its handling of the situation; privately Howe admitted that he would have done the same, only earlier. The CSC were disturbed by Diefenbaker's reliance on military rather than economic arguments to justify the cancellation - and that there was only a vague promise of replacement interceptors for the RCAF. Avro and Orenda, having done little to prepare for this contingency, were ruined. Top management personnel resigned, and over 14,000 highly skilled employees were fired on "Black Friday," largely leaving for jobs with British or US companies with a number making an invaluable contribution to the US space programme. In 1962, A.V. Roe Canada Limited was renamed Hawker-Siddeley Canada Limited: the Malton facilities were eventually bought by the US McDonnell-Douglas Corporation.