Pilot Training Industry Perspective: CAE Quarter Earnings Review

Pilot Training Industry Perspective: CAE Quarter Earnings Review

Global Pilot Training leader and publicly listed CAE released its Financial Year Q1 2021 results (for the period ending June 30, 2020) on the 12th of August. The information released provides the wider pilot training industry a good overview of how CAE has been affected by the global pandemic and CAE management's view of the industry trends moving forward.

Key points of interest were as follows:

  • 48% drop in civil training revenues compared to the same quarter last year
  • 33% average training center utilization for the quarter, this has now increased to around 40%
  • At the peak of the global lockdown more than half of the training centers had suspended operations
  • CAE delivered two full flight simulators (compared with 5 previously)
  • $193.5mn training contracts signed including:
    • 5 year training agreement with Boeing to support Boeing's ab initio pilot development program
    • 4 year training agreement with Alitalia
    • 5 year training agreement with Wamos Air
    • 5 year training agreement with SC Aviation
    • 2 year business aviation training agreement with Air Hamburg
  • CAE will consolidate some facilities where there is overlaps (not exiting any market but consolidating to create larger centers to drive efficiencies)
  • Will relocate several training assets to optimize utilization (around 20)
  • Hardest hit region - Europe with North America performing the best
  • CAE's CEO told analysts that he sees opportunities to win outsourced training business from airlines which are struggling to conserve cash and that CAE is in advanced discussions with a number of airline customers to do more for them
  • Introduced new virtual service offerings to support its customers as a response to border restrictions including remote support for the installation, acceptance and qualification of the simulators.
  • Had no cancellations, manufacturered no white tail simulators and is forecasting to deliver 35 to 40 simulators this year
  • CAE is bullish on North America: Marc Parent, CEO said "the level of activity for training right now in North America is pretty good, it's pretty high. I would say -- one thing I would point to you, it's not necessarily simulators-based training but I'd point you with the -- on the training of pilots, it's interesting, you might think that -- you talked about furloughs of pilots or that there will be no demand for pilots, but when we look at the industry overall dynamics over the next few years, two, three years, there will be a need for pilots -- new pilots because of the ones that are being furloughed that I think it's -- we now have just one contract that we received -- that we announced in my notes from Boeing where they put us on a contract for pilots.So therefore you see they are being bullish on the fact that there will be pilots needed for the future -- new pilots. And I would add to that and we're the largest -- we're the largest company in the world in terms of training pilots to become pilots, so not using simulators, but using our training aircraft in our various training operations. And what I can tell you is none of the airlines that we trained, and we trained a lot of cadets for airlines, none of them have reduced their level of activity, which again is testimony to the fact that, yes, there is a tough time right now and there's aircrafts being parked, so there is furloughs, there's early retirements. But, if you like, if you thought about what we were talking about literally in February is how -- where are we going to get all these pilots. Now we have a situation of furloughs, but things will come back and it takes two -- depending on where you are in the world, it takes two to three years to train a new pilot. So we see it renew in demand and I think if a youngster wants to become a pilot, it's still a good time, as far as I'm concerned."

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