Pilot Training Industry Perspective: CAE Quarterly Earnings Review – Q3

Pilot Training Industry Perspective: CAE Quarterly Earnings Review – Q3

Global Pilot Training leader and publicly listed CAE released its Financial Year Q3 2021 results. 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. You can find our summary review of Q2 results here.

Key points of interest were as follows:

  • 18% increase in Revenue vs. second quarter and down 10% vs. third quarter last year
  • 50% Training centre utilization - same as in Q2 and expected to be similar for Q4.
  • 10 full-flight simulators (FFS) delivered
  • 3 new full flight simulators sales
  • Civil Training business remains profitable
  • No change in order backlog which remains solid at $7.8 billion
  • Strengthened financial position through the issuance of $495 million of common equity (which is mentioned could be used for future potential acquisitions and growth opportunities)
  • CAD$329mn training contracts signed including:
    • 3 Full-Flight Simulator Sales and a five-year exclusive business aviation training agreement with the Bundeswehr of Germany for the Global Vision.
    • Exclusive training agreement with MasAir, a new cargo airline in Mexico (Boeing B767)
    • 5 year extension of exclusive training agreement with Iberia for all their training
    • 5 year training agreement with Tui Airways (British Charter Airline)
    • 2 year exclusive pilot training agreement with LOT Polish Airlines (broad range of aircraft platforms)
    • 5 year housing agreement with Virgin Atlantic Airways
  • Annouced three acquisitions: Flight Simulation Company B.V. (FSC - Simulator Training Center in the Netherlands),TRU Simulation + Training Canada (Simulator Manufacturer) and Merlot Aero Limited (Flight Crew Management)
  • During the earning call CEO Marc Parent states "The pandemic continues to be a global reality and the resumption of CAE's recovery remains highly dependent on the timing and rate at which travel restrictions and quarantines can eventually be safely lifted and normal activities resume in our end markets. Looking beyond, given our recent investments and future potential opportunities to deploy growth capital, we are confident CAE will emerge from this period in a position of even greater strength."
  • "The Company believes more airline training partnership and outsourcing opportunities should materialize for CAE as the industry looks for ways to gain greater agility and resiliency in the post-COVID-19 era."
  • "The global roll-out of vaccines to combat COVID-19 is indeed encouraging; however, renewed quarantine measures and border restrictions to contain the spread of the virus have contributed to expectations for a potentially more protracted recovery period for commercial air travel, particularly for cross-border and transcontinental operations"
  • "When I look at the utilization of training centers, I expect a very similar level in the quarter that we're in based on what I've seen in the third quarter."
  • Delivery of full flight simulator backlog is pretty firm over next couple of years but customers have wanted to defer the delivery because they have deferred the aircraft deliveries.
  • CAE has delivered 41 B737MAX simulators to-date including 5 to its own training center network. In total CAE has sold 53 with a further 2 which are deferred which are supposed to go to CAE's own training network and another 2 that are deferred by an airline customer.
  • TRU have delivered 11 B737MAX simulators to date and they have 14 sold.
  • "Continuing to support Boeing through a MAX overflow training agreement and that's -- well, that's exciting, because it's our first training cooperation with Boeing."
  • On B737MAX FFS Sales - " I certainly expect northward of 50 to 60 737 MAX simulators over the next five years minimum."
  • Interesting point that the priority remains to use funds for acquisitions - "The capital allocation priorities have not changed. The first priority remains to invest in accretive growth and as we've seen with the three acquisitions actioned in the quarter and we continue to see opportunities on the organic growth capital front and we balance that with maintaining a solid financial position."

If you are interested to read the CAE Earnings call transcript you can find it here.

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