Pilot Training Industry Perspective: CAE Quarterly Earnings Review

Pilot Training Industry Perspective: CAE Quarterly Earnings Review

Global Pilot Training leader and publicly listed CAE released its Financial Year Q2 2021 results on the 10th of November. 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:

  • 28% increase in Revenue vs. first quarter and down 21% vs. second quarter last year
  • 49% Training centre utilization - utilization has more than doubled since the low point of Q1FY2021. Since the beginning of Oct-2020, Civil training centre utilisation has continued to average at approximately this level. This utilization compares to 33% in the first quarter.
  • 10 full-flight simulators (FFS) delivered
  • 3 new full flight simulators contracts
  • Business aviation has been experiencing a more rapid recovery than commercial.
  • While some locations remained operating at reduced capacities, all previously closed training locations had re-opened
  • CAD$364.5mn training contracts signed including:
    • 5 year business aviation training agreement with a private business jet charter company in the US
    • 5 year exclusive training extension with Virgin Atlantic
    • 2 year business aviation training agreement with XOJET Aviation
    • 2 year business aviation training extension with VistaJet
  • During the earning call CEO Marc Parent states that for the civil aviation sim training utilization that it has plateaued in recent months and further growth will be linked to commercial flight activity!
  • Interesting point about CAE's cadetship programs during the earnings call was that CAE mentions that "All of our programs have been maintained. In fact, we've won more business. We won, for example, with Boeing, we announced that last quarter, a contract to deliver pilots for them. So I haven't seen any impact. In fact, our flight hours are basically the same. And the only effect that we've had is where we've had to close centers temporarily like, for example, in Australia, in Melbourne, because of COVID and that's affected our flight operators."
  • In regards to discussions with airlines about outsourcing training - CAE mentions that all kinds of deals are being looked at and that historically often it has been CAE taking over airline partner's existing assets (just like what was done with Japan Airlines, Singapore Airlines - they contribute their existing training assets)
  • On CAE’s outlook, Marc Parent said, "In Civil, as the global fleet gradually recovers and daily flights resume service, we expect to continue to expand our market share and secure new customer partnerships with our innovative training and operational solutions. We continue to have discussions with airlines about potential outsourcings and partnerships, and while we don't control the timeline of those agreements, we expect some from our pipeline to come to fruition in the period ahead. At a steady state, business aviation training represents about a third of our Civil business, and based on global aircraft fleet activity levels, we expect this segment to continue recovering faster than commercial aviation.
  • On CAE’s outlook, Marc Parent said, “COVID-19 remains a global reality and the pace of CAE’s recovery from this point forward will be highly correlated to the rate at which travel restrictions and quarantines can be safely lifted and activities resume in our end markets. We continue to expect a stronger second half of the fiscal year, compared with the first, and to generate positive free cash flow for the year."

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

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