FARNBOROUGH: Interview with CAE chief executive Marc Parent

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Marc Parent, president and chief executive of global training and simulator provider, CAE, can "walk the walk" when it comes to the products he sells. Parent regularly flies his own Piper Mirage single-engined aircraft solo in instrument conditions along the eastern seaboard of Canada and the USA, locations where the weather is anything but predictable and tame.

"Most of our customers are pilots," says Parent. "It rings close to them that you're living in their world."

CAE, under Parent's direction, is forging an expanded presence in that world, a move highlighted by its continued growth and recent acquisitions, undaunted by military cuts on the horizon.

The company earned $1.82 billion in revenue in the fiscal year ended March 31, up by nearly 12% from fiscal year 2011. The company's revenue is split 50/50 between the civilian and military sectors, with a 50/50 split between products and services within each sector. One-third of CAE's revenue comes from the US, a little less than one-third from Europe and the remainder from the rest of the world.

"We like the split," says Parent. "What we've been trying to do over the past few years is to broaden the revenue sources and diversify away from what CAE traditionally was - [a provider of] airline simulators. Now [airline simulators] is 20% of our revenue."

Parent says the military market has been strong but the commercial market is "very" strong.

"In contrast with what you read in the papers about the slowing in other markets, the world's airlines are still doing very well. Our [commercial] business - selling simulators and operating training centres - is very strong. The occupancy of those simulators for civil aviation is very, very high around the world."

CAE has 211 full-flight simulators in 42 civil training locations worldwide, serving approximately 3,500 airlines, aircraft operators and manufacturers. For its training business, one-third of the revenue comes from products like simulators and two-thirds from the operation of training centres.

The company in May acquired Oxford Aviation Academy, an aviation training provider with 40 flight simulators, four flight academies and a crew sourcing business (Parc Aviation) that provides 1,200 pilots and maintenance crew to 50 airlines and leasing companies in 40 countries, primarily in Asia. The acquisition boosts the capacity of CAE's in-house ab initio programmes from 900 cadets per year at eight schools to 1,500 per year at 12 schools.

"What we gained with Oxford were three businesses," says Parent. "One was the same as ours - operating training centres - but in places where we are not, including Hong Kong, Stockholm and Oslo. A second business was the Oxford Aviation Academy, which has a strong brand in training cadets to be airline pilots. We already had the CAE Global Academy, but by combining the two, we have the undisputed largest network of [ab initio] flight schools in the world.

"We're creating pilots at a time when pilots are already in dire demand, especially in the Far East", says Parent, noting that the shortage could be as high as 20,000-25,000 pilots a year. "At the moment, the capacity that we have is about 2,000 cadets annually. I would be comfortable that you can increase that to 3,000 per year."

He says CAE is going to "see how the market plays out" in terms of how many pilots it seeks to supply through ab initio training. "I suspect other people will join in to provide the lift. We want to make sure the business will survive changes in demand."

Regarding the impact on the industry from cuts in military spending in the US and abroad, Parent says "nobody is immune", but for CAE, the issues are more related to delays in defence procurement.

"Our results show that for the financial year just finished end of March, we had a record year of order intake in the USA", says Parent, adding that there is strong military growth in other parts of the world as well, particularly in emerging markets. He notes that Brunei signed a $170 million contract for CAE to set up a helicopter training centre there.

Sequestration aside, Parent says declining budgets can mean increased simulation for readiness. "We firmly believe that simulation modelling has bright future in that environment - it saves costs," he says. "The reality is, it saves the wear and tear on the aircraft, and because of the operational tempo that aircraft have been put through in the past few years, the military cannot afford to use aircraft for training as much as they have in the past. The military in particular wants to not only train their aircrew - they want to rehearse the missions."

Rehearsals in turn drive technology requirements for realism, which can benefit the commercial side of the business in terms of findings. "At CAE, we continue to invest 10% of revenue on research and development every year to make sure we're at the forefront of making the virtual world very, very close to reality," says Parent.