Canadian company aims to benefit from more complete package as net profits halve

CAE's fledgling civil aviation training business is moving to increase revenues and margins in a bid to offset a steep decline in commercial flight simulator sales.

The Canadian company hopes to interest customers in a wider range of products and services as competition to sell "dry" simulator time pushes prices down. "We have got to get wetter in training, and provide more than the dry lease," says chief executive Derek Burney.

In addition to simulator time at its training centres, CAE is offering to provide customers with the curriculum, instructors and the company's Simfinity "virtual simulation" range of training tools. "We need to offer a more complete package to get out of the commodity price war," Burney adds.

Civil aviation training was the highlight of an otherwise disappointing first quarter for CAE, which saw the company's net profits more than halve to C$15.1 million ($10.8 million) on revenues down 12% to C$243 million. Commercial equipment sales fell 50% year-on-year to C$38.9 million, but training revenues increased 20% to C$70.2 million. "We expect to maintain a 20%-plus growth rate through the year in civil training," says Burney. "After adjustment for the 10% increase in the value of the Canadian dollar, the real rate is close to 30%."

CAE had 91 simulators in service in the first quarter, ending 30 June. The fleet will top 100 by the end of the 2003-4 financial year. Capacity utilisation was 64%, up from 60% a year earlier, says CAE. "We managed to maintain revenue per simulator on average even in a down market," says Burney. Pricing pressure depends on simulator type and location, he adds, with those for newer business aircraft holding up best.

The simulator manufacturer launched its civil aviation training initiative in 2000. "At the end of our fiscal year in March, 40% of our revenues came from training services. That is a significant change over the last three years," says Burney. "Over the same period, the civil simulator order base has gone from 35 to 22 to 11 last year. Training will not fill the gap overnight, but we would be a much smaller company without it."


Source: Flight International