Civil aviation flight simulator providers are reporting strong demand for their products and services, particularly in Asia but also in North America, as the US majors take delivery of newly-ordered fleets. CAE continues to dominate the scene, but a number of other players, including new entrants, are fighting among themselves to secure ever-larger slices of the market.
Meanwhile, Belgian start-up Venyo is expecting to deliver its first simulator later this year and is banking on its flexible leasing approach to win over customers in search of less rigid commitments to training equipment.
“The commercial market, for sure, is strong,” says Nick Leontidis, group president simulation and training at CAE, headquartered in Montreal, Canada.
In the first nine months of CAE’s fiscal year, which ends on 31 March 2015, it sold 31 full-flight simulators (FFS) and signed three joint ventures – the latest of which was with China Eastern Airlines in the fiscal third quarter. This involved CAE selling half of its stake in its flight academy in Melbourne, Australia, and China Eastern agreeing to outsource the training of more than 650 of its cadet pilots to the joint venture over the next five years.
“We’ve expanded the number of training locations and added 12 new simulators to our civil training network to deal with demand,” says Leontidis.
Demand for aviation training solutions, including simulators, is up “across the board”, but emerging markets – particularly China, where CAE also operates a large training centre through a joint venture with China Southern Airlines – dominate. “We sell eight to 10 simulators a year in China,” says Leontidis. “The China market is growing very rapidly and there is a strong pilot need.”
While Europe is showing the slowest market growth, he points to demand increasing recently in the USA: “The USA has shown some strength in the last year or two with new airplanes taken by carriers.”
Flightglobal’s latest Civil Simulator Census, from June 2014, records a total of 1,208 commercial simulators in use in the industry. Of these, 626, or 52%, were built by CAE; 24% by L-3 Link UK; and 9% by FlightSafety International. The previous year’s census showed that there were a total of 1,063 simulators, of which 56% were built by CAE; 26% by L-3 Link; and 10% by FlightSafety.
When it comes to simulator operators, CAE still leads the market with a 14% share, followed by FlightSafety International and Pan Am International Flight Academy with 6% apiece. Other operators make up the remaining 75%.
A drop in CAE’s market share can again be seen when contrasting these figures with the previous year’s census, when CAE had a 16% share of the training market, followed by FlightSafety at 7% and Pan Am at 5%. Smaller operators made up the remaining 73%.
The civil flight training landscape has been changing in recent years, with Lockheed Martin, L-3 Technologies and Rockwell Collins all joining in the action. The former announced in January that its Sim-Industries unit – which it acquired 2011 – has been renamed Lockheed Martin Commercial Flight Training.
CAE is cognizant that other players are striving to nip at its heels but remains confident in its ability to retain the loyalty of its customers. “Competition is there, as it has always been, and everyone’s trying to unseat us as the largest player, but we feel very good about the training portfolio we offer,” says Leontidis.
CAE
The Canadian company last year launched its latest FFS, the 7000XR Series, which Leontidis says has been well received in the marketplace. “[The 7000XR Series] stands out in the market. Customers have acknowledged that and have spoken with their wallets,” he says. "We will be delivering our very first unit this spring." The 7000XR Series includes a redesigned instructor office with support for mobile devices and real-time analysis and feedback, and features new capabilities to address the recently-introduced US FAA regulation on upset prevention and recovery training.
But the FFS manufacturing market is small and questions have been raised as to whether too many suppliers are scrapping over what is essentially a small bone. “The market is relatively finite for simulators. Over the last couple of years, 50 simulators were bought in total so there are four or five competitors for what is a relatively finite market,” says Leontidis, adding that CAE’s goal is to “be the best in class in offering a complete training solution and to go into an airline in a partnering mode”.
FlightSafety International also points to big changes in the civil aviation training market and says that the growing number of players has driven costs down.
“The market has changed significantly and there are several new players in the simulator market. We’re seeing big names in other industries building simulators,” says FlightSafety vice-president simulation John Van Maren. “Training equipment is almost becoming a commodity that’s based on price – it’s becoming more of a price-driven market.”
Van Maren adds that this pressure is “driving us to reduce our costs”, but says the company is “working on technology to set ourselves apart”. For instance, FlightSafety’s new FS1000 simulator, an Airbus A320 FFS it is building for China’s Wisesoft Corporation, is a “completely redesigned simulator”, says FlightSafety vice-president visual systems Jon Hester. Integrated hardware and software systems will allow for “more accurate and higher fidelity simulation”,according to FlightSafety.
FlightSafety
Upset recovery training will also be improved with new technology set to be introduced at the end of this year, says FlightSafety director of engineering Nidal Sammur. “Instead of just worrying about the stick shaker, we want to be able to induce a situation where you’re going beyond what we normally train to – beyond the stall,” he adds.
Van Maren believes there are “too many vendors” in the civil FFS market and there is “going to have to be a correction”.
“Fifteen years ago there were three or four players, today there are many more,” says Van Maren. “In the long term, people will have to exit the market and the quicker the better for us. We’re here to stay, we have a diverse product line. Long term it’s anyone’s guess but I would expect to see fewer vendors in the market.”
However, this outlook does not appear to be troubling Belgian start-up Venyo, which expects to deliver its first Boeing 737NG fixed training device (FTD) to an unnamed launch customer this autumn, with a Level D FFS version set to follow later on.
Venyo aims to differentiate itself in two ways. First, instead of selling its simulators, the company plans to rent them out and charge by the hour. The devices can be transported to customer sites by trailer and set up within three days. Second, Venyo claims that the technical functionality of its product is “well above all FFS Level D requirements, with unique pedagogical features”. The company demonstrated its first pre-production unit at the Farnborough air show in 2014.
Initial EASA certification of the device is expected in June 2015, says Venyo business development manager Jean-Claude Streel, with delivery to an unnamed European launch customer scheduled for September or October. At the end of this year, Venyo plans to open an office in Florida and begin the US FAA certification process, which it expects to complete by mid- to late-2016.
Venyo is hoping its flexible approach to renting out its devices will be a key selling point. “There is no contractual engagement and there are no operating fees – it’s just a monthly invoice for the hours flown,” says Streel. “We think a flexible solution is the right answer.”
Aside from its business model, Venyo is keen to stress the technological advantages it believes its product brings to the table. “The technical specification is higher than [existing] FFSs and it’s really realistic compared with other FTDs,” says Streel. “We propose an FTD at a very low price but with the feeling of entering a plane and not a simulator.”
Venyo plans to keep its focus on the single-aisle simulator market and will start working on a different model – most likely the A320 – by the end of this year, says Streel. The company aims to put 10 simulators into operation each year over the next five years and has “three potential customers knocking at our door today”, says Streel.
“I expect the need for simulators will grow, but the problem is that manufacturers like CAE and others are proposing a product that’s very expensive,” says Streel. “It’s not easy for airlines or training centres to buy new simulators – it’s a lot of money on the table and a long-term engagement. The demand needs flexibility because training capacity is moving very quickly.”
While Venyo is billing its flexible approach to leasing out simulators as a unique selling point, FlightSafety’s Van Maren says it is “not a new concept” and has “been around for four or five years”. He says leasing “is an option” and FlightSafety “consider[s] any business case, depending on the customer”, adding: “Any new competitor causes you to evaluate where you are.”
Greg Darrow, senior advisor on sales and marketing for Pan Am International Flight Academy and formerly sales and marketing vice-president at the Florida-based pilot training company, describes 2014 as “an interesting year”.
“Airlines are starting to make money so there’s a lot of overflow training going on,” he says, adding that low fuel prices have also led to a spike in demand for training on older aircraft types. “Because fuel is so low and the ability to make money with older aircraft is viable, we’re seeing start-ups contacting us for training on legacy aircraft.” While this demand has mainly come from Latin American and African start-ups, Darrow says Pan Am has received “a few” requests from US start-ups operating Boeing 737 Classics.
Pan Am is “manufacturer agnostic” when it comes to simulators and has relationships with most of the major players. However, Darrow says that newcomer Tru Simulation and Training – a joint venture between Mechtronix, Opinicus and AAI – is “attractive to us” because unlike suppliers such as CAE and FlightSafety, it does not compete with Pan Am on the training centre side.
Delivery time can be a deciding factor when it comes to which manufacturer to order from, says Darrow, noting that “getting a simulator in less than 12 months can be a very big problem”.
Another problem causing concern for Pan Am as a third-party training company, says Darrow, is a recent decision by Boeing to charge a “royalty fee” on the use of data for training purposes on any Boeing model simulator built after 2009. He says that a few years ago, Boeing started requesting a fixed percentage – the figure for which is “confidential” – of “every dollar made on training” by third-party providers.
“What’s interesting is that Boeing competes with us for the same customers and they don’t have to pay the royalty,” says Darrow, adding that Airbus “have been very clear that they would not do that to us”.
“At a time when airlines are so short of pilots and need training options, Boeing appears to be limiting the training marketplace and reducing client training options by making our product non-competitive,” says Darrow. “I haven’t seen an endgame – Boeing is holding its line that royalty is due. Negotiations continue with no resolution.”
Emphasising how seriously Pan Am views this development, Darrow says the situation “is at a point where they [Boeing] could drive some third-party Boeing trainers out of business”.
Boeing made the following statement in response to a request for comment from Flight International: “Boeing makes continued investments in products and services that contain valuable intellectual property. This IP creates value to those who use it to grow their businesses.
“However, the terms of the licence agreements are confidential and we do not comment on them.”
Both CAE and FlightSafety declined to comment on the royalty issue.
Flightglobal’s Civil Simulator Census shows that when it comes to aircraft types, the Airbus A320 family dominates with a 21% market share. The Boeing 737 family, including both NG and Classic variants, follows close behind with a combined market share of 19%. The A330/A340 has a 9% share, followed by the 747 and 777 at 7% and 6%, respectively. The Embraer aircraft family is next with 4% of the market – a change from the previous census, in which this position was held by the Bombardier CRJ family. In the latest census, the 767 accounts for 4% of the market and the remaining 31% comprises other manufacturers’ aircraft and legacy aircraft.
The USA has the largest number of the 1,208 simulators in the market at 383, followed by China, which accounts for 116 simulators. France, the UK and Canada follow with 59, 57 and 46 simulators, respectively.
Source: Flight International
