Independent flight training centres are expanding. Are they also competing with their customers?
Graham Warwick/WASHINGTON DC
As red ink begins once again to flow through the veins of the world's airlines, the training industry does not seem overly concerned. It has had its share of ups and downs as the airlines have gone through their boom/bust cycles, but this time there is reason to hope the ride will be smoother.
Firstly, airlines are continuing to renew their fleets, retiring older aircraft where necessary to reduce capacity. Even without adding aircraft, the airlines are facing a pilot shortage which is driving demand for training. Secondly, the regional airlines are showing no signs of scaling back their appetite for regional jets, while the backlogs held by business jet manufacturers mean deliveries will continue at high levels for a few more years.
According to manufacturers' figures, a healthy total of 50 full flight simulators (FFSs) were sold last year. Simulators for Airbus and Boeing types accounted for 36 of the total, regional airliners six and business aircraft seven. Manufacturers believe sales of simulators for mainline types may have peaked last year, but demand from the regional and business sectors remains strong. Of 11 new sales announced by CAE so far this year, seven have been for regional and business aircraft.
More dramatic is the influence independent training centres are having on orderbooks. Of last year's 50 simulator orders, 27 were from training centres: FlightSafety Boeing (FSB) ordered 10 machines, GE Commercial Aviation Training (GECAT) and its stablemate SimuFlite Training International together also ordered 10, while PanAm International Flight Academy (PAIFA) bought three and Schreiner Aviation Training four.
Year of achievement
The result of all this activity was a good year for the commercial flight simulation industry overall. CAE took 29 orders last year, not including simulators for its own training centres, maintaining its commanding lead, and Thales Training &Simulation (TTS) booked 12 orders, including three for Saudi Arabian Airlines in a deal announced in late 1999. Newcomer NLX sold three FFSs and BAE Systems, now owned by CAE, sold one.
FlightSafety International (FSI), which mostly builds simulators for its own use, ordered 29 machines into production last year, of which five were for its FSB joint venture with Boeing. Including FSI's in-house production and the simulators CAE builds for its training centre venture, there were more than 80 new simulator "starts" last year - probably a record for recent years.
CAE, which claims a marketshare of over 80% based on 34 "competed" FFS orders last year, forecasts there will be 32-36 such orders this year, dropping to 29-31 in 2002.
Against this background, CAE is venturing into the training centre business in a move which baffled some when it was announced a year ago. CAE had avoided the training business, preferring selling simulators to operating them, but its strategy has changed. Equipment- market domination is no longer enough to meet the Canadian company's growth targets.
CAE estimates the commercial pilot training market, based on dry-lease simulator hours, is worth $4 billion a year, of which about a third is outsourced. About half of that $1.2 billion is outsourced to other airlines and the rest to training centres such as FSB. The market is growing only slowly, but is attractive nonetheless: "We see airlines in a downturn outsourcing all infrastructure, which gives us the opportunity to acquire more of that $4 billion market," says executive vice-president, commercial simulation and training, Steve Wilson.
Simulator operation
The company's first centres have as anchor customers airlines that require training because of a fleet change, and want to avoid investing in infrastructure: TAM in Brazil for AirbusA320s, Canada 3000 and Skyservice in Toronto for A320s and A330s, and Air Nostrum in Spain for Bombardier CRJs. At each site, other customers and simulators are being added. All the centres so far have been built from scratch, but CAE is close to acquiring the training operation of a "smaller national carrier", says Wilson.
CAE's entry into the training market has been eased by the shake-up which followed FSB's creation in 1997. FlightSafety was already a powerhouse in the business and regional market, but a lesser player in airline training, while Boeing's simulator operation was focused on providing entitlement training to customers taking delivery of aircraft. It has taken time, and a change of management, for the joint venture to find its feet, but FSB's worldwide network of training centres is now the industry model.
"We believe the future will see training move closer in location and time to the work event to which the training applies. That means training closer to home, with a larger number of smaller doses of instruction," says FSB president Gary Scott. "Training needs to become a more nearly just-in-time process." To achieve this goal, FSB has established an expansive domestic and international network of centres - 18 in eight countries - sometimes by taking over the training operations of smaller carriers.
The creation of GECAT has followed a comparable route. Formed by the acquisition of Raytheon's UK training centre by GE Capital Aviation Services (GECAS) and its subsequent take-over of TTS's Orbit operation, GECAT has expanded beyond its UK origins. The company now has centres in Hong Kong and Switzerland through joint ventures with Cathay Pacific Airways and Crossair, respectively. At each site, GECAT is adding its own simulators to the fleet.
The company also owns SimuFlite, and the US business aircraft training provider has embarked on its own expansion, fuelled by the growth of the business jet fleet. FSI is building and fielding new business jet simulators at breakneck pace, while aircraft manufacturer Bombardier is adding machines at its Montreal and new Dallas/Fort Worth training centres.
PAIFA, which entered a consolidation phase, after its initial rapid expansion, is balancing its growth between the mainline, regional and business aircraft sectors. The company now has seven US centres and an expanding SimCom division providing business aircraft training. So far, PAIFA has not ventured offshore, but the Netherlands-based Schreiner, the largest European-owned independent, has established a US foothold in Dallas/Fort Worth.
New providers
New training providers continue to spring up. Lockheed Martin's Orlando, Florida-based Commercial Flight Training Centre is now operational with two used simulators and has its first new machine on order with plans for more. "This market can only continue to grow," says programme manager Ed Slomka. "Airline finance people are not releasing funds for simulators, because it gets to be very expensive." Lockheed Martin is focusing on operators of Airbus and Boeing single-aisle aircraft in regional markets such as South America, and the plan is to have "multiple locations".
CAE, meanwhile, plans to take on the major players, deploying 15 simulators at its own centres in the initial phase. Beyond that "we see consolidation in training-provider numbers," Wilson says. "We're counting on acquiring existing facilities to meet growth targets."
Training centre growth is creating a challenge for airlines that rely on outside business to make the case for a new simulator. Finnair, for example, justified acquiring a Boeing MD-11 simulator to support its small fleet on the revenue it could raise by training others. It proved to be a profitable venture.
Such a case would be more difficult to make today, after the creation of FSB, suggests Petri Louhivuori, director of marketing and sales for Finnair's flight operations division. "Airbus does not interfere with the training market. 'Brand B', though, has planted simulators all over," he says. This makes it difficult for an airline like Finnair to build a business case for buying its own simulator. But using someone else's training centre incurs crew travel costs, and Louhivuori argues this can make buying 'Brand B's' aircraft look "uneconomic". Airbus, meanwhile, made it easier for the Finnair to sell training on its A320 simulator by providing a generic data package, he says.
CAE is wrestling with similar issues about competing with its customers, particularly as training centres account for a large part of its orderbook. "Ultimately this could hurt the simulator business, but I think we'll find ways to work with our customer base," CAE says.
Source: Flight International
