Marc Parent is the new chief executive of CAE, having taken the reins of the simulator and training company late in 2009. He talks to Flight Daily News about the landscape for the industry and his company
You started in this position in October, at the bottom of the cycle. How have things been going since you started?
We've been able to get through, not unscathed, but pretty well. It is really due to our strategy of diversification. What's helped us through this crisis is that half our business is civil and half our business is military. For the full year, it is 53%.
We've been growing that over the past three or four years and growing that quite significantly. That's helped us a lot in counterbalancing the effects of the civil business. Even in the civil business we've expanded to training. Those airlines that don't buy any simulators send their pilots to be trained at third party training centres.
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How do you see future markets and CAE's international footprint?
I think one of the things people don't realise is the international nature of CAE. Throughout this cycle one-third of our revenue came from North America, one-third from Europe and one-third from the rest of the world. That's basically a result of the strategy we've had to go into developing markets and, in particular, we are the first in our industry in China and India.
We've used that to establish footholds in personnel and training centres, with the result that today we're 7,000 strong at CAE. Half of those employees are outside Canada.
There's really a two-speed recovery. North America and Europe are performing well, but South America and Asia are doing really well. We've grown our revenue quite substantially over the past four years on the military, and a lot has to do with going after business internationally from a local standpoint.
That means getting close to the defence customers, understanding the dynamic in the country, the governments, what's going on in each country. As a result, rather than chasing the business out of Montreal, we saw the pipeline of opportunities really grow, then we develop strategies to win them.
With airlines struggling for profitability and razor-thin margins, how do you see the landscape for reducing your costs to be more competitive?
There's two sides to that. First of all, if you're a supplier to the airline industry, you have to be competitive. Ticket prices in real terms are at 1980s' levels, which we're quite happy about as the travelling public, but from an industry perspective it's pretty tough. We're over 70% market share - selling simulators to airlines. The answer is that we don't take anything for granted. Every deal as far as I'm concerned is a new deal.
It's a sophisticated business, you're talking about safety. The airplanes are getting more sophisticated, but they're only as safe as the two people in front.
We can go to airlines and say look, it's not about the simulator, it's about the training. In the end it's about the pilots. That's the ultimate commodity for the airlines: a trained airline captain.
We try and bring them best value, not just on the day of the sale. We establish a relationship there for decades. That simulator will be in operation as long as the aircraft is in service. It is going to be operating 20h a day, seven days a week. And if it breaks down, it doesn't take long before your airplane is on the ground and pilots can't be trained.
We don't build airplanes, helicopters, avionics or anything else, all we do is build simulators and deliver training so we have to be good at it. We've done that for decades and will be around 25 years from now.
The one thing we won't do at CAE is offer less for less. We strongly believe that our mission is to ensure safety, the safety of the travelling public. When we look at how we develop our simulators, the cost - the cost of sale and the cost of maintaining, the cost of ownership - is tantamount to how we design it.
But what we also endeavour to do is continuously invest in R&D, and to increase that realism, so if a pilot faces one of the catastrophes we throw at him in the simulator, he will have had a realistic experience and will react automatically to the emergency he sees. That's why we spend 10% of our revenue on R&D every year, even through this crisis. We've unfortunately reduced our manpower by 10% to face the crisis, but we've maintained 10% R&D spending throughout that time.
What does the competitive landscape look like for full flight simulators?
It seems that in every cycle somebody says they can do a simulator, but it's not just about the simulator. The technology is such now that companies can come up with simulators and be credible, but there's much more to it than just meeting the standard of a Level D simulator. There's much more involvement.
Is the company going to be around in 25 years? It's a mundane thing but it's important. What kind of credibility do you have in terms of the ruggedness of this product? Anyone can do an airplane, but why do they keep buying from Boeing and Airbus? There's a reason: the ruggedness of these products, the track record of customer support, the experience that you have, the potential to have financing solutions, the credibility with regulators.
The number of competitors hasn't changed. At any given time, there are five to seven competitors in the civil aerospace field, yet we get over 70% market share. Even though we build the best simulators, because we pride ourselves on that, when you buy a CAE simulator you expect the quality and realism of CAE simulator. Having said that, we don't believe that the fact that you've won the last one is a guarantee you'll win the next one, so you bust your gut on each one.
Source: Flight Daily News
