GRAHAM WARWICK / WASHINGTON DC
Independent commercial flight simulator operators are refocusing on their core businesses amid early signs that demand for training is once again picking up.
While simulator manufacturer CAE has been grabbing headlines with its well-funded entry into the aviation training market, the company's established rivals have not been idle. They have been busy refining their strategies to reflect the changes in the market since the US terrorist attacks of 11 September and view their new competitor with interest, but not yet with concern.
That may change in an industry which has seen more than its fair share of turmoil in recent times. For years, the aviation training business was dominated by the airlines and one independent supplier, FlightSafety International (FSI). The market changed in the 1990s when Pan Am International Flight Academy (PAIFA) and GE Commercial Aviation Training (GECAT) emerged as competitors, while Boeing joined forces with FlightSafety to offer training for airliners with 100 or more seats.
Today, FSI remains the largest independent provider of aviation training, with over 220 full-flight simulators at 35 locations, but is focused on the regional and business aircraft markets. CAE only embarked on a strategy to enter the training market in 2000, but vaulted into second place with its December purchase of SimuFlite Training International. By the end of this year it will have 14 locations worldwide with over 75 simulators for aircraft ranging from helicopters through business jets to airlifters. By comparison, FlightSafetyBoeing (FSB) will soon have 65 simulators at 22 locations and GECAT 20 machines in four places, all for airliners.
PAIFA began life as the training arm of Pan American World Airways and continued to operate in Miami, Florida, even after the airline declared bankruptcy in 1991. The Academy has been privately owned since 1992 and has been quietly expanding since it was acquired by its current owner, investment firm JW Childs, in 1998. Today, the company owns and operates 37 full-flight simulators at seven US locations.
PAIFA appears uniquely placed to judge the state of the industry because it operates in four primary businesses, providing simulator training for commercial transport-category aircraft, regional airliners, and business and general aircraft, as well as performing ab initio pilot training. Air traffic controller training is also a small part of the Academy's business. Each of the businesses has been affected to a different degree by the events of 11 September.
Bottomed out
Vito Cutrone, executive vice-president and chief operating officer, believes the training market "bottomed out" at the end of last year and has been improving since January. The company's simulators are now running at two-thirds capacity, he says. With much of PAIFA's transport-category business tied to providing overflow training on older types for the US major airlines, the widespread aircraft groundings and pilot furloughs after 11 September were blows, but were cushioned by the Academy's long-term contracts to provide training for regional airlines.
"The results of 11 September were dramatic across the company and the transport-category aircraft market was most dramatically affected," says president and chief executive Wally David. "When the majors stopped hiring, overflow training reduced." He says the impact was less on the regional side as it benefited from the airlines' capacity reductions, which redistributed flying to smaller aircraft. Business and general aviation training, meanwhile, remained "pretty strong".
Regional airline training under long-term exclusive contracts is a relatively new business for PAIFA, which opened a new centre last year in Dulles, Virginia, to provide training for Atlantic Coast Airlines and another in Minneapolis, Minnesota, earlier this year to serve Mesaba Airlines and Chicago Express. "On the regional side, 70% of our business is on long-term contracts. On the commercial side, 20% is long term. That's the nature of the business," says Cutrone.
Career pilot, or ab initio, training is the newest venture for PAIFA. As a result of a number of acquisitions in 1999 and 2000, the Academy is now one of the top three US players producing regional captains, says David. The company has two centres for ab initio training, in Ft Pearce, Florida, and Phoenix, Arizona. The career pilot business has "held up pretty well", he says, and despite the recent furloughs demand for new pilots is expected to return to the levels seen last year.
"The regionals would say they have been given a respite, from what was a very serious problem last summer, and time to prepare a better long-term strategy to assure a consistent supply of pilots in the future," says David. "They ran into a desperate shortage last summer. Now we are seeing regionals looking into the pipeline, trying to solve the problem over the longer term, because they expect to see pilot turnover go back to what it was."
PAIFA has worked to shorten the training time while improving quality, by investing in new aircraft and more complex training devices. "The real inhibiting factor is aircraft breaking down, delaying training flights. New aircraft give a consistent level of training so that students are not set back," says David. A Bombardier CRJ flight training device has been installed at Phoenix to provide piston-to-turbine bridge training.
In common with its airline customers, aircraft manufacturers and other training providers, PAIFA reduced its workforce in the wake of the 11 September events and, Cutrone says, has learned how to operate more efficiently. "When the market begins to turn around, as we saw in the first quarter, we will come back a much more efficient outfit," he says.
Despite the downturn, the company has continued to expand its fleet, mainly by acquiring simulators that have become available. "We have continued to expand at every opportunity to purchase a simulator, filling up the centres we opened in 1999 and 2000," says Cutrone. "We have 37 full-flight simulators in hand and are working on another five. That's 15 to 20 more than two and a half years ago."
The Academy has also continued to add customers. PAIFA's core business is providing training on older airliner types and, as was the case following previous airline recessions, the company believes the availability of cheap aircraft will create opportunities for new entrants once the market recovers. "The majors have let go of older aircraft and some will go to second- and third-tier carriers and new starts looking for aircraft and pilots. That will flow into our core business," says Cutrone.
PAIFA may be helped by the fact that other independent providers appear to be leaving the training market for older types. FlightSafetyBoeing is trying to draw down its older devices, says Paul Hinton, vice-president and international. FSB has idled Boeing 737 and MD-82 simulators in Dallas, Texas, and is re-evaluating its position in the Airbus A300B4 market.
Market positioning
The move to re-evaluate FSB's fleet is "in part because of reduced demand, but it's also a question of which part of the market do we want to be in", says Hinton. "We still see this as a very good market to be in, and long term we expect to end up with a very good share of the market." The joint venture continues to expand its international presence, opening centres in Luton and Manchester in the UK and Palma in Spain while its Seoul, South Korea, and Kunming, China, operations are scheduled to grow.
As was the case during previous recessions, more airlines are looking more seriously at outsourcing their training, and possibly offloading their training centres, to independent providers. That phenomenon has helped fuel CAE's rapid expansion into aviation training, and both FSB and PAIFA report there are plenty of outsourcing opportunities on offer.
"There have been a lot of discussions over the last two to three years with airlines about acquiring facilities, but the airlines pulled back," says David. "The talk was there, but the real desire was not." The closest PAIFA has come is its agreement to market time on Northwest Airlines' fleet of simulators, but the company continues to look for acquisitions, particularly in Europe. "My personal view is that there are not as many opportunities as there appear to be." says David.
Source: Flight International
