CAE President and CEO Marc Parent speaks during an investment announcement at CAE in Montreal, Wednesday, August 8, 2018. THE CANADIAN PRESS/Graham Hughes
MONTREAL – The head of CAE Inc. says demand for its pilot training services dropped last quarter, due in part to lower travel volumes to Europe because of the Paris Olympics, coupled with a drop in hiring at some major airlines.
The Olympic Games as well as the Euro Cup “altered normal travel behaviour” to and from the Continent, said CEO Marc Parent. A smaller need for aviator training in Europe stemmed from “aircraft supply side constraints and special events, namely the Euro Cup and the Paris Olympics,” he told analysts on a conference call Wednesday.
Carriers including Air Canada, Delta Air Lines and Air France have all reported that the summer games hurt their seasonal sales, as travellers opted to steer clear of France, where parts of central Paris were closed off for the duration of the event.
Sports competitions weren’t the only culprits.
CAE, which makes flight simulators and trains commercial pilots, said a broader decrease in short-term demand yielded a 26 per cent year-over-year profit drop in the quarter ended June 30.
Large airlines in the U.S. reduced hiring by 80 per cent year over year in June, Parent said. He pointed to delays at plane manufacturers such as Boeing Co., where production problems have pushed back fleet expansion and pilot training at some carriers. Others have at last filled the hiring gap caused by the travel rebound after the COVID-19 pandemic.
“The airline industry is currently managing through what we believe represents the peak of narrow-body aircraft supply headwinds,” Parent said.
For this fiscal year, CAE forecasted operating income growth of about 10 per cent for its civil segment, smaller than previous expectations of low double-digit growth.
However, Parent remained optimistic about the flight simulator maker’s longer-term prospects.
“The demographic realities of an aging pilot population, mandatory age-based retirements and the continued secular growth outlook for air travel are immutable, and they really underlie our continued confidence in the long-term outlook for CAE.”
Boeing and Airbus – the two giants of the plane making world – have projected the number of commercial jets will roughly double in the next two decades, he noted.
CAE is already seeing an uptick in training bookings for the third and fourth quarters as pilot hiring – on pause at American Airlines and Southwest Airlines – resumes at some carriers next year.
The Montreal-based company booked nearly $1.2 billion in total orders in its first quarter for a record $17 billion in adjusted backlog, up by more than half from a year earlier.
Much of the backlog boost owes to CAE’s $4.7-billion share of a 25-year crew-training contract with the Royal Canadian Air Force.
On Tuesday, the company reported net income attributable to shareholders of $48.3 million in the quarter ended June 30, up from $65.3 million in the same period a year earlier. It said revenue rose six per cent year-over-year to $1.07 billion.
This report by The Canadian Press was first published Aug. 14, 2024.
Companies in this story: (TSX:CAE)
