Analyst: CAE well positioned to fend of intensifying competition
By Canadian PressGeneral Aerospace Aerospace CAE flight simulator Montreal
Montreal-based firm expected to maintain dominance of flight simulator market.
A transportation analyst says CAE is well-positioned to maintain its global leadership in flight simulator sales despite intensifying competition that is cutting prices and margins.
Cameron Doerksen of National Bank Financial says the Montreal-based company’s large installed base of simulators, low cost base and unparalleled ability to also offer pilot training services position it well in the long-term.
CAE Inc. has nearly half of all civil aircraft simulators operating around the world. Excluding business jets and helicopter simulators, it dominates with a 56 per cent share of the market. Its next closest rival, L-3 Link has a 26 per cent share, followed by Flight Safety International with 10 per cent.
Doerksen says the manufacturer has “an incumbency advantage” because airlines or training providers are reluctant to switch suppliers.
Demand for simulators is expected to grow in the coming years as the global aircraft orders rise, particularly in China, and thousands of new pilots are trained.
One simulator is needed for every 30 new narrow-body planes and about 15 to 20 wide-body aircraft. Airbus and Boeing expect to deliver about 1,250 new planes this year, while aircraft produced by Bombardier, Embraer and others suggest that up to 60 simulators will be needed this year.
CAE recently said it expects to sell a record 40 simulators this year, up from 35 in the last fiscal year. In the first quarter, it sold 23 units.
While commercial simulator sales have become less important to CAE over the past decade, Doerksen estimates the segment still accounts for 23 per cent of CAE’s total revenues and 28 per cent of its operating earnings.
Meanwhile, the analyst said that while CAE’s margins will come under pressure, demand for simulators will remain high. He also expects the company will benefit from improved results in its civil training business as disruptions around restructuring in Europe last year ease. The military market remains uncertain, but is not likely to worsen.
© 2013 The Canadian Press