National Post (National Edition)
COVID pushed CAE out of comfort zone
More than just simulators, says CEO
Marc Parent, chief executive of CAE Inc., the Montreal-based maker of flight simulators, is a flatterer. “People like you are important,” he said after I thanked him for making time for an interview. “Seriously. If there is one industry that, personally, I think people will hold in high regard in this whole COVID crisis it's the media.”
This eye-strained wretch would like to think so. A newfound regard for real information is perhaps the one positive to emerge from what has otherwise been a mostly dismal year for the newspaper business.
Parent can relate.
He informed shareholders in August that CAE, a 73-year-old company started by a former Royal Canadian Air Force officer after the Second World War, was going through “the most challenging conditions” it has ever faced.
Revenue plunged by more than 30 per cent in the first quarter from a year earlier and CAE posted a loss of some $110 million, reflecting the collapse of global air travel. Parent pledged to slash $50 million in costs, which included “adapting” its workforce to the depressed demand. But it isn't all misery. The recession forced him to look for other opportunities.
“I've never been more excited about this company, notwithstanding, obviously, short-term pain,” Parent, who joined CAE in 2005 and took over as CEO in 2009, said on Oct. 2.
More on that in a bit. First, CAE offered 20 minutes with the boss because the company wanted to amplify some news: on Sept. 28, it became the first Canadian aerospace company to be certified as carbon-neutral.
To be sure, the feat would have been more impressive if CAE was an oil company or even an airline. Still, it's not nothing. CAE has a fleet of about 200 planes for real-life lessons and it has some 160 facilities around the world so it's consuming its fair share of electricity generated from some form of carbon fuel.
In all, CAE had to offset 90,000 tonnes of emissions. It did so mostly by investing in a wind-power project in India and a reforestation effort in British Columbia, but it also shifted some of its factories to solar energy. Expect more of the latter, since buying carbon credits is an outof-pocket expense that cuts into profit margins.
The moon shot is installing electric engines in all its planes. The technology isn't there yet, but Parent has decided to devote some of CAE's technical prowess — and budget — to solving the puzzle.
“I have a lot of R&D going on right now that is seriously investigating the use of electric and hybrid aircraft to replace all of our suite of aircraft at our training centres,” he said. “That, at the moment, has not resulted in the elimination of any carbon offset, but, in the meantime, we are offsetting those additions. We are putting real money into real projects.”
I assumed Parent decided to make CAE carbon neutral to attract the attention of ESG (environmental, social and corporate governance) investors, a strategy that was dismissed as a fad before the pandemic, but now appears to be a legitimately growing trend. The company's share price peaked at around $41 in February, but has lost half its value since. Investors need a new reason to get excited about one of Canada's international flag carriers.
Parent insisted that the stock price had nothing to do with CAE's decision to go green. The plan to neutralize the company's carbon emissions was set a year ago after 500,000 people attended a climate-change rally in Montreal.
“I was struck by it,” he said. “I looked at this. I said, `You see hundreds of thousands of people walking.' I picked up the phone. I got on my email. I texted all of my vice-presidents and I said, `We're doing a lot, but I think we should be doing even more, so let's meet together and figure out how do we do more.'”
The mission now is to significantly reduce CAE's contribution to climate change. The aviation industry is a big part of the problem and there is currently no obvious path to electrifying flight. Parent said existing battery technology could keep a plane in the air for about 10 minutes. That's one of the reasons people talk seriously, if not quite realistically, about ending leisure air travel altogether.
Parent, a mechanical engineer by training, said a battery-powered plane is unlikely anytime soon, if ever. “The physics don't work,” he said. But he thinks a hybrid engine is possible, so much so that he said it's conceivable that half of CAE's 200 planes will be converted to an “electric-hybrid-based solution” in five years.
“We are looking at that specifically,” he said. “We are going to be developing that. I am committed that we are going to be replacing, over time, that fleet of aircraft that we have from gas-powered aircraft to some kind of electric-hybrid aircraft. That's not going to be over 10 years. That's going to be in a short time frame, but we have to work in concert (with others) and we have to spend R&D to be able to do that.”
CAE, maker of hybrid jet engines? Maybe. The COVID-19 crisis pushed Parent out of his comfort zone. The company made a ventilator essentially from scratch, a “wartime effort” that looks set to turn into a decent business. That's probably just the beginning. It turns out it's a good moment to have hundreds of engineers on your payroll.
“Maybe we can do a lot more than just simulators,” Parent said. “We've come out of this saying, `You know what? We're a technology company.' And as we look at the world as a technology company, we see a much brighter world than we ever saw before.”