Pilot training firm predicts solid demand when Max jets fly
CAE Inc expects strong demand from airlines for pilot training when Boeing Co’s grounded 737 Max jets are cleared to fly, chief executive Marc Parent told analysts on Wednesday, after the Canadian training specialist reported lower-than-expected quarterly earnings.
CAE, the world’s largest civil aviation training company, reported higher costs and a near 30-percent fall in quarterly operating income from its second-largest defence and security business, but said its full-year outlook for fiscal 2020 remains on track.
The shares fell as much as 14 per cent but pared losses to end down 4.6 per cent at $34.17, giving it a market value of $9.1 billion.
The Montreal-based company, which offers health care and military aircraft training, also sees demand from carriers as air traffic rises and the supply of commercial pilots remains limited.
Boeing’s 737 Max has been grounded since March following two fatal accidents. Southwest Airlines Co and Air Canada have removed the plane from their schedules until January 2020, but there is no firm date for Max to resume flights.
“Clearly there is going to be a lot of training to be done when the aircraft are cleared so I would see pent up demand there when the airlines start to fly,” Parent said.
CAE recorded 47 sales of 737 Max simulators, with 11 delivered and another 11 to be delivered by December. Max simulator sales are driven by plane orders, Parent said, noting demand was not unusual.
CAE said costs rose with the company’s selling, general and administrative expenses up 10 per cent and finance expenses doubling.
CAE reported a weaker-than-expected negative free cash flow of $102.1 million, compared with an estimated negative cash flow of $11 million, according to four analysts polled by Refinitiv. But chief financial officer Sonya Branco said free cash flow was affected by simulator deliveries, which are under production for delivery later in the year.