CAE Issuing Temp Layoffs, Cutting Salaries

 - March 23, 2020, 12:20 PM
Marc Parent, CAE’s President and CEO, delivering a speech at the inauguration of CAE's new London Gatwick training centre.

This story is part of AIN's continuing coverage of the impact of the coronavirus on aviation.

Preparing for what it believes could be an extended crisis from the Covid-19 outbreak, CAE is laying off workers, cutting salaries throughout the company, curbing hours, and restricting research and development and other capital investment.

The company on Friday issued its initial notifications of temporary layoffs to 465 employees, but CAE president and CEO Marc Parent said during a call with RBC Capital Markets Monday morning that more will be evaluated and issued in the “coming days.” In addition, the senior leadership is taking a 50 percent pay cut, while vice presidents will see salaries reduced by 30 percent. Managers and directors will receive 20 percent cuts, while all others will see their salaries reduced by 10 percent. The company has more than 10,000 employees worldwide in over 35 countries.

In addition, the company said it has reduced capital expenditures to “minimum levels,” reduced operating hours and adjusted staffing at centers with lower demand and asked all employees that can work from home to do so.

Parent stressed that the company is entering the crisis in a position of liquidity strength, but said, “This crisis of unprecedented speed and magnitude has caused pretty dramatic disruptions to the global transportation system…We’re assuming a very tough period ahead.”

While he added “we definitely believe it will be temporary,” how long is uncertain. “This is significantly worse than anything we have seen.”

Its training centers are facing lower demand and varying closures. The situation remains fluid, said Andrew Arnovitz, CAE v-p of strategy and investor relations, pointing to closures at its centers in Peru, the Philippines, Brussels, and Milan. Others have reopened. “Asia is generally opening up,” said Arnovitz. In fact, Parent said he was encouraged by orders received just last week for simulators from China and Singapore.

A major issue, Parent added, is the ability for trainees to get to the centers in the face of travel restrictions. Business aviation centers are all running, albeit with lower volume focused on recurrent training.

On the training front, CAE has somewhat of a buffer since training is a regulatory requirement, he said. In addition, CAE has healthy backlogs for the simulators it builds. Since orders come with substantial upfront deposits that fund the build, CAE doesn’t typically see cancellations, Parent said. A few customers have asked for delays in taking delivery, however.

“We’re planning for a severe impact that could run for a number of quarters,” said CFO Sonya Branco, but added, “I am confident that CAE has the tools and the ability to weather the storm and resume growth once the episode is behind us.”