CAE Plans Restructuring During Covid-19 Recovery

 - August 13, 2020, 11:26 AM

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

After posting a $110 million first-quarter loss, including a $97.9 million loss in its Civil Aviation Training Solutions division, CAE is embarking on a year-long restructuring plan that includes consolidations of facilities, transferring of various assets, and up to 350 layoffs. At the same time, the Montreal-based flight training giant is accelerating its digital initiatives.

“No doubt the rapid onset and pervasiveness of the economic and social impacts of the pandemic are like nothing we’ve ever seen before,” CAE president and CEO Marc Parent told analysts Wednesday as the company reported its earnings for its first-quarter Fiscal Year 2021 ending June 30.

Parent noted that the first quarter bore the brunt of the pandemic with temporary facility closures, travel restrictions, and ongoing challenges its customers faced. This led to closed or reduced operations throughout its network. At the low point, operations were in the 20 percent range and averaged 33 percent during the quarter. The civil division alone saw revenue plummet 48 percent, to $248 million, and backlog drop 11 percent from a year ago, to $4.5 billion

However, Parent was encouraged that “CAE has shown considerable agility and resiliency, having significantly mitigated our loss position and maintained a solid financial base in the first quarter, amid the most challenging conditions our company has ever faced.”

To prepare for this, CAE had taken a series of measures that, in addition to rolling facility closures, included furloughing some 2,600 employees during the time and cutting research and development activities.

Since that time, operations have ticked up to about 40 percent as facilities reopened and flight crews began to return. CAE further was able to deliver two full-flight simulators to airline customers in the quarter and despite the slide in backlog, the company booked training contracts and orders valued at $194 million from both airline and business aviation operators, in addition to an ab initio program with Boeing. Parent told analysts that North America is stronger than other regions in the world, with Europe lagging in recovery. Further, business aviation is expected to recover sooner.

While believing the worst is over, Parent cautioned that “the pace of recovery is unlikely to be linear or quick.” In preparation, the company rolled out a restructuring plan that is estimated to cost $100 million over the next 12 months but save $50 million annually beginning in 2022. Most immediately is the permanent layoff of up to 350 workers that will be ongoing over the next couple of months. Canada-based workers, however, can avoid layoff by shifting over to CAE's ventilator program.

Longer-term, however, will be the consolidation of facilities that overlap in a location to increase efficiency and reduce duplication. CAE stressed that it has no plans to exit any market. The restructuring also will involve a shift in simulators to locations that increase efficiencies, but no announcements yet are ready on which facilities are consolidating or the number of facilities that are moving.

The restructuring also involves the introduction and acceleration of new digitally enhanced processes such as remote installations and certifications and work from home practices, CAE said.

The pandemic set the stage for these efforts. While digital services already were a strong part of CAE’s capabilities, with Covid-19 the company began offering instructor-led online courses and implementing work-from-home policies as possible.

CAE further has launched a new digital platform, Airside, which provides training and career resources to pilots grounded due to Covid-19. Airside includes articles and other tools on subjects that pilots who were surveyed said mattered most to them, CAE said.