CAE eyes Indian simulator market

BY A CORRESPONDENT
June 24, 2006

Canada-based CAE Inc. is looking to expand its activities in booming markets like India and China, as defence budgets in international countries demand greater use of cost-effective flight simulation and outsourcing in these and other countries. According to CEO Robert Brown, "We've come through a massive restructuring to get our costs in line and now we've got the technology and financial muscle to go after growth again in international markets."

The 59-year old company has already made headways in the Indian market, with Indian airline clients training pilots at the CAE's Dubai centre. And with the Indian aviation market facing a severe shortage of pilots, CAE's prospects are looking good. Commenting on the two biggest aircraft manufacturing giants to supply planes to Indian airlines, Brown said, "Last year Boeing and Airbus announced orders for more than 2,000 aircraft and that will translate into simulator orders as deliveries are made," and added, "The current cycle could be extended, especially if U.S. carriers start returning to the market next year."

Although Airbus has announced a six-month delay on its forthcoming deliveries of the Airbus A380, Brown said it would not cause CAE any "real grief." The simulator company has already delivered two A380 simulators.

Simulation technology tends to reduce costs of homeland security as well as battle-training, and Brown was optimistic of CAE's marketability in emerging Middle-East markets as well as markets in India and China. CAE is looking to deliver 21 simulators in fiscal 2007 (which ends March 31), a figure that might eventually increase towards the latter half of the year.

The company is also looking to tap into other markets, such as the video gaming industry, which at a growth rate of 10 per cent, is already worth $15 billion in the U.S. He said, "We've got a team of 50 working on innovations with a budget this year of several million dollars, and we're looking at many things and learning. It's an area where, like computers and gaming, technology gets more sophisticated and costs are falling." Other potential sectors include health, urban solutions and public security.

The company is the world's leader in and building simulators and visual systems for civil aviation, and earned a revenue of $1.1 billion last year, our of which only half was generated from defence work, while the rest came from the civil sector. It has recently won a contract with Lockheed Martin for C130J Super Hercules training systems, and continues to supply the Canadian military with CF-18 fighter engineering systems.