Workers assemble the CAE Air1 ventilator at the CAE plant in Montreal, on Wednesday, June 17, 2020. CAE Inc. reported a loss in its second-quarter as it was hit by one-time restructuring charges.THE CANADIAN PRESS/Paul Chiasson

CAE says recovery tied to lifting of travel restriction, business jet interest

CAE says recovery tied to lifting of travel restriction, business jet interest

CAE Inc. says its recovery from the COVID-19 pandemic will be closely tied to the lifting of travel restrictions and continued demand for private aircraft.

The Montreal-based simulator maker and training company’s outlook is in line with the International Air Transport Association, which expects travel will fall 66 per cent this year and not recover until late 2023 or 2024.

But CAE chief executive Marc Parent is hopeful that Pfizer’s announcement Monday about the efficacy of its new coronavirus vaccine could accelerate the return to normalcy.

“Maybe that gets better because of news we had yesterday. Hopefully it does, that would be great,” he said Tuesday during a conference call about its quarterly results.

While commercial airline traffic has plunged because of the pandemic, there’s been a 50 per cent recovery of daily flight activity from the April lows.

And business aviation, which accounts for about one-third of CAE’s civil aviation business, has been recovering faster than commercial aviation and is within 10 to 15 per cent of pre-pandemic levels, Parent said..

“Anecdotally, our charter operator customers are seeing significant volume in business aircraft from customers who are new to private jet travel and in my experience from nearly 35 years in this industry, once people experience private jet travel, there tends to be a high retention rate.”

CAE shares got a lift after the company beat expectations despite posting lower profits on a dip in revenues.

Its shares gained $1.86 or 6.7 per cent at $29.76 in afternoon trading on the Toronto Stock Exchange.

CAE reported a loss in its fiscal second quarter as it was hit by a one-time $51.1 million restructuring charge related to the COVID-19 pandemic, mainly from impairment charges on non-financial assets and $108.2 million owed from customers.

The restructuring is expected to yield annual cost savings of approximately $50 million, starting in the company’s 2022 financial year.

Its loss attributable to equity holders in the second quarter was $5.2 million or two cents per share compared with a profit of $73.8 million or 28 cents per share a year earlier. It was also better than the $110.6 million loss in the first quarter.

“Short-term visibility remains limited, however, I take confidence in the fact that we’re in a better position now than we were at the start of the fiscal year. We continue to expect a stronger second half,” he told analysts.

Parent added that he sees lots of opportunities to get new business for its defence operations and doesn’t foresee any challenges from a change in U.S. administrations with the election of Democrat Joe Biden as president.

“I think we have lots of opportunities to grow within the defence budgets that are out there today and foreseen to be out there under any reasonable scenario,” he said, adding that simulator training saves money.

“I feel good about our prospects for growth in the next few years.”

Revenue totalled $704.7 million for quarter ended Sept. 30, down from $896.8 million in its second quarter last year.

CAE says its net income before specific items for the quarter amounted to $34.2 million or 13 cents per share for the quarter, down from $74.7 million or 28 cents per share in the same quarter last year.

The results were “well ahead of expectations,” said Steve Arthur of RBC Dominion Services Inc.

Analysts on average expected CAE would report a two cents per share adjusted loss on $634.6 million of revenues, according to financial data firm Refinitiv.

COVID-19 continues to have a profound impact on CAE’s customers but the company saw its training utilization recover to 49 per cent from 33 per cent in the first quarter. That’s up from expectations of 40 per cent utilization, still below normal use of more than 70 per cent.

It also demonstrated strength in business jet training contracts and the delivery of 10 full-flight simulators and three new orders.

“Bigger picture, we continue to like CAE’s long-term positioning and potential,” Arthur wrote in a report.

“Clearly COVID-related headwinds will persist in the near- and midterm (though vaccine news is certainly encouraging and supportive to end-markets), but we expect CAE to emerge with an even wider competitive lead, lower cost base, and technology platforms to drive future growth.”

He added that CAE’s aggressive cost-cutting at the start of the pandemic is paying off with its civil aviation margin recovering faster than anticipated, paving the way for the EPS outperformance, positive free cash flow and a reduced leverage ratio.

This report by The Canadian Press was first published Nov. 10, 2020.

Companies in this story: (TSX:CAE)

Ross Marowits, The Canadian Press

Business

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Prime Minister Justin Trudeau leaves the House of Commons on Parliament Hill in Ottawa, on Monday, Nov. 30, 2020. THE CANADIAN PRESS/Justin Tang
Conservatives push for parliamentary committee study into failed vaccine deal

OTTAWA — The federal Conservatives are calling for a parliamentary committee to… Continue reading

(Red Deer Advocate file photo).
Red Deer County seeks public feedback on draft budget

Minimal impact on ratepayers was the goal

(Advocate file photo).
RDC’s The Nutcracker is being videotaped for online viewing

COVID-19 presents challenges for live performance

Trail RCMP report three impaired driving investigations. Photo: Black Press file
New drunk driving rules allow police to impose tougher penalties immediately

New impaired driving regulations started on Tuesday

(Lacombe Express file photo)
Lacombe County holds the line on taxes

Staff hiring freeze planned for 2021 to make up for lost oil and gas revenue

Idyllic winter scenes are part of the atmosphere of the holiday season, and are depicted in many seasonal movies. How much do you know about holiday movies? Put your knowledge to the test. (Pixabay.com)
QUIZ: Test your knowledge of holiday movies and television specials

The festive season is a time for relaxing and enjoying some seasonal favourites

Toronto police respond to an incident at St. Michael’s College School, in Toronto, Nov. 19, 2018. The trial of a teen accused of sexually assaulting two students at a prestigious Toronto high school is set to resume today. THE CANADIAN PRESS/Tijana Martin
Trial resumes for teen accused in St. Michael’s College School sex assault case

Defence lawyers for a teen accused of sexually assaulting two students at… Continue reading

Minister of Health Patty Hajdu responds to a question during question period in the House of Commons on Parliament Hill in Ottawa on Monday, Nov. 30, 2020. The Trump administration is keeping silent about Canada blocking its plan to import prescription drugs from north of the border. THE CANADIAN PRESS/Sean Kilpatrick
Trump admin silent after Hajdu pushes back on U.S. plan to raid Canada’s drug cabinet

WASHINGTON, D.C. — The Trump administration is keeping silent about Canada blocking… Continue reading

Quebec City mayor Regis Labeaume, right, speaks at the inauguration of a memorial to the 2017 mosque shooting, Tuesday, December 1, 2020 in Quebec City. From the left, Luce Pelletier, artist who designed the memorial, MP Joel Lightbound, Boufeldja Benabdallah, and MNA Joelle Boutin.THE CANADIAN PRESS/Jacques Boissinot
Quebec City’s memorial to 2017 mosque shooting victims symbolizes defeat of hatred

Quebec City has inaugurated a memorial to the victims of the 2017… Continue reading

A scene from last year’s Light the Night fundraiser at the Stettler Town and Country Museum. This year’s rendition is on a drive-through basis only, but it still promises to be a not-to-be-missed seasonal highlight. (Independent file photo)
Stettler Town and Country Museum hosts ‘Light the Night’

This year’s rendition is drive-through only, but will still prove to be a dazzling display

Opinion piece
Opinion: A down payment on recovery, details to come

Just to be clear: Justin Trudeau’s government has not acquired the ability… Continue reading

(Black Press File Photo)
Rimbey woman gathering Christmas gifts for seniors at Valleyview Manor

Margaret Tanasiuk says she doesn’t want anyone to feel forgotten on Christmas morning

Mike Miltimore, seen in Kamloops, B.C., in an undated handout photo, says the Gretsch electric guitar that a woman brought into his store is from 1955 and similar to one played by country music legend Chet Atkins before he developed his signature series of guitars. THE CANADIAN PRESS/HO-Mike Miltimore
Guitar made in 1950s worth more than B.C. family imagined

KAMLOOPS, B.C. — When Renee Latheur decided to take an old guitar… Continue reading

Lewis Hamilton won the German Grand Prix after Sebastian Vettel crashed while leading near the end. (Photo by THE ASSOCIATED PRESS)
Hamilton positive for COVID-19, will miss F1’s Sakhir GP

SAKHIR, Bahrain — Seven-time Formula One champion Lewis Hamilton has tested positive… Continue reading

Most Read