Long overdue, a commentary piece this morning on CAE Inc, a Canadian based international manufacturer of simulation technologies, modelling technologies and training services to the global airline industry, aircraft manufacturers, military and defence, security and healthcare sectors.
A recent visit to CAE’s state-of-the-art Burgess Hill facility in West Sussex provided me the opportunity to see some of the results of many years investment that CAE has made here in the UK. CAE is today a dominant world player in synthetic based, computer simulation and actual flying training for both commercial airline and business jet pilots using own built and designed actual aircraft simulation equipment. Over many years CAE has earned a tremendous reputation for pilot training and one that is second to none in the industry. The international leader in competency based training, CAE is also industry leader in in respect of accident and incident recording.
At Burgess Hill, simulation based training is provided for commercial, business jet and military rotary pilots and the facility is today the largest simulator based pilot training centre in the UK.
In global terms, CAE is to be regarded as the leader in the field of synthetics based civil aviation, military and defence training solutions and a fast growing player in the areas of security and healthcare I regard the company as being very well placed to grow in what are clearly still fast growing industry segments.
Operating in over 35 individual countries and from 160 different site locations, CAE has a total of 65 purpose built training centres worldwide. With over 8,500 employees spread across the globe, CAE’s revenue in 2017 was £1.485 billion and the company ended the year with an order backlog in excess of £4 billion. CAE is today to be regarded as a large and highly respected international company, one that is the leader in the vast majority of its special fields of operation and one that still has massive potential to grow.
In respect of UK activities, the subsequent Burgess Hill facility development has its roots in the late 1990’s when 4 simulator bays were initially operated by the Defence & Security division. However, following a change in business focus in 2004, CAE decided to add the first of two A320 simulators for EasyJet and followed this later with Boeing 747 and Airbus A340 simulators for Virgin Atlantic.
In a second stage of development at Burgess Hill that had begun in 2005 the company added a further 8 simulator bays included the first Business Aviation Training (BAT) devices that including the Falcon 900/2000, Falcon 7X and the Bombardier Global Express aircraft. In the years that followed a third Airbus A320 simulator was added together with those for the Citation XLS and Phenom 100 platforms and in 2009, a Phase 3 stage development that would house an additional 4 simulator bays for Lear Jet 45 and Citation II. In 2014, Gulfstream G450/550 simulator devices appeared together with those required for the Embraer 145 and in 2016, an AS332L2 super puma rotary device was added. The most recent addition in 2018 is the Bombardier Global 6000 Vision simulator and which has taken its first clients in recent weeks.
In terms of UK presence outside of Burgess Hill and that of CAE Oxford Aviation Academy which I will cover in the following paragraph, CAE has dedicated civil aviation based training and services based facilities located at Manchester and Gatwick together with various other airport locations and in respect of defence based training, facilities at RAF Benson, RAF Brize Norton together with a number of other RAF and USAF bases around the country. Of a total 1,730 plus staff employed by the company in Europe as a whole, over 450 are now employed in the UK.
CAE Oxford Aviation whose UK facilities at Oxford Airport I will hopefully be visiting over the coming months operates in a total of nine locations within six countries and four continents. Successfully training over 1,000 pilots annually, Oxford Aviation is responsible for ‘actual’ flying training of student pilots. In total, Oxford Aviation employs 275 instructors who operate 160 aircraft of 16 different types. It is also worth mentioning here that Oxford Aviation is also the international leader in competency based training for airlines and is industry leader in respect of accident and incident recording. CAE AB-Initio Flight Training Network operates a mix of either fully owned or joint venture academies in the USA, UK, Belgium, Spain, Australia and elsewhere and also supports CAE built simulators operating in Saudi Arabia and Oman.
In defence and security synthetic based training, CAE has major operations and activities with the UK, Germany, Italy and several other Europe based militaries and governments. With the emphasis on Training Systems Integration, the mix of virtual and live flying together with constructive training implementation ensures that CAE is providing a complete offering and one that allows also for an optimal LVC (Live-Virtual Constructive) training mix and importantly, is operated within an immersive, integrated and interoperable training environment.
In total, CAE provides equipment and training services at seven military bases in the UK – RAF Benson, RAF Brize Norton, RAF Cranwell, RAF Shawbury, RNAS Culdrose, and RNAS Yeovilton and also for USAF at RAF Mildenhall. The current defence related programmes include the Medium Support Helicopter Aircrew Training Facility (MSHATF) facility at RAF Benson which is a CAE owned 40 year Private Finance Initiative based contract from the MOD that provides ground based rotary wing mission training. The MSHATF facility which I have previously visited includes 3 full mission Chinook helicopter simulators, one Puma full mission simulator and two Royal Navy Merlin full mission simulators.
In respect of Military Flying Training System (MFTS) programme for which CAE is in this respect a sub-contractor to Lockheed Martin UK/Babcock International ‘Ascent’ partnership, the programme which is centred at RAF Shawbury and includes the Army Air Corps element at Middle wallop is based on future multi-engine rotary pilot training for the UK military using newly constructed Airbus H135/H145 helicopters. The operation includes 7 flight training devices, one command and tactics trainer and for fixed wing Phenom 100, a full flight simulator, one flight training device and 3 x part task trainers.
Importantly in respect of defence and security based synthetic simulator based training, CAE invests continuously in research and development of new product technology. Training is based on developed common database (CDB) architecture adopted by the Open Geospatial Consortium as an OGC standard and the company prides itself on having the ability to design product agnostic solutions to fit customer requirements. With proven experience in the integration of multiple software products the synthetic base of technologies developed transfer across the Air, Land and Sea domains.
Synthetic based Healthcare training is another fast growing area of activity for CAE. Whether this might be requirements covering civilian and patient medical emergency response, military and disaster response training or specialist simulation based training for doctors, nurses and that could include all forms of medical specialisation training including imaging, interventional, patient simulation, courseware or centre management, I see this a very fast growing area and one that CAE is very well placed.
Overall CAE may be considered today as being a worldwide leader in the field of training for civil aviation, defence, security and healthcare. It is the number one in military virtual air training, commercial aviation training, helicopter aviation training civil simulation equipment sales, AB-Initio Pilot training, crew resourcing and also in Healthcare Simulation Training Technology and second largest in Business Aviation Training.
As a global company civil aviation based training now accounts for 58% of revenue with defence at 38% and the latest form of simulation based training facilities, that of Healthcare now 4% but likely to rise fast. Overall, product based sales, simulator based systems, account for 40% of the business and those of service based training 60%. In respect of global activity split, the US accounts for 36% of revenue, Europe 28% and Asia, Australia, Canada, Central and South America and the Middle East the remaining 36%.
Founded by Ken Patrick, a former Royal Canadian Air Force officer in 1947 and then known as Canadian Aviation Electronics, the initial idea had been based on formation of a company that could take advantage of a sophisticated war-trained team of aviation based electronics engineers and who were considered at the time in respect of the need to retain developed skills, to be innovative and technology intensive.
In the 1960’s the company was awarded a milestone military contract from the Canadian Government – this in the form of was a military contract for six F-104 Starfighter simulators. The F-104 program was the company’s first experience with radar land mass simulation and the incorporation of a visual system, a motion system and a compact mission recorder. Within a five-year span, 26 additional units had be purchased by five other North Atlantic Treaty Organization (NATO) countries. In 1961 CAE Elektronik was established in Stolberg, West Germany in order to maintain the CAE built F-104 simulators delivered in Europe. Today this division provides maintenance, repair, overhaul and modification services for military flight simulators, and designs and builds sophisticated maintenance training aids for complex aircraft systems. CAE G, as the division is I believe now known, also designs and manufactures communication equipment and systems for computer related telecommunications services, which are sold to government agencies throughout Western Europe.
In 1962 the decision was taken to change from analog to digital technology and to aggressively pursue simulation based training of commercial aircraft pilots. Suffice to say that from that point on CAE has probably never looked back and while up to then it had only secured prime contracts on the military front, the growth of the airline industry would, as it continues to do today, would provide the company with a constant flow of growth opportunities in the full round of commercial aviation based synthetic training.
By the mid 1980’s the company was already exporting 85% of simulation equipment production and over the following 30 years the company continued to grow at a fairly rapid pace. Moreover, it did so by investing and developing new and more sophisticated synthetic based training technology and by providing military, governments and airlines with cost effective, more efficient and faster ways of training pilots.
Over the years CAE grow to the point that it was providing civil aircraft based simulation systems for virtually all different aircraft types for airlines, military and business jet customers all over the world.
Over the past ten years CAE has also grown its overall training network including actual training and today it has secured a position of being a world leader in the training of civil aviation, defence & security and healthcare. CAE has also more recently deployed a new vision, one of wishing to be recognized as the global training partner of choice.
In respect of the May 2012 acquisition of Oxford Aviation Academy, one of the oldest and most esteemed brands in ab-initio training and aviation personnel sourcing, this expanded CAE’s global training network to more than 65 training centres and flight academies.
Today CAE trains approximately 120,000 civil and defence crew members and healthcare professionals every year. In the process the company offers cadet-to-captain training solutions to hundreds of airlines globally. CAE’s training services represent approximately 60% of revenue and the business will no doubt soon be reaching $2 billion of annual revenue and beyond.
Through organic growth and strategic acquisitions the number of CAE’s international training facilities has grown rapidly during this decade. The first had I believe been opened in Sao Paulo and Toronto and these were followed by an acceleration of footprint internationally with acquisitions of the Netherlands-based Schreiner Aviation Training in 2001 and which at the time made CAE the world’s second largest independent provider of aviation training services. One year later, with the acquisition of SimuFlite, CAE was quickly catapulted into the into business aviation training and throughout this period of rapid expansion CAE was also establishing strategic training partnerships and alliances with airlines around the world – these have included with Emirates Airlines, Alitalia, Iberia, LATAM, Air Asia, Cebu Pacific and China Southern, and with major aircraft manufacturers like Airbus, Embraer, Bombardier and Dassault.
In 2006, CAE formally launched a network of Ab-Initio flight schools which quickly became the largest in the world. These initiatives have made CAE’s civil training and services unit the industry powerhouse it is today-global in every sense with a network of training centres on five continents serving airlines, operators and aircraft manufacturers. In just a few short years, the company has earned a reputation for uncompromising quality and expertise for training delivered close to the customer and customized to meet their unique requirements.
Celebrating its sixtieth year of operation in March 2007, the company launched the CAE 5000 Series full-flight simulator (FFS) which had been purpose-built to address training requirements on commercial narrow-body platforms and those of regional and business jets. The CAE 5000 Series features an innovative, standardized design employing proven commercial-off-the-shelf (COTS) technologies that include PC-based visuals, high-performance liquid crystal on silicon (LCoS) projectors, electric motion and composite components.
While CAE was expanding into aviation training management recognised not only that military simulation and training still had much untapped potential but also, because of the size of the US defense market, that the company needed a presence in the United States. To that end in 2001 CAE acquired Florida-based BAE SYSTEMS Flight Simulation and Training, which had formally been known as Reflectone. Over the following years CAE’s US based military business grew significantly as new relationships were built. Key programs such as US Navy MH-60 Seahawk helicopter simulators and US Air Force C-130J training systems were won. Since then CAE has established more key relationships in the US including with major manufacturers such as Lockheed Martin and Boeing, with the latter awarding CAE its Outstanding Supplier Award in 2006.
It was around this same period that other parts of CAE’s internationally based military training business activities also began to flourish. In the U.K for example, CAE was awarded the world’s first military training ‘Private Finance Initiative’ (PFI) programme building new facilities at RAF Benson in order to provide operational training for MSHTF which is CAE’s Medium Support Helicopter Aircrew Training Facility.
CAE Gmbh in Stolberg, Germany continued to thrive with key positions on European multi-national programs such as Eurofighter and NH90. CAE Australia established CAE as a key player “down under” as the company became an authorized engineering organization for supporting a range of Australian Defence Forces flight simulators. By the end of the decade, CAE’s military business had grown to approximately 50% of CAE’s revenues.
Following on from this CAE developed the new CAE 7000XR Series full-flight simulator and modernized its processes to be even more competitive. Leveraging the latest advancements in technology and training capabilities, the CAE 7000XR Series is designed to optimize life-cycle costs for the customers and to address new and future training requirements. In 2015, CAE set a new industry record of 53 sales of FFSs. During the same period CAE sold its mining division and also acquired one of its flight-simulator market competitors in the form of Lockheed Martin Commercial Flight Training (LMCFT). This acquisition expanded CAE’s customer installed base of commercial flight simulators by approximately 50 simulators and also added training facilities capacity in Korea and Brazil.
CAE’s thought leadership contributed to shaping the future of training. This includes representing its stakeholders in discussions on civil aviation regulations to ensure the industry’s strategic, safe and sustainable evolution. CAE was involved in numerous Federal Aviation Administration (FAA), European Aviation Safety Agency (EASA) and International Civil Aviation Organization (ICAO) regulatory committees and working groups, notably to find solutions to the Loss of Control In Flight (LOC-I), the primary cause of aircraft fatalities worldwide. CAE delivered the first simulators equipped with Upset Prevention and Recovery Training (UPRT) capable instructor stations in 2015.
In 2011, CAE Healthcare acquired Medical Education Technologies Inc. (METI), a Sarasota-based company renowned notably for its innovative patient simulators. This acquisition brought a direct sales force in the U.S., close customer relationships and a worldwide distributor network. Since then, CAE Healthcare became the global leader in technology that enhances training and lowers the risks inherent in delivering healthcare, and has the industry’s broadest portfolio of end-to-end solutions and proprietary technologies to improve patient safety in clinical settings. Today, CAE Healthcare is a training partner of choice for medical societies and industry, helping shape the future of healthcare training by leveraging CAE’s expertise in aviation.
In the meantime, CAE’s Defence and Security business unit had to combat a declining defence spending environment. Fortunately, CAE’s simulation-based training solutions were increasingly accepted by defence forces, and seen as a cost-effective response to maintaining and enhancing mission readiness in a cost-constrained budget environment. CAE D&S also made good progress on its training systems integration (TSI) strategy, delivering end-to-end live-virtual-constructive (LVC) training solutions to its customers. In October 2015, CAE became the prime contractor of the NATO Flying Training in Canada (NFTC) program, one of the world’s premier military pilot training programs and now provides classroom, simulator and live flying training support for the Royal Canadian Air Force (RCAF) and allied military pilots.
In June 2015, CAE was awarded a contract to provide the U.S. Army with comprehensive training for fixed-wing pilots, and which included a requirement for a new training centre to be built in Alabama in order to provide academic and simulator based training as well as live flying training on both US. Army and CAE-owned aircraft.
It is worth noting also that two years ago CAE achieved a major success in the strategy to leverage training systems integration expertise into the naval market when the United Arab Emirates selected the company to develop a comprehensive training centre for the UAE Navy.
CAE has already reached the validation phase of its Next Generation Training Systems with the launch customer being AirAsia. Supported by innovative data collection and analysis techniques, this system promises to improve training quality and efficiency through the integration of untapped data-driven insights into training, allowing CAE to customize training for each and every pilot.
In 2017, CAE celebrated its 70th anniversary. Suffice to say that CAE has, in my view, has successfully sustained its leadership position through offering compelling solutions to customers operating in complex, mission-critical environments. The success reflects an ability to evolve and adapt in a timely way to changing needs and to deliver on our promises of quality, reliability and performance. It is also testament to the real passion of the people involved to provide customers with what they need and also to the zest, innovation and focus, all of which was very evident on my visit to Burgess Hill.
CHW (London – 15th May 2018)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785