WASHINGTON ― Travel restrictions and closures related to the ongoing coronavirus pandemic hit CAE’s civil training and defense segments, fueling a 44.3 percent decline in net income in its fourth quarter, the company said Friday.
CAE President and CEO Marc Parent said on the Quebec-based contractor’s quarterly earnings call that the defense segment projections for a strong year were blunted by the pandemic. Defense closed the year with 2 percent growth, but for the quarter, revenue was down C$46.1 million ($32.9 million), or 12 percent―and operating income fell 36 percent.
“In defense, we expected a strong fourth quarter, in order to reach our annual outlook for modest growth, but it too was impacted by the pandemic,” Parent said. “We achieved modest revenue growth, but we came up short on operating income, which was down 13 percent, mainly on lowered and expected program progress on programs and delays securing new orders.”
Nonetheless, the company said it booked C$1.2 billion ($857 million) in orders, including a subcontract through Lockheed to make C-130J simulators for the U.S. Air Force and Marine Corps, as well as separate contracts to train KC-135 aircrews for the U.S. Air Force and provide the German Navy with a comprehensive training solution for the NH90 Sea Lion helicopter.
CAE was one of the first defense and aerospace companies to take dramatic measures in response to the new coronavirus pandemic. It’s also one of the many firms that supply the defense market whose civil sides were battered by the global downturn in commercial air travel.
In April, CAE announced cuts for pay, capital expenditures and development investment ― and that it had furloughed 2,600 employees. Since then, it recalled 1,500 employees in Canada after two weeks and inked a deal with the Canadian government to build 10,000 ventilators for COVID-19 patients.
COVID-19 restrictions forced the closure of one third of its civil training locations and has sapped demand, the company said. The civil segment saw a 58 percent, or C$640.7 million, drop in orders compared to the same quarter last year.
Asked about the massive travel downturn, Parent predicted the market would take two years to return to normal and insisted it would ultimately rebound based on the public’s enduring desire to fly.
“I think we have seen the bottom and we are starting to see the recovery,” Parent said, adding that there had been a “slow, steady curve up over the last three or four weeks. At the same time, I fully expect that’s going to continue.”
“You have 60 percent of the world’s fleet on the ground; that’s not going to be sustained,” Parent said. “As those airplanes start being brought back, there’s going to be pilots who need to fly. So there is pent up demand for training, number one.”