BUSINESS

Ottawa makes $250-million investment in Montreal-based simulator maker CAE

02/27/2014 09:50 EST | Updated 04/29/2014 05:59 EDT
MONTREAL - Flight simulator company CAE is moving ahead with a $700-million project to develop its next generation of simulation platforms over the next five years — with help from the federal government.

Denis Lebel, the minister responsible for economic development for Quebec, announced a $250-million loan on Thursday.

In making the announcement during a visit to CAE's Montreal headquarters, Lebel said the money will help the world's largest maker of aircraft simulators keep its competitive edge.

"The market is changing quickly and, with this support, they will be able to play the game against any competitors," he told reporters.

Stephane Lefebvre, CAE's chief financial officer, said there's a 15-year repayment period for the loan starting in 2020 and that it is not interest free.

Asked if the project would create any additional jobs, Lefebvre replied:

"It's highly dependent on the market and the number of simulators that we'll be able to sell over the next few years. We'll maintain highly skilled employees, but we believe we'll also create some jobs."

Lefebvre also conceded that CAE has been feeling the heat from its competitors.

CAE's main commercial aircraft competition comes from L-3 Link, Lockheed Martin and Rockwell Collins, which have all beefed up their civil simulation operations through acquisitions in recent years.

L-3 bought the civil simulation and training business of France's Thales, Lockheed Martin acquired Dutch-based simulator manufacturer Sim-Industries, while avionics supplier Rockwell Collins signed a joint venture in June with Chinese simulator maker Bluesky Aviation Technology, a subsidiary of state-owned AVIC.

Small competitors include Mechtronix, whose operations are near CAE's main plant in Montreal.

"I think, overall, that it is an industry that is quite competitive," Lefebvre said. "We always need to be at the leading edge of the technology to be able to compete on the world market."

He also said that while the civilian side of CAE's business remains "very strong," the military side continues to be soft.

"In the past couple of years, we've seen a bit of softness — especially out of Europe and in the U.S. (where) we've been impacted by budget issues that our customers had in the U.S.," Lefebvre noted.

"Overall, our level of business in military hasn't gone down, but it's not increasing at the same pace as we have seen on the civil side."

He added that CAE has had to adjust its workforce in Europe.

The federal money is being provided under Canada's Strategic Aerospace and Defence Initiative. Better known as SADI, the program supports research and development in the aerospace, defence, space and security industries.

CAE flight simulators are used around the world to train airline and military pilots and cockpit crews. The company also provides other training equipment and services for the civil aviation and defence markets.

CAE employs 4,000 people in 15 locations across Canada, most of them in Montreal, and around 4,000 in the rest of the world.

On the Toronto Stock Exchange, CAE's shares closed down two cents at $14.92 on Thursday.