CAE beats on profit on training demand, inks 737 MAX simulator sales

MONTREAL (Reuters) - Canada's CAE Inc CAE.TO, the world's largest civil aviation training company, on Friday reported a better-than-expected profit, driven by strength in its commercial pilot training and simulators business.

CAE is making deals to train pilots for airlines like easyjet Plc EZJ.L as air traffic rises.

Both CAE and U.S.-based Textron Inc's TXT.N TRU training division are also seeing increased demand for 737 MAX full flight simulators, after Boeing Co BA.N recently recommended that pilots train in a simulator for the model.

The 737 MAX, which was grounded in March following two crashes involving the type, is being fixed by the planemaker.

“There has been a step up in demand,” Chief Executive Marc Parent told analysts, although he stressed that it was up to regulators to finalize pilot training for the aircraft.

As thousands of pilots from more than 54 airlines need training, Boeing estimates that 36 737 MAX simulators are in service, driving demand.

To date, CAE has sold 56 MAX simulators to airlines, and has delivered 22 as of December, Parent said.

Since January, six of the company’s seven full flight simulator orders were for the 737 MAX.

CAE is “in the process of deploying more” simulators in its training network, above the three already in service.

With limited 737 MAX simulator capacity in Europe, Parent said “it’s reasonable to expect that one would go there,” without elaborating.

Parent also said CAE had to pull about 20 workers out of China and had some customers who were forced to cancel their training because of the coronavirus outbreak, although he added that any impact would be contained.

Revenue in CAE’s civil aviation training business jumped about 22% to C$558.1 million in the third quarter ended Dec. 31.

CAE reaffirmed its full-year outlook for 30% growth in operating income in the civil aviation training business.

Montreal-based CAE said net income attributable to shareholders rose 26% to C$97.7 million ($73.4 million), or 37 Canadian cents per share, in the quarter.

Revenue rose 13% to C$923.5 million.

Analysts on average had expected quarterly earnings of 35 Canadian cents per share and revenue of C$939.7 million, according to IBES data from Refinitiv.

Reporting by Allison Lampert; Additional reporting by Ankit Ajmera in Bengaluru; Editing by Maju Samuel and Richard Chang