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As a provider of training solutions and simulation technology to civil and military aviation customers, Quebec-based CAE has become a leading force in the high-tech world of simulation. But as President and CEO Marc Parent explains, the company’s global growth is based entirely on real-world strategies
“I always say, ‘listen to your customers; deliver on time, quality products. This way they will have no excuse to go somewhere else.’” Marc Parent is talking about building and maintaining client relationships – a traditional notion, to be sure, but one that has acquired new importance in today’s shifting markets. As the leader of a publicly traded, multinational corporation with more than 8,000 employees, he’s keenly aware of the importance of stable, long-term business partnerships. And working in the high-tech world of aerospace, which is as vulnerable to the vagaries of international economics and politics as almost any sector you can name, he’s also aware of the value of traditional business philosophies. He’s fond of words like “trust” and “full service” – touchstones in an ever-changing environment.
Luckily, CAE Inc. has never lacked customers. The company was born in Montreal on St. Patrick’s Day in 1947 as Canadian Aviation Electronics Ltd. Within a week, founder Ken Patrick, a former Royal Canadian Air Force (RCAF) officer, had secured his first contract, building and installing radar detection systems above the Arctic Circle ¬for the RCAF. With the Cold War looming, the government was worried about Russian bombers. It was the first sign that CAE’s very existence would be linked to global matters.
Today, CAE focuses primarily on designing and building flight simulators at its plant near Montréal-Pierre Elliott Trudeau International Airport, supporting its products worldwide and providing flight training for both civil and defence clients. It has customers in some 190 countries. Parent, who joined CAE in 2005 and became President and CEO in 2009 (after previously working for Canadair Ltd. and Bombardier Aerospace), says that in the current climate, where companies seek a global presence in the face of declining opportunities at home, “we are somewhat fortunate because we are already there.”
In terms of defence contracts alone, CAE was destined to become a global company. “In Canada we’ve never had a very large home market for military-related hardware. So, we’ve had, by necessity, to go international. What that means is that CAE already has partnerships in the military, with personnel on the ground and a history of doing business around the world in 50 separate countries where we have defence customers,” says Parent.
Combining its defence revenues with robust results from its civil aviation activities and new endeavours in simulation services for the mining and healthcare sectors, CAE reported gross revenue in fiscal 2013 of more than $2.1- billion. Still, with defence budgets being slashed globally, the question becomes one of maintaining those revenues. But Parent is optimistic: “Simulation and modelling actually provide a solution, because training in a simulator can be done at 10 per cent of the cost of training in a real aircraft. So, what’s happening now is that you see a trend toward increasing the use of simulation in the military, and for us that’s very positive.”
That trend mirrors the rush toward simulation in the 1970s, when high fuel costs forced the civil and military aerospace industries to seek alternatives to “live” training – the same phenomenon, in fact, that led CAE to specialize in simulation in the first place. The same is true in the health and mining sectors, where training is costly and errors can be fatal. CAE has parlayed its success in aviation simulation to creating surgical, patient and ultrasound simulation tools for the healthcare industry and creating high-fidelity training environments for mining-industry clients.
Meanwhile, the civil aviation market is flourishing, with emerging markets leading the way. Parent attributes the boom to a growing middle class in developing nations and the rise of low-cost carriers. “That has fuelled a huge amount of potential demand,” says Parent. He points to last November’s Dubai Airshow, where more than $200-billion worth of deals for new aircraft were signed. Every one of those planes will require trained crews. Indeed, later that month, CAE and InterGlobe Enterprises inaugurated a simulation centre in India that will train more than 5,000 pilots a year. It is the latest addition to CAE’s global network of more than 50 training locations.
Parent also underlines the success of the Canadian aerospace industry in general and dismisses the notion that Canada is fated to be a resource-based economy, unable to compete in manufacturing. “Aerospace in Canada has been proving that wrong for a long time,” he says. “The fact of the matter is, we punch way above our weight. We’re the fifth-largest aerospace country in the world, and that’s completely disproportionate to our population. I think aerospace should be seen as an example that Canada can succeed on the world stage.”
Parent credits the company’s historical focus on R&D as a prime source of its ongoing success. The company believes that R&D is essential, so roughly 10 per cent of its revenues are earmarked for it annually. Says Parent: “What I’m proud of is that even during the recession that we just had, in 2008 and 2009, we maintained that level.”
And through strategy, the company’s revenue distribution is balanced: 40 per cent defence, 55 per cent civil and five per cent new core markets (healthcare and mining), with roughly a 50/50 split between simulation products and training and services. Geographically, revenue also splits along clean lines, with just under one-third (30 per cent) coming from the United States, 31 per cent coming from Europe and 39 per cent coming from the rest of the world. Even the workforce is neatly divided: 4,000 employees in Canada and another 4,000 spread out over the globe (with around 1,500 in the U.S. and 1,300 in Europe).
Given the size and diversity of that workforce, Parent preaches the importance of having talented, motivated people – yet another traditional business notion, but one that has kept CAE in the forefront. “We want to have engaged employees,” says Parent. “And what I mean by engaged is that people come to work and they feel that their individual contribution matters in the overall picture.”
Most of all, he looks for leaders. “I look for passion, I look for energy, I look for the ability to energize others – you recognize that kind of person in a room.” For Marc Parent, some qualities simply can’t be simulated.