New CAE chief unveils transformation plan, with cost cutting top of mind

MONTREAL – CAE Inc.’s new chief executive rolled out the first steps of a transformation plan Wednesday, stressing the need to clamp down on costs and reap the profits from its vast flight training network, rather than hunt for big expansions.

“We have this world-class network. It’s a field of strawberries that are going to continue to grow, and we want to harvest it,” Matthew Bromberg told analysts on a conference call.

“We’ll be more disciplined, more selective and more demanding in all our commercial bids, in all our capital project, and all our research and development programs. Likewise, any acquisition would be considered only within our core markets.”

The CEO also forecasted 10 per cent lower capital expenditures than was previously predicted for the year in a bid to retain cash amid slowing demand for air travel and commercial pilots.

Stepping into the top job in August, Bromberg launched a top-to-bottom review of the flight simulator maker’s operations last quarter and unveiled the broad outlines to analysts on Wednesday, with a focus on streamlining.

The overhaul will scrap the chief operating officer role, merge commercial and business aviation training into a single unit and consolidate the company’s three defence segments into two — one focusing on the U.S. market and the other on Canada and overseas.

Executive chairman Calin Rovinescu, who ran Air Canada as CEO for 12 years, leaned into the farm metaphor.

“CAE’s culture has centred primarily on growth over the last two decades, and it is time now to harvest that growth and extract even greater bottom-line profitability,” said Rovinescu, who took on the board role in February.

The federal government’s renewed focus on defence spending bodes well for CAE. Last week’s Liberal budget laid out an additional $81.8 billion in spending in the sector over the next five years.

Even purchases that flow to companies outside of Canada could have spillover benefits for domestic firms, Rovinescu noted, pointing to aircraft contracts as an example.

“If there’s a training footprint that attaches to that, if there’s a mission readiness footprint that attaches to that, there are opportunities for CAE and, frankly, for other Canadian companies.”

Nearly half of the firm’s revenue stems from its defence segment, where revenue grew 14 per cent year-over-year last quarter due to a ramp-up of recent contracts in Canada and the U.S.

More than a third of CAE’s $88 million in capital spending in its second quarter went toward simulators deployed to the U.S. army’s helicopter training program in Alabama, the company said.

Over the past five years, more than a half-dozen fixed-price defence contracts signed before the pandemic have eaten away at profits due to supply chain problems and cost inflation, but those deals are expected to fall off CAE’s plate in the next year or so, analysts say. Profit margins topped eight per cent last quarter.

“Some contracts we can go renegotiate because we see long-term strategic value; others we have to attrit out,” Bromberg said, referring to attrition — deals that are cancelled or expire, in this case.

One analyst questioned whether the rise of drone warfare threatens to sideline CAE as a trainer of military pilots.

“When you train pilots, whether they’re remote or operating systems of aircraft, training is required,” said Bromberg. He pointed to the company’s partnership with San Diego-based General Atomics, which makes Predator drones.

“It’s something we’re very well positioned in.”

In civil aviation, CAE enjoys enormous market share, executives stressed. The company churns out 80 per cent of the world’s flight simulators and trains about a third of its commercial pilots as well as 40 per cent of business jet aviators, according to S&P Global Rating.

The segment’s book-to-bill ratio — a measure of orders received to sales completed, a key indicator of near-term demand for a company’s services — sagged to 0.88 times in its latest quarter, but Bromberg called the change a “temporary dip.”

“Order activity was lighter than we anticipated at this stage, consistent with the slow recovery and pilot hiring, particularly in the U.S.,” he said.

“We believe pilot hiring activity has passed a trough and is currently improving.”

The company revised its full-year forecast for adjusted operating income from civil aviation to be flat, rather than growth in the mid-single-digit percentage range that was previously predicted.

On Tuesday, CAE reported profits attributable to shareholders rose 41 per cent year-over-year to $73.9 million in the quarter ended Sept. 30.

The Montreal-based company said revenue in its second quarter increased nine per cent to $1.24 billion compared with the same period a year earlier.

On an adjusted basis, earnings sat at 23 cents per share versus 24 cents per share the year before, beating analysts’ expectations of 20 cents per share, according to financial markets firm LSEG Data and Analytics.

This report by The Canadian Press was first published Nov. 12, 2025.

Companies in this story: (TSX:CAE)