CAE taps feds and Quebec government for nearly $200 million in loans to launch ambitious $1-billion digitization project

The federal government is helping one of Canada’s most enduring aerospace firms to apply the latest developments in digital technology to its simulation and training products and services. CAE Inc will receive $150 million from the Strategic Innovation Fund (SIF) to support a $1-billion, five-year program dubbed Project Digital Intelligence. The repayable contribution marks the third time CAE has tapped the SIF and its predecessor – the Strategic Aerospace and Defence Initiative (SADI) - over the past 10 years.

The SIF contribution is being augmented with $47.5 million from the Quebec government, bringing the project’s support package to $197.5 million.

In a company press release, CAE says the project is intended to “transform CAE’s products and services to leverage digital technologies, ranging from big data to artificial intelligence, cloud-computing, cybersecurity and augmented/virtual reality … The project includes three major activity areas: advanced digital technology development, digital transformation of the training and user experience, as well as CAE innovation and collaboration facilities.”

“CAE has been working with virtual reality since the 1950s - through its flight simulators. For decades, no one was really paying attention to virtual reality. Today, most companies try to integrate some form of virtual reality or digital-focus in their business,” says Marc St-Hilaire, CAE’s CTO and VP Technology and Innovation. “As a leader in the field, CAE must continue to be at the forefront of the digital revolution. With Project Digital Intelligence, that’s our commitment.  We know that it will take our products and services to another level, just like it did for every company that started to really integrate digital in its business.”

Since 2000, CAE revenues have pivoted from 80% products (flight simulators) to 60% services, opening up facilities throughout North America as well as Europe, Africa, the Middle East and Asia-Pacific. A primary focus on civil aviation has been augmented by an expansion into defence and security, corporate and healthcare.

Project Digital Intelligence also includes the development of an innovation campus at its Montreal facility, facilitating greater collaboration and co-development of new technologies with smaller firms across Canada. This will entail qualifying 150 new suppliers and continuing research collaboration with more than 50 academic institutions and research centres.

“It is important to have workspaces attractive for the young generation and to allow more collaboration, creativity and innovation between employees, and between actors in the innovation ecosystem,” says St-Hilaire. “It will be in CAE’s interest to leverage the expertise of various SMEs to further innovate our products and services and will allow them to benefit from working with a world leader exporting all over the world. It could open new markets for a number of SMEs.”

With an increased digital capacity, CAE is seeking personnel with different skillsets from those it has traditionally hired. St-Hilaire says the firm has retained a chief digital officer who is building what it calls a digital accelerator team. In addition, 1,700 workers are being given additional digital training, augmented by 400 new engineering and manufacturing positions. The firm currently employs approximately 9,000 people – 4,000 at 18 locations across Canada and 5,000 internationally where it maintains 160 sites and training locations.

“CAE is a world leader in aviation training with about one third of (global) market share – and the world leader in commercial aviation training,” says St-Hilaire. “No other company in the field has committed to such a significant investment in innovation. (We have) the largest installed base of full-flight simulators in the world. We can gather data from all of these full-flight simulators and derive insights for our customers to improve training as well as aviation safety.”

Previous government assistance

In 2014, CAE tapped SADI for $250 million to launch a $700-million project called Project Innovate. The project developed and expanded its modelling and simulation technologies for civilian and military applications

In 2009, SADI contributed $250 million to CAE’s $714-million Project Falcon to expand and diversify the business sectors it aimed to compete in and enhance six key technology areas. The project marked the firm’s entry into the healthcare field to compensate for its exit from the marine sector in 2005.

In 2005, CAE received $189 million from SADI predecessor Technology Partnerships Canada and $31.5 million from Investissement Québec for its $630-million Project Phoenix.

Throughout the company’s various R&D and innovation projects, revenues have continued to climb, increasing 51.2% from $1.662 billion in 2009 to $2.513 billion in 2016.

CAE R&D Spending

($ millions)

Ranking *               Year                            Amount                              R&D Intensity

#08                           1999                            128.3                                     12.0

#11                           2000                            126.4                                     10.9

#17                           2001                            122.3                                     10.3

#20                           2002                            117.3                                     10.4

#19                           2003                            115.0                                     10.2

#27                           2004                            118.2                                     10.8

#21                           2005                            107.6                                     10.9

#26                           2006                            96.3                                       8.7

#21                           2007                            89.2                                       7.1

#16                           2008                            113.1                                     7.9

#18                           2009                            121.7                                     7.3

#19                           2010                            117.0                                     7.7

#19                           2011                            117.0                                     7.2

#19                           2012                            144.4                                     7.9

#23                           2013                            144.1                                     6.8

#22                           2014                            149.0                                     7.0

#22                           2015                            138.9                                     6.2

#21                           2016                            150.0                                     6.0             $2.5 billion revenue

#19                           2017                            180.0                                     2.7

* Ranking in the Top Corporate R&D Spenders list, compiled annually by Research Infosource      

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