Outlook for Flight Training Market: A Mixed Bag.

• Author: Erwin, Sandra I.
• Position: Statistical Data Included - Industry Overview

Some growth expected in niche areas, such as 'collaborative' simulations

The current downturn in the commercial aviation industry could result in lower sales of simulators and trainers in the short term, but how long the slump will last is difficult to predict, said experts. The military sector is not expected to decline, but companies in the simulation and training industry face tough competition, as more niche players enter the marketplace.

The outlook for commercial aviation is grim, said the president of the Aerospace Industries Association, John Douglass. "The effects of the [September 11] terrorist attack on the U.S. aviation industry ... will be long lasting," he told a congressional panel. "Eventually, there will be renewed growth in the air transportation industry, but the immediate outlook is bleak."

The cutbacks in airline operations and the accompanying free fall of revenues, said Douglass, are "already having an effect on industries that support the airlines, including suppliers and maintenance providers."

According to AIA estimates, commercial aircraft and parts sales are expected to decline this year by approximately $2 billion, compared to previous forecasts. For 2002, AIA projects that industry sales could decline as much as $5.6 billion, and could drop by $6.7 billion in 2003.

The bad news for providers of simulators is that the commercial airlines have been the biggest buyers of simulation-based training services in recent years, said Jerry Weltsch, senior consulting analyst at Frost & Sullivan Aerospace and Defense Research Group, a business intelligence firm.

"There will be lower demand for pilot training if the airlines cut back on their schedules in the long term," Weltsch said in an interview. "How long that will last is hard to tell."

Expected declines in commercial sales of simulators are unlikely to be offset by sales of military flight trainers, even though, "there will always be a demand for military flight simulation," Weltsch said. "A military conflict would not necessarily drive up demand."

Any near-term upswings in Pentagon budgets likely will take care of immediate priorities, such as ammunition and replacement parts for aircraft.

The simulation and training market, Weltsch said, "doesn't seem to be growing in the defense areas."

Outside of fight training, there are other applications that could boost demand for visual simulation technologies, he said, such as biological research. The use of modeling and simulation will be expanded in the pharmaceutical and medical fields, Weltsch said, as well as in engineering.

Among the companies best poised for future growth in the military sector, Weltsch said, are CAE, L-3 Communications, FlightSafety International and Thales...