60 Minutes with Eric Hinson, President & CEO, SIMCOM International
As the world moves ever faster and becomes increasingly Interconnected, global air travel continues to grow rapidly. And while many would argue that future air travel will be conducted by pilotless aircraft, Boeing, Airbus and the rest of the Industry anticipate the need for a 4 to 5-fold increase in the number of commercial (ATP rated) pilots over the next 30 years.
As the leader of one of the world's premier pilot training organizations, Eric Hinson understands very well the challenges and the opportunities these forecasts represent. He has successfully orchestrated two transactions in less than 12 months, designed to position SIMCOM to thrive in a flight training Industry that will also grow rapidly to support the enormous demand.
CS: There have been some interesting developments at SIMCOM in the last couple of months. Can you bring us up to speed and talk a bit about what led to the new partnership with CAE?
EH: To understand what has happened at SIMCOM recently, you have to go back to our origins 30 years ago. SIMCOM was founded to serve the owner-flown (pilot) market, a niche segment that had been neglected by larger more established training companies. While this proved to be a fertile segment for SIMCOM’s early success the limited size of the owner flown market was constraining SIMCOM’s growth. In terms of revenue, the large-cabin market is the biggest segment of the general and business aviation training industry. It is currently served by CAE and FlightSafety. The barriers to entry in this segment are significant. To maximize the potential of SIMCOM we needed to find a strategic partner with strong OEM relationships. When our previous private equity owner was ready to sell the company, we reached out to Kenn Ricci at Directional Aviation, the owner of Flexjet. Given Flexjet’s purchasing power and large pilot training demand, Directional was the logical new partner for SIMCOM.
We completed the transaction with Directional in October of 2018. Shortly afterward, we issued an RFP for full flight simulators and FTDs to support Flexjet training requirements. CAE was one of several companies that submitted bids. As CAE learned more about our plans for SIMCOM they proposed, in addition to supplying the simulators, an investment in the company. Discussions ensued and the result is a 50/50 joint venture between the current investors in SIMCOM and CAE. The transaction has been announced and will be finalized in November 2019.
CS: How will SIMCOM evolve in the months and years to come? Can you shed some additional light on how the new relationship with CAE will impact SIMCOM service offerings going forward?
EH: SIMCOM will remain an independent company with CAE as a long-term investor. We will certainly leverage their technology and training tools with an eye toward improving training for our customers and enterprise value for our shareholders. There are important strategic advantages to remaining an independent entity with strong ties to Flexjet and other Directional companies. Directional and CAE see the opportunity clearly and both are strategic investors.
CS: Can you share your thoughts on how you see the traditional and the emerging aviation business sectors evolving in the years to come and the role flight training will play across the industry?
EH: If we break down the traditional GA and business aviation market by segment the owner-flown segment is evolving quickly. Owners have embraced single-engine turboprops and light jets. While the entire segment is much smaller than it was 20 years ago, aircraft manufacturers like Daher and Pilatus have thrived with single-engine turboprop offerings. Greater automation like the recently announced auto throttles for both the PC-12 and TBM, will require robust training solutions to ensure pilots have a solid grasp of the underlying technology and employ it properly. The larger question for participants in the owner flown segment is whether or not it is possible to once again grow this market. Cost, training requirements and operating complexity limit the level of interest in flying your own airplane.
The business jet market is also evolving. While companies continue to purchase aircraft, we see a growing market for third party solutions including fractional ownership, hourly cards, and various charter models. High net worth individuals also represent a growing segment of the business jet market. Aircraft management companies are a logical solution for these buyers. Training companies will have to offer more flexible training solutions that can be adjusted to meet the unique needs of these larger fleet operators.
CS: You have very well-informed thoughts on the emerging VTOL/eVTOL/urban air mobility industry segment. How do you see that business developing and how will flight training be involved?
EH: These are certainly exciting times for the aerospace industry. The groundswell of interest in urban air transport is understandable. People simply love mobility. I’m confident that, in time, the technological issues (propulsion systems, energy sources, flight automation, air traffic control) will be solved. Whether or not the public will accept high-density air traffic in urban environments is perhaps the more important question. Regardless, I believe there will be many applications for UAM platforms including final mile freight forwarding, aerial surveillance, aerial application, and the extension of commercial airport catchments. This new market will present some interesting challenges for training providers. The goal for most UAM manufacturers is to create autonomous vehicles. Even if pilots are initially required for regulatory requirements or public acceptance, what sort of training is appropriate for highly automated vehicles that will operate in unique airspaces? And once autonomous flight is embraced, who trains the operators, who manages the system? We will be watching these developments closely and looking for opportunities.
CS: Anything else on your mind today? Anything we missed?
EH: There has never been a more exciting time to be in the aerospace industry. The level of investment and innovation today is unprecedented. A future that includes autonomous electric airborne vehicles, commercial supersonic flight, a moon settlement and even a trip to Mars no longer seems like a far-off dream. The sense of optimism that surrounded the jet age and Apollo moon missions is back. And we are at our best when we believe anything is possible.
The GovCon / Aerospace & Defense Team
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