Aviation training firm CAE Inc. has signed what observers described is a "strategically important" United States Air Force aircrew training contract that could be worth as much as $250-million (U.S.) over 10 years.
The base nine-month contract to provide training at 13 USAF bases in the United States and internationally is valued at $20-million. It also has nine one-year options.
The Montreal-based simulator manufacturer and training company said it will provide qualification and upgrading training to flight crew of KC-135 aircraft in several bases including ones in Florida, California, the United Kingdom and Japan.
The company said more than 3,500 pilots, co-pilots and boom operators train at the bases each year.
"Winning the U.S. Air Force KC-135 Aircrew Training System program as a prime contractor is an important milestone for CAE USA," said John Lenyo president and general manager of CAE USA.
He said the U.S. military recognized CAE's expertise in providing training for tanker aircraft.
The company will provide program management, academic and simulator instruction, maintenance services, and training device upgrades.
"We look forward to helping KC-135 air crews stay well-prepared and mission ready," Mr. Lenyo added.
The contract was originally awarded in late August but was challenged by the incumbent contractor, FlightSafety Services, a division of FlightSafety International, which held the contract for 18 years. It was announced Monday after the protect was denied.
Cameron Doerksen of National Bank Financial said the contract was strategically important for CAE because the value is material and it has unseated a major competitor.
CAE's annual military revenues were $808-million (Canadian) last year. The contract adds to its recurring revenue stream, which represents 30 to 35 per cent of total military segment revenues.
"We are not changing our estimates for CAE at this time, but this contract win gives us increased confidence in our defence segment revenue growth forecasts," he wrote in a report.
The military segment accounted for 53 per cent of CAE's total revenue and earnings in fiscal 2010.
The contract win also points to potential success in CAE winning other similarly sized U.S. contracts it is bidding on, Mr. Doerksen said.
The most likely will be the C-5 transport ATS, worth about $30-million (U.S.) to $35-million per year. CAE was recently awarded a contract to upgrade the U.S Air Force's C-5 simulators. The contract is expected to be awarded in mid-2011.
The KC-135 Stratotanker is the U.S. Air Force's primary aerial refuelling aircraft, which entered service in 1956. The United States operates a fleet of more than 400 of the Boeing designed and manufactured planes.
The Americans are conducting a competitions to eventually replace older models in the fleet.
CAE is a world leader in providing simulation and training for the civil aviation industry and defence forces around the globe. It has annual revenues exceeding $1.5-billion and employs more than 7,500 people at sites in more than 20 countries.
On the Toronto Stock Exchange, CAE shares gained six cents at $11.54 (Canadian) in morning trading.