Bombardier Inc. (BBD/B) will not have to raise additional funds this year after delaying delivery of its CSeries narrow-body plane for a fourth time, Chief Executive Officer Pierre Beaudoin said.
“We feel that we have the liquidity to complete our programs,” Beaudoin said today in Davos at the World Economic Forum. “We don’t need to issue debt or equity.”
Bombardier, which is relying on deliveries of the CSeries and new business jets to improve its balance sheet, has suffered scheduling setbacks on several development programs. The manufacturer delayed its CSeries jetliner again on Jan. 16, saying the aircraft won’t enter commercial service until late next year instead of 2014 because it needs more time for tests.
The smaller CS100 model of the CSeries is now set to debut in the second half of 2015, with the larger CS300 to follow six months later. Beaudoin said the Montreal-based company will disclose the extra costs associated with a delayed CSeries handover in conjunction with its earnings release next month.
The cost of hedging against losses on Bombardier’s debt climbed today. Five-year credit-default swap contracts on Bombardier debt widened about 9.7 basis points to about 299 basis points as of 4:09 p.m. in New York, the most among members of Canada’s benchmark Standard & Poor’s/TSX Composite Index for which there are actively traded contracts, according to prices compiled by Bloomberg.
Bombardier’s widely traded Class B shares fell 1 percent to C$3.91 at 4 p.m. on the Toronto Stock Exchange. That was lowest closing price since April, according to data compiled by Bloomberg, and pushed the company’s year-to-date decline to 15 percent.
The maiden flight of Bombardier’s biggest-ever jet was already pushed back three times. Bad weather has slowed trials, and program costs have climbed to $3.9 billion, 15 percent more than projected.
The program “is doing very well,” Beaudoin said today, adding that he is “disappointed that we are taking a little bit more time.”
The new schedule is “quite reliable” although risk remains as testing continues on an “extremely complex product,” Beaudoin said. “It is important to enter into service with great reliability.”
The CSeries competes for orders with the smallest Airbus Group NV (AIR) and Boeing Co. (BA) single-aisle models, the workhorses of the global airline fleet. Seating capacity on the CSeries will range from 108 to 160, a step up in size for the planemaker whose regional jets are its signature commercial aircraft.
Bombardier is betting the CSeries can generate $5 billion to $8 billion of additional annual revenue by the end of the decade and help the company almost double sales. The business case for the jet remains intact with 198 of 300 planed orders before first delivery in hand, Beaudoin said.
With development programs nearing their end, Beaudoin said investments costs are coming down. The Learjet 85, a new business aircraft that the company began developing in 2007, is due to fly soon after missing a 2013 target.
The manufacturer, which announced plans yesterday to cut 1,700 jobs at its aerospace division, sees no need for additional reductions, Beaudoin said.
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