Bombardier Says This Time Is Different After C Series Rescueby and
Forecast for flagship jet: More than 250 deliveries by 2020
With liquidity buoyed, CEO promises `culture of performance'
Bombardier Inc. could deliver more than 250 C Series jetliners by the end of the decade after a pair of cash infusions gave new life to the beleaguered planemaker.
While profit and sales could fall next year, recent investments from within the company’s home province of Quebec have improved liquidity and buoyed the outlook for aircraft-development programs, Bombardier said Tuesday at its annual investor day in New York.
Bombardier’s C Series forecast was the most detailed yet for the introduction of its marquee model: shipments of 255 to 315 planes by 2020. Chief Executive Officer Alain Bellemare also promised investors an operational turnaround after C Series setbacks sent the stock to the worst rout among Canadian industrials in the past 10 years. But the assurances weren’t enough to stem another decline.
“Now that the liquidity has been addressed, it’s all about executing our programs, delivering our transformation plan and creating a culture of performance across the entire organization,” said Bellemare, who joined the manufacturer in February after its first annual loss since 2005. “We have a plan to transform Bombardier.”
Executives acknowledged that the onus was on them to deliver results after Bombardier’s recent struggles, including more than two years of postponements for the C Series’ introduction into service.
Chief Financial Officer John Di Bert said Bombardier needed to show improved performance, not just offer promises. Bombardier Commercial Aircraft President Fred Cromer also suggested that the company is focused on finding higher-profile C Series buyers to add prestige to a customer list now tilted toward smaller carriers and lessors.
“We’re being very selective about the airlines that we’re talking to,” Cromer said. “We’re looking at airlines that would really put a seal of approval on the program and energize this vis-a-vis other customers’ perception in the marketplace.”
Drumming up more interest is crucial, because the 243 firm C Series orders trail the target of 300 by the time the jet enters service in 2016. No one has placed an order in more than a year for the aircraft, which is a step up in size from Bombardier’s signature regional planes and is intended to challenge Boeing Co. and Airbus Group SE in the single-aisle jetliner market.
Bombardier said Tuesday it hopes to deliver 15 to 20 C Series jets in 2016, following certification of the aircraft later this year. That number could increase steadily until 2020, when Bombardier has a delivery target of as many as 120.
The widely traded Class B shares fell 4.8 percent to C$1.18 at the close in Toronto, dragging the 2015 decline to 72 percent. Quebec’s Bombardier family controls the company through ownership of a majority of the Class A shares, which carry 10 votes each.
Pension-fund manager Caisse de Depot & Placement du Quebec agreed last week to take a 30 percent stake in Bombardier’s rail business for $1.5 billion, boosting the division that Bellemare had explored taking public. The accord came after Quebec’s government said on Oct. 29 that it would invest $1 billion to prop up the C Series program.
Those lifelines supported Bellemare’s goal of shoring up a balance sheet weakened by development of the C Series, whose costs have ballooned by $2 billion to at least $5.4 billion. The company’s woes extend to business aircraft, as well, including the canceled Learjet 85.
Bellemare’s changes include a new leadership team. Of the eight executives speaking at the investor meeting, six weren’t with the company at the beginning of the year, including the CEO, CFO and head of the commercial aircraft division. Bellemare was most recently an executive at United Technologies Corp.
Bombardier didn’t give specific targets for 2016 sales or earnings before interest and taxes, the two measures that it said would decline. Analysts expect both gauges to fall, based on estimates compiled by Bloomberg. Next year’s results will be pressured by falling production rates for the Global 5000 and Global 6000 business jets.
Sales may exceed $25 billion, with margins of as much as 8 percent, in 2020, Bombardier said. Revenue may reach $18.9 billion this year, based on results through the first three quarters and analysts’ estimates compiled by Bloomberg.