Category Archives: Bombardier Aerospace
Bombardier expects to begin delivering CSeries aircraft to Delta Air Lines this year, saying there is no longer any impediment to delivering CS100s straight from its Mirabel, Canada, final assembly line to the Atlanta-based airline.
“Clearly, the Delta aircraft are in the skyline for 2018,” Bombardier CEO Alain Bellemare told analysts Feb. 15 as he presented the Canadian company’s 2017 financial results. Bellemare said the recent 4-0 ruling by the US International Trade Commission (ITC) negating proposed tariffs on CSeries exports to the US removes any restrictions on CSeries deliveries. The ruling gives Bombardier the “ability to shift the aircraft out of Mirabel to Delta,” Bellemare said.
The uncertainty surrounding the US Commerce Department’s proposed duties on the CSeries forced Bombardier and Delta to delay the originally planned April 2018 start of CS100 deliveries to Delta, which has 75 CS100s on firm order. With the tariff issue hanging over Bombardier, it was thought deliveries to Delta would have to wait until Bombardier and Airbus, which has agreed to take a majority stake in the CSeries program, established a CSeries final assembly line (FAL) in Mobile, Alabama, alongside Airbus’ existing A320 family US FAL.
Bellemare emphasized that plans for the Mobile FAL are “moving full speed ahead,” explaining, “We believe it’s the right strategy to have a US FAL to serve US customers.” But at least the first batch of Delta deliveries can now come from Mirabel, he said.
The ITC ruling “clears the path for us to support Delta this year,” Bellemare said. Bombardier is working “through the logistics” of CS100 deliveries with Delta, and will soon be able to finalize a delivery plan, he said, adding that the ITC ruling “clears the way to finalize our plans” with Delta.
Bellemare expects the Bombardier-Airbus CSeries deal to be approved by regulators and close later this year. “Integration planning is going extremely well,” he said. “We are ready to hit the ground running once we close, including construction of the Alabama FAL as soon as possible.”
Bombardier reported a 2017 net loss of $553 million, a 44% improvement over a $981 million net deficit in 2016. Bellemare urged investors to focus on the improvement, noting that 2017 completed the “second full year of our turnaround plan” and Bombardier is “exceeding our commitments” in terms of its financial performance. “2018 will be a pivotal year for Bombardier,” he said, predicting that the company will move into “a strong growth phase” this year.
- Consolidated full-year EBIT before special items(1) increased 57% year-over-year to $672M
- Margin(2) guidance exceeded across all business segments; full-year EBIT margins above 8% at Transportation, Business Aircraft and Aerostructures
- Full year free cash flow usage(1) better than guidance by over $200M
- Strong momentum continues as Company approaches midpoint in turnaround plan
- Bombardier’s participation in Transportation increases from 70% to 72.5% as results surpass incentive targets underlying CDPQ investment
Bombardier (TSX: BBD.B) today reported its fourth quarter and full year 2017 results, highlighting solid financial and operational performance across the company.
“Bombardier closed out the second full year of its five-year turnaround plan with very strong performance,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “Because of this solid performance, we begin 2018 with great momentum. Our operational transformation is in full motion; our growth programs – including the Global 7000 – are on track and we have a clear line of sight to our 2020 objectives.”
In 2017, Bombardier’s full-year EBIT before special items grew 57% year-over-year, from $427 million to $672 million, while EBITDA before special items(1) reached close to $1 billion. Full year EBIT margins exceeded guidance at Transportation, Business Aircraft and Aerostructures. Before special items, EBIT margins(1) were 8.4% at Transportation and Business Aircraft; and 10.0% at Aerostructures. Consolidated revenues for the year were $16.2 billion, in line with our guidance.
Free cash flow performance(2) for 2017 was better than guidance by more than $200 million, with a usage of $786 million. This over performance allowed Bombardier to end the year with a $3.1 billion cash balance and well positioned to achieve cash flow breakeven in 2018(3), a key objective of the Company’s turnaround plan.
“2018 will be a pivotal year for Bombardier,” Bellemare continued. “We are moving out of our investment cycle and into a strong growth cycle. Our focus is on flawless execution: bringing the Global 7000 into service; delivering on our major rail projects; and closing the Airbus partnership following regulatory approvals later this year.”
The company also announced that Transportation’s strong results in 2017 outpaced the performance targets underlying CDPQ’s investment in BT Holdco. Accordingly, for the 12-month period starting on February 12, 2018, Bombardier’s percentage of ownership on conversion of CDPQ’s shares will increase by 2.5%, up from 70% to 72.5%. Any dividends paid by BT Holdco to its shareholders during this period will be distributed on the basis of each shareholder’s percentage of ownership on conversion, being 72.5% for Bombardier and 27.5% for the CDPQ. These adjustments will become effective once the audited consolidated financial statements of BT Holdco are duly approved by its Board of Directors.
Bombardier is expecting its CRJ series to see an upsurge in orders in the coming years as the type rides a replacement wave for smaller regional jets.
“What we’re targeting there is first of all the entry into service of the new Atmosphere cabin, and a lot of the activity we suspect will be from replacement of regional jets and upgauging regional jets in the United States,” says Colin Bole, senior vice-president of sales and asset management for Bombardier Commercial Aircraft.
At the Singapore air show, a number of regional jet manufacturers have opined that 2017 was a low in the order cycle for regional jets, and that there will be an upswing over the next few years. This is an assessment that Bole agrees with.
“I think we’re right at the point of inflection where we’re about to hit that next wave of replacements,” he says, adding that the orders for CRJs tend to be large in number but from a smaller operator base. He adds that if a flurry of orders emerges, its production line is able to ramp up to meet the added demand.
“The CRJ assembly line is extremely sophisticated in terms of its adaptability to the cycle and our ability to ramp up and ramp down,” he says.
In contrast to the CRJ, orders for its Q400 turboprop are expected to come in smaller batches from more operators.
Bole says Asia is a major target for Q400 sales this year, following the success of selling 25 high-density configured aircraft, plus 25 options, to Indian carrier SpiceJet last year.
Bombardier Commercial Aircraft’s 2017-2036 Market Forecast, covering the 60- to 150-seat segment, shows that the Asia-Pacific region, which Bombardier defines as Asia without Greater China, is forecasted to undergo impressive growth over the next 20 years. This region is expected to take delivery of 2,050 aircraft, or 16 per cent of a worldwide market for 12,550 aircraft valued at $820 billion U.S. Asia-Pacific deliveries should consist of 1,050 large regional aircraft (50 to 100 seats) and 1,000 small single-aisle aircraft (100 to 150 seat).
“Asia-Pacific region is the home of the fastest growing economies. Strong GDP growth and a booming middle class should drive passenger traffic numbers to triple in the next 20 years,” said Francois Cognard, Vice President, Sales, Asia-Pacific, Bombardier Commercial Aircraft. “Bombardier aims to build upon its strong foundation in Asia-Pacific. Due to the demand for more frequencies and more city pairs to increase connectivity between smaller communities, there is a great opportunity to continue to support the expected growth with high-performing regional and small single-aisle aircraft.”
The drive for domestic and regional connectivity means that the fastest traffic growth in the region would be seen from small and medium sized cities with challenging airports. This is creating an increased number of point-to-point routes where the traffic is insufficient to allow economical operation of a larger single aisle aircraft. Thus, the increasing demand for high-performing regional and small single-aisle aircraft.
In the region, over 60% of all routes flown today have demand for less than 150 passengers per day. The forecast says that by 2036, intra-regional traffic will account for 80 per cent of all Asia-Pacific demand, with the majority of passengers taking short haul flights of under 500 nautical miles (925 km).
Bombardier Footprint in Asia-Pacific
Over 40 operators are flying or will soon be flying a total of 330 Bombardier regional and small single-aisle aircraft in the region and 27 of these operators fly more than 260 Q Series turboprops. Bombardier’s Q400 aircraft is the only turboprop that can seat up to 90 passengers. SpiceJet is the launch customer for the 90-seat configuration, having placed an order for up to 50 of this type to support regional connectivity in India. Nok Air and Philippine Airlines also operate the Q400 in a high-density 86-seat configuration.
There are 50 CRJ Series aircraft already flying in Asia-Pacific with 13 operators, such as IBEX Airlines of Japan. Recently, many start-up airlines in Asia-Pacific have selected the CRJ200 as the right aircraft to commence operations with. These include Zoom Air of India, Shree Airlines & Saurya Airlines of Nepal, and Air Pohang of Korea. Globally, 68% of all CRJ200 operators have gone on to operate larger CRJ700/900/1000 aircraft.
Bombardier developed its all new C Series aircraft, to fill an emerging 100- to 150-segment between large regional jets and large single-aisle aircraft. The launch customer for the C Series in Asia was Korean Air, who ordered 10 CS300 with 10 options. Korean Air have taken delivery of two CS300 aircraft to date, and had their first revenue flight from Seoul to Ulsan on January 20, 2018.