Feds sign $105-million deal with Bombardier for two new Challenger jets

News from Vancouver Sun – link to story

The Canadian Press | 6 June 2020

A Bombardier plant is seen in Montreal on Friday, June 5, 2020. The federal Liberal government is buying two new Challenger jets from Bombardier to replace half the military's existing executive aircraft fleet. THE CANADIAN PRESS/Paul Chiasson
A Bombardier plant is seen in Montreal on Friday, June 5, 2020. The federal Liberal government is buying two new Challenger jets from Bombardier to replace half the military’s existing executive aircraft fleet. PAUL CHIASSON / THE CANADIAN PRESS

OTTAWA — The federal Liberal government has inked a sole-source deal with Quebec aerospace firm Bombardier to purchase two new Challenger jets to replace half the Canadian Armed Forces’ existing executive aircraft fleet.

The $105-million contract follows recent warnings from defence officials that two of the military’s four existing aircraft would no longer be allowed to fly in many countries within a few years because of outdated technology.

It also comes after Bombardier announced Friday that it was slashing 2,500 jobs from its aviation division as demand for private jets has plummeted due to the economic impacts of the COVID-19 pandemic.

Yet the decision to purchase the two new Challenger 650s could stoke criticism as governors general, prime ministers and cabinet ministers have been routinely accused in the past of using the small private jets as personal flying taxis.

The Department of National Defence announced the deal with Bombardier on Saturday, saying the new planes along with a supply of spare parts and initial training for military personnel will be delivered this summer.

It was an excellent confluence of timing. We needed the planes with the regulatory changes

“We are really pleased to be able to announce that we’re going to purchase two new Challenger 650s from Bombardier,” said the Defence Department’s deputy minister, Jody Thomas.

“It was an excellent confluence of timing. We needed the planes with the regulatory changes.”

Due to more congested airspace and the incorporation of newer digital technology such as GPS in air-traffic control, countries around the world are phasing in new standards requiring modern navigation systems on all aircraft.

While two Challengers purchased by the federal government in the early 2000s have relatively modern systems, the two Challengers purchased in the 1980s don’t meet the new standards.

Ottawa bought itself some time when it inked an agreement in December that lets the two older jets continue to fly in the U.S., but other countries are starting to bring in the same standards. Canada will implement the standards between 2021 and 2023.

Thomas defended the decision to purchase the planes from Bombardier without a competition. The new planes are similar to the military’s existing Challengers, she said, which will allow them to be seamlessly integrated into the Royal Canadian Air Force.

“It made sense to buy Canadian capability when there is an innate Canadian capability,” she said. “And these planes actually will fit into the fleet very easily. The same technicians. The pilots will be able to fly both types of planes.”

Thomas denied the purchase amounted to a handout to Bombardier as it faces massive layoffs. Rather, she said the government saw an opportunity as the two planes were “on the line” and ready to be snapped up.

While online searches suggest the going rate for a Challenger 650 is around $40 million, Thomas said the full $105-million contract includes spare parts and training.

“We are not overpaying,” she said. “It is more than just the purchase of the plane. … And so it’s too easy to just Google a number. This is the in-totality price.”

The Challengers, which can carry nine passengers, have long been attached to controversy, with opposition parties of all stripes painting any use of the jets as inappropriate and wasteful.

It was an excellent confluence of timing. We needed the planes with the regulatory changes

Stephen Harper’s Conservative government, which was accused of excessive use of the Challengers, made a point of retiring two of the aircraft in 2014 as a cost-cutting measure. The Tories said at the time that the move would save $1.5 million per year.

Previous governments have said the aircraft are needed because the prime minister and governor general are not allowed, for security reasons, to use commercial aircraft. Defence officials note the Challengers are also used by the military to transport senior officers and troops in some circumstances, as well as for medical evacuations.

The aircraft have also been used to carry supplies and personal protective equipment around the country during the COVID-19 crisis, Thomas said. They also ferried military personnel to Europe after a helicopter crashed off the coast of Greece in April.

“The Air Force uses these planes every day on behalf of the Canadian Armed Forces,” she said. “Taking members of the Royal Canadian Navy after the Cyclone crash, that’s not political. That’s work. And these are the right planes to do that kind of work.”

Bombardier Aviation Announces Workforce Adjustments in Response to COVID-19 Pandemic

From Bombardier Business Aircraft

MONTREAL, June 05, 2020 (GLOBE NEWSWIRE) — Bombardier Aviation announced today that it would adjust its workforce to align with current market conditions reflecting the extraordinary industry interruptions and challenges caused by COVID-19.

When the pandemic first arose, Bombardier Aviation responded quickly, suspending manufacturing operations to support local government efforts to slow the spread of the virus and to protect the health and safety of employees, partners and customers. Over the past month, Bombardier Aviation guided by health professionals and industry best practices, implemented comprehensive procedures and safeguards to further protect employees and communities as manufacturing operations resumed. Now with business jet deliveries, industry-wide, forecasted to be down approximately 30% year-over-year due to the pandemic, Bombardier must adjust its operations and workforce to ensure that it emerges from the current crisis on solid footing.

Accordingly, Bombardier Aviation has made the difficult decision to reduce its workforce by approximately 2,500 employees. The majority of these reductions will impact manufacturing operations in Canada and will be carried out progressively throughout 2020. Bombardier’s worldwide customer service operations have continued to operate largely uninterrupted throughout the pandemic. 

Bombardier expects to record a special charge of approximately $40M in 2020 for this workforce adjustment and will provide further information on its market outlook when it reports its second quarter financial results on August 6, 2020.     

Bombardier Concludes Sale of the CRJ Series Regional Jet Program to Mitsubishi Heavy Industries

From Bombardier Inc.


All amounts in this press release are in U.S. dollars unless otherwise indicated.

MONTREAL, June 01, 2020 (GLOBE NEWSWIRE) — Bombardier (TSX: BBD.B) confirmed today the closing of the previously announced sale of the CRJ Series aircraft program to Mitsubishi Heavy Industries, Ltd (MHI) (TOKYO:7011) for a cash consideration of approximately $550 million, subject to post-closing adjustments and the assumption of liabilities by MHI related to credit and residual value guarantees and lease subsidies amounting to approximately $200 million. Under the agreement, the Corporation’s net beneficial interest in the Regional Aircraft Securitization Program (RASPRO), which is valued at approximately $170 million, has been transferred to MHI.

Through this sale, MHI acquires the maintenance, support, refurbishment, marketing, and sales activities for the CRJ Series aircraft, including the related services and support network located in Montréal, Québec, and Toronto, Ontario, and its service centres located in Bridgeport, West Virginia, and Tucson, Arizona, as well as the type certificates.

Bombardier will continue to supply components and spare parts and will assemble the remaining 15 CRJ aircraft in the backlog as of March 31, 2020 on behalf of MHI until the complete delivery of the current backlog, expected in the second half of 2020.

Bombardier retains certain liabilities representing a portion of the credit and residual value guarantees totalling $288 million as of March 31, 2020. This amount is largely fixed and not subject to future changes in aircraft value and is mainly payable by Bombardier over the next four years.

MHI RJ Aviation Group launches as Mitsubishi Heavy Industries Ltd. closes acquisition of CRJ Series Program from Bombardier Inc.

From Mitsubishi Heavy Industries, Ltd.

 The newly created group entities of MHI RJ Aviation Group begins operations today –

MONTRÉAL, June 1, 2020 /CNW Telbec/ – Headquartered in Montréal, Canada, MHI RJ Aviation Group (MHIRJ) is launching as a newly created group of entities providing a holistic service and support solution for the global regional aircraft industry including the CRJ Series aircraft. The launch of MHIRJ coincides with the acquisition close of the CRJ Series Program from Bombardier Inc. (Bombardier) (TSX: BBD.B) by Mitsubishi Heavy Industries, Ltd. (MHI) (TOKYO:7011).

“I am pleased to announce the opening chapter of MHIRJ’s story,” said Hiroaki Yamamoto, President & CEO of the MHI RJ Aviation Group. “Building on the solid foundations already in place and with the strong support of the MHI group of companies, there is new energy on board and our team is committed to serving the regional aviation market and becoming a platform for growth in the industry.”

As part of the acquisition, MHI acquires the maintenance, engineering, airworthiness certification support, refurbishment, asset management, marketing, and sales activities for the CRJ Series aircraft, along with the type certificates and related intellectual property rights. This transaction also includes the related services and support network mainly located in Mirabel and Toronto (Canada), and Bridgeport and Tucson (United States). CRJ Series Spare parts will continue to be distributed from depots in Chicago (United States) and Frankfurt (Germany).

About MHI RJ Aviation Group
MHI RJ Aviation Group (MHIRJ) provides comprehensive critical operational, engineering and customer support solutions including maintenance, refurbishment, technical publications, marketing and sales activities for the global regional aircraft industry. Headquartered in Montréal, Quebec, and bolstered by an Aerospace Engineering Center, MHIRJ’s network of service centres, support offices and parts depots are positioned in important aviation hubs in the U.S., Canada and Germany. A wholly owned subsidiary of Mitsubishi Heavy Industries, Ltd, MHI RJ Aviation Group includes MHI RJ Aviation ULC (Canada), MHI RJ Aviation Inc. (U.S.A.) and MHI RJ Aviation GmbH (Germany).

For more information about the company, please visit: www.mhirj.com.

Mitsubishi struggles to realize its jet globalization plans

News from Nikkei Asian Review – link to story

Financial woes hit SpaceJet program while low demand hits Bombardier deal

A SpaceJet takes off at Nagoya airport in Japan. Mitsubishi Heavy Industries has made cuts to the program. (Photo by Koji Uema)

MITSURU OBE, Nikkei staff writer ▪︎ June 1, 2020

TOKYO — Mitsubishi Heavy Industries marks a milestone in its aviation ambitions on Monday by integrating the commercial jet business of Canada’s Bombardier, even as doubts grow about the Japanese company’s ability to keep its own commercial jet program on track at a time of airline industry upheaval.

MHI’s $550 million purchase of Bombardier’s global network of service centers was meant to secure a foothold in the aircraft servicing business and provide a maintenance platform for its own Mitsubishi SpaceJet family of next-generation regional aircraft under development for 12 years.

But MIH’s ability to finance the much delayed program is under renewed scrutiny as the short-term challenge of the coronavirus crisis weighs heavily on its finances.null

Last month, MHI decided to shutter SpaceJet’s overseas operations, consolidate activities at its headquarters in Nagoya and suspend all flight testing. Mitsubishi Aircraft, the program operator, has approximately 2,500 workers — 1,800 in Japan, some 100 at the development center in Montreal, 160 at the U.S. headquarters in Renton and 450 at the flight test center in Moses Lake, both in the state of Washington.

MHI fell into the red for the first time in 20 years for the year ended in March and is struggling to shoulder the cost of the SpaceJet program, in which it has invested at least 716 billion yen ($6.7 billion). S&P Global downgraded company debt to BBB plus from A minus on Feb. 19, due to the growing strain the program is putting on finances. The rating company warned of a further downgrade if project costs surge beyond present assumptions.]

MHI, also a core supplier to Boeing, says it remains committed to the SpaceJet program, at least in the long-term. “As we consolidate, the hope is to reduce redundancies while still maintaining the core competencies we have developed,” said a spokesman for Nagoya-based Mitsubishi Aircraft, which is overseeing the program.

That the Bombardier acquisition will have to be written off entirely underscores MHI’s financial challenge. There is little demand for new aircraft or maintenance services, as 60% of the world’s 26,000 passenger jets are grounded during the pandemic, meaning they require no servicing. Bombardier’s network of service centers around the world repairs and maintains 1,250 jets flown by 130 operators.

Global passenger jet traffic has been down about 80% from a year earlier since April 1, according to data from aviation analytics company Cirium.

A Mitsubishi Aircraft spokesman stressed that the retrench is not the first step in canceling the SpaceJet program.

“Because of the cost control measures and budget directives that forced us to close our flight test facility at Moses Lake, we are putting the aircraft into storage,” the spokesman said, adding that a small team will continue to maintain the aircraft. “Since we are focused on cost control measures now, we will focus on [the] validation and documentation” portion of type certification, he added, referring to paper work for certification with the Japan Civil Aviation Bureau and work to validate it with the U.S. Federal Aviation Administration and the European Union Aviation Safety Agency.

After more than 3,000 hours of actual flight testing, Mitsubishi Aircraft officials have said that the company’s 88-seat aircraft for the Japan market, SpaceJet M90, was close to type certification, and were eyeing that to be achieved in the spring of 2021.

The coronavirus, however, upended the plan. “When the whole industry is downsizing, right-sizing and fleet-optimizing, the last thing they need is a brand-new airplane, all new training, all new spare parts,” said David Pritchard, associate professor of business at the State University of New York Empire State College.

In such an environment, MHI has no choice but to control costs and has frozen its ambition to develop, certify, and mass-produce the SpaceJet M100, a 76-seater for the lucrative U.S. market — the main target for the SpaceJet program.

Mitsubishi Aircraft has company orders for 163 aircraft, options for 124 and letters of intent for another 200, most of them for SpaceJet 100. But those orders could be in jeopardy if the buyers go out of business.

Boeing CEO David Calhoun predicted in May that a major U.S. airline could go under, warning that it will take a full-three years for air traffic to return to the pre-crisis level and another two years for the growth rate to recover.

With the industry in survival mode, “cash is the king,” Pritchard said. “As much as I hate that statement, it’s so true.”

He argues that MHI will have to find a partner to fund the project and said that Commercial Aircraft Corporation of China, or Comac, is the most logical one, noting the Chinese aircraft maker’s deep pockets and its desire to access Bombardier’s global service network and Mitsubishi’s experience in FAA certification.

Comac will form a joint venture either with Mitsubishi Aircraft or its rival Embraer of Brazil, and the one that doesn’t get such a partner “will not be around,” Pritchard predicted.

There have already been reports that Comac is reaching out to Embraer for collaboration. The Brazilian company already has over 80% of the Chinese market for planes carrying 150 passengers or less, and maintains a dedicated office for the country.

Hirotaka Yamauchi, director of the Japan Transport and Tourism Research Institute, a Japanese government affiliate, says it’s highly unlikely that MHI, the nation’s top defense contractor, will partner with a Chinese state-owned company. Further, SpaceJet’s billing as a ‘national project’ has also made it difficult to bring in foreign capital.

Aircraft manufacturing is a highly concentrated industry, and only Airbus and Boeing have the financial, engineering and marketing wherewithal to support a major jet program. But both companies reported net losses last year and are now too consumed with their own problems to throw a lifeline to others.

Therefore, Yamauchi doesn’t expect realignment to happen anytime soon. But, he said, “MHI will eventually need a partner” for the SpaceJet program.

Bombardier Releases its 2019 Activity Report, Highlighting Sustainability Milestones and Objectives

From Bombardier Inc.

MONTREAL, May 28, 2020 (GLOBE NEWSWIRE) — Bombardier (TSX: BBD.B) today released its 2019 Activity Report, reaffirming its commitment to sustainability and highlighting the Company’s progress over the past year towards achieving its environmental, social and governance (ESG) goals.

“As a company entrusted to safely move millions of people around the globe every day, Bombardier is proud to be a leader in sustainable business practices,” said Éric Martel, President and Chief Executive Officer, Bombardier Inc. “Moreover, the current global health and economic crisis has demonstrated that sustainability is more important today than ever before. With this Activity Report, we hope to send a clear message reaffirming our commitment to pursuing ambitious ESG goals as we look to move beyond the current crisis.”

Recognized among Corporate Knights’ Global 100 Most Sustainable Corporations in the World, Bombardier is committed to developing efficient, cost-effective and innovative products, efficiently managing resources in its operations and across its supply chain, and transparently and annually reporting on its progress.

The Company also believes that the manner in which it delivers its results is as important as the results it achieves, which includes maintaining the highest ethical standards, creating a people-centric and healthy work environment and supporting the communities where it operates.  

Bombardier’s 2019 Activity Report highlights the Company’s progress in integrating ESG considerations across the organization. Notable achievements from the past year include playing a leadership role in promoting the adoption and availability of sustainable aviation fuel (SAF) in business aviation; exceeding its goal of providing more than 1,000 paid internships in Canada and launching an updated Code of Ethics, Supplier Code of Conduct and enhanced ethics and compliance program.

In 2020, Bombardier expects to announce and deploy a renewed global sustainability strategy, overseen by its Board of Directors, to create value for stakeholders and further the company’s goal of building a world-class, sustainable business for the long-term.

Bombardier has published reports about its sustainability performance since 2008. Read the full 2019 report here: https://www.bombardier.com/en/sustainability.html

Bombardier Statement on fire incident in Northern Ireland

From Bombardier Inc

May 25, 2020 Montréal | Bombardier Inc.,  Aerostructures & Engineering Services

Thanks to the incredible work of the Northern Ireland Fire and Rescue Service, along with our security, health and safety and operations teams, as well as strict safety protocols and fire prevention infrastructure within our buildings, yesterday’s fire was contained within one area of the factory.  While there is damage to some machinery and a portion of the roof, there is no damage to any aircraft structures or aerostructure assembly lines.

Following thorough safety inspections, work has resumed as normal in other areas of the factory. We will work with our customers and suppliers to address any production concerns, however we are confident there will be minimal impact to customer deliveries.

Bombardier: Firefighters tackle ‘significant’ blaze at Belfast docks

News from BNN Bloomberg – link to story

24 May 2020

scene of fire

Fifty firefighters have been tackling a “significant fire” at the Bombardier factory in the docks area of Belfast.

The Northern Ireland Fire and Rescue Service (NIFRS) received a call at about 20:45 BST to attend the blaze on Airport Road in the east of the city.

The extent of the damage to the factory unit is not yet known, but there are no injuries.

Members of the public are being asked to avoid the area to allow operations to continue unhindered.

The aerospace company, Bombardier, is one of Northern Ireland’s largest employers.

In a statement, it said there were no employees working in the factory at the time, adding that it would take time to assess any damage.

Fire at the Bombardier plant

The fire service said six pumping appliances, one aerial appliance, and a high-volume pump were being used to contain the fire.

Fire Service Area Commander Dermott Rooney said it was a “very significant” blaze and he and his colleagues would be at the scene for some time.

crews tackle blaze

“Obviously, we are trying to get the fire under control. It’s very early stages, we would ask members of the public to stay away from the area so they don’t hamper our efforts,” he said.

“We’ve no indication of any particular risk to the local people, but they would be well advised to keep their windows and doors closed,” he added.

It is not yet known how the fire started.

scene of fire

The road has been closed to traffic.

DUP MP for East Belfast Gavin Robinson said it was “worrying news of a large scale fire in the factory”.

Alliance MLA for East Belfast Chris Lyttle said Victoria Park was also closed and that he was “grateful for the prompt response” of the fire service.

Jetflite’s Newly Delivered Challenger 650 Aircraft Demonstrates Versatility for Medevac Use in Efforts to Assist with COVID-19 Evacuation Flights

From Bombardier Business Aircraft

  • Aircraft completed its first 100 hours of flight in just 14 days upon delivery
  • Unique adaptability of the Challenger 650 aircraft lends itself to VIP or air ambulance configuration
  • On its longest tour, the aircraft visited 10 countries across three continents in just five days
  • In addition to its quiet and widest-in-class cabin, impressive range and outstanding short-field performance, the Challenger 650 aircraft’s exceptionally smooth ride provides added comfort for passengers receiving medical care
Challenger650_hi_res_2
Challenger 650

MONTREAL, May 13, 2020 (GLOBE NEWSWIRE) — Bombardier Aviation and Finnish charter operator Jetflite today revealed details of how a freshly delivered Challenger 650 business jet was immediately pressed into service to repatriate dozens of patients impacted by COVID-19 as airports and borders around the world shut down. True to its reputation for tried-and-true performance, the Challenger 650 aircraft performed flawlessly straight out of delivery, completing its first 100 hours in just 14 days.

The aircraft, configured for executive charter service, was delivered to long-time Bombardier customer Wihuri Group, a large Finnish industrial conglomerate, on March 26, 2020. The aircraft is operated by Jetflite, which is owned by Wihuri Group. The unique adaptability of the Challenger 650 aircraft interior allows Jetflite to quickly transform the business jet’s 12-to-16-passenger VIP configuration to an air ambulance configuration, complete with two stretchers, a portable isolation unit, personal protective equipment, COVID-19 test kits and a medical team to respond effectively to the growing worldwide humanitarian crisis.

“Our Jetflite fleet is always busy, but completing the first 100 hours inside 14 days directly out of the factory was something of a record, even for us, particularly in light of the challenges in flight route planning, obtaining diplomatic clearances and booking risk-free crew accommodation during the spread of COVID-19,” said Elina Karjalainen, Managing Director, Jetflite. “We are very proud to have this impressive new aircraft in our fleet, and to be able to help so many people, as we wait for better days ahead.”

On its longest tour, the aircraft traversed three continents in five days, flying from its base in Helsinki, Finland, to Portugal, Italy, Mali, Canary Islands, Liberia, South Africa, Seychelles, Afghanistan and Estonia to repatriate citizens to their home countries.

“The importance of reliability and flexibility, for which our Challenger platform is legendary, is brought into sharper focus when lives are on the line,” said David Coleal, President, Bombardier Aviation. “We are extremely proud that our Challenger 650 aircraft is able to make a strong contribution to the important humanitarian work the Jetflite team is doing.”

The same qualities that make the Challenger 650 jet an ideal business tool also make the aircraft an excellence choice as a next-generation air ambulance. In addition to its quiet and widest-in-class cabin, outstanding short-field performance and impressive range of 4,000 nm (7,408 km), the Challenger 650 aircraft offers an exceptionally smooth ride – its advanced wing design promotes greater patient comfort from takeoff to touchdown.

Bombardier Reports First Quarter 2020 Financial Results and Measures Taken in Response to COVID-19 Pandemic

From Bombardier Inc

  • Consolidated revenues of $3.7 billion, increasing by 5% year-over-year; consolidated adjusted EBIT(1) of $60 million, down 65% year-over-year, $156 million of reported EBIT; free cash flow usage(1) of $1.6 billion; operating cash flow usage of $1.5 billion
  • Cash on hand of $2.1 billion, including a $386 million equity injection in Transportation in the quarter by Caisse de dépôt et placement du Québec
  • Pro forma(2) liquidity of ~ $3.5 billion, including ~ $550 million proceeds from CRJ program sale set to close on June 1, 2020, and ~ $860 million available on Transportation’s revolving credit facility
  • Previously announced divestitures of aerostructures business and Bombardier Transportation progressing as planned(2)

All amounts in this press release are in U.S. dollars unless otherwise indicated. Amounts in tables are in millions except per share amounts, unless otherwise indicated.

MONTRÉAL, May 07, 2020 (GLOBE NEWSWIRE) — Bombardier (TSX: BBD.B) announced today its financial results for the first quarter of 2020 and provided an overview of the measures the company is taking to manage the business through the COVID-19 pandemic. The company also confirmed that all of the previously announced divestures are continuing to progress towards closing.(2)

“Bombardier is taking the right actions to manage the impact of the COVID-19 pandemic,” said Éric Martel, President and Chief Executive Officer, Bombardier Inc. “As the crisis unfolded, we acted swiftly to protect the health and safety of our employees and support our customers to the best of our ability. We also managed our operations to reduce costs, preserve cash and ensure sufficient liquidity to operate our business as we complete the ongoing divestitures necessary to address our balance sheet.(3) This includes an ongoing dialogue with governments where we have major operations regarding additional support programs, should they be necessary, to navigate through an extended crisis.”

Bombardier has pro forma liquidity of approximately $3.5 billion, which includes $2.1 billion of cash on hand, access to the undrawn amount of approximately $860 million on Transportation’s revolving credit facility at March 31, 2020, and approximately $550 million of proceeds from the sale of the CRJ program, which is set to close June 1, 2020 as all closing conditions have been met.

Notwithstanding the impact of reduced activity and travel restrictions in the second half of March due to the global COVID-19 pandemic, Bombardier reported consolidated revenues of $3.7 billion in the quarter, increasing by 8% and 5% year-over-year at Aviation and Transportation, respectively, and excluding currency translation impact. This growth was mainly driven by additional Global 7500 deliveries at Aviation and the ongoing ramp-up of large rolling stock projects in the U.K. and Germany at Transportation.

Adjusted EBITDA(1) and adjusted EBIT were $171 million and $60 million, respectively, for the quarter. These results reflect the impact of Transportation working through several low-margin, legacy rolling stock projects, as well as, lower share of income from joint ventures and associates. At Aviation, earnings were lower year-over-year due to an unfavourable aircraft mix, including lower margin early Global 7500 business jets and delayed deliveries related to the COVID-19 pandemic, combined with lower services revenues and higher dilution from commercial aircraft activities. Reported EBIT was $156 million for the quarter.

Cash usage from operations for the first quarter was $1.5 billion. Free cash flow usage totalled $1.6 billion, including an estimated $600-800 million COVID-19 impact reflecting our inability to deliver aircraft following government-imposed travel restrictions, temporary production shutdowns of several key sites, and lower than expected order intake at both Transportation and Aviation.

“Bombardier has begun the gradual resumption of manufacturing operations at both Aviation and Transportation necessary to deliver on our strong rail backlog and to continue the production ramp-up of the Global 7500,” stated Martel. “As we bring our operations back on-line, we remain focused on protecting our employees, supporting our customers during this difficult period and taking the actions necessary to preserve the Company’s long-term future.”

The Company suspended its previously issued 2020 financial outlook on March 24, 2020 as it evaluated the impact of the COVID-19 pandemic. The continuing uncertainty surrounding the duration of the pandemic precludes us from providing financial guidance with any reasonable confidence at this time. However, based on our current assessment of the COVID-19 situation, and the continuing gradual resumption and stabilization of our operations, we expect business activity to hit a low point in the second quarter, with similar cash usage relative to the first quarter, before gradually recovering in the second half of the year. Bombardier will look to provide updated projections when it has greater visibility into the total impact of the pandemic on our businesses and markets.(3)

SELECTED RESULTSEGMENTED RESULTS AND HIGHLIGHTS

AviationKey highlights and events

  • Revenues during the quarter increased to $1.5 billion, 8% higher year-over-year, reflecting 16% growth from business aircraft activities driven by six Global 7500 deliveries. This growth was offset mainly by the wind-down of commercial aircraft activities. Overall, 26 business aircraft and five commercial aircraft were delivered during the period.
     
  • Adjusted EBITDA and adjusted EBIT margins were 6.7% and 1.6%, respectively, for the quarter, lower year-over-year, reflecting an unfavourable aircraft mix due in part to delayed deliveries caused by the global COVID-19 pandemic, combined with low contribution of early Global 7500 units. Reported EBIT margin was 0.5%.
  • In the last week of March 2020, Canadian operations, where Global and Challenger aircraft are assembled and delivered, were temporarily suspended due to the global COVID-19 pandemic. Key aerostructures operations in Mexico and Belfast were similarly suspended, impacting a total of approximately 15,000 employees globally.
    º  Free cash flow for the quarter was negatively impacted by delayed aircraft deliveries caused by travel restrictions and production shutdowns, as well as a slowdown in order intake tied to the economic uncertainty. This resulted in an estimated $400 million to $500 million free cash flow shortfall for the quarter.
    º  The revenues and earnings impact of the production slowdown, supply chain shortages and other disruptions is expected to increase as the situation extended into April and May 2020.(2)
    º  As production gradually resumes, Aviation is working with customers and suppliers to reestablish new delivery schedules.
     
  • Aviation experienced a significant slowdown in order intake during the month of March, leading to a $13.6 billion business aircraft backlog at the end of the quarter. This low order environment is driving production rate adjustments across the industry. 
    º  Aviation’s production rates are being aligned to market demand, which is expected to be down by 30 to 35% year-over-year.(2)
    º  The solid order book on the Global 7500 is largely intact, and the business continues to focus on ramping up production and driving down the learning curve.
    º  In parallel, the Company is managing costs through aggressive company-wide actions, including cutting non-essential spending and deferring discretionary capital expenditures to make Aviation more profitable and a steadier cash-flow generating business even at lower production volumes.

TransportationKey highlights and events

  • Revenues during the quarter grew 5% organically to $2.2 billion, excluding currency translation year-over-year, mainly from rolling stock and systems and signalling activities. This growth mainly reflects the ongoing production ramp-up in the U.K. and Germany, notwithstanding impacts of reduced activity in the second half of March 2020 due to the global COVID-19 pandemic.
  • EBIT margin of 2.4% for the first quarter was generally in line with expectations, and reflects an unfavourable rolling stock contract mix. The margin dilution from mix is expected to continue as Transportation executes on low-margin contracts in the backlog expected to be realized in 2020.(2)
     
  • Cash on hand was increased through a $386 million equity injection in Transportation by Caisse de dépôt et placement du Québec to support working capital as part of our measures to deal with the COVID-19 pandemic. In connection with this contribution, the Corporation secured amendments to Transportation’s revolving and letter of credit facilities. These amendments provide for, among other things, temporary adjustments to certain financial covenants.
     
  • In the second half of March 2020, production at several locations, including key sites across Transportation’s largest markets in Europe and the Americas, was temporarily suspended due to the global COVID-19 pandemic.
    º  Approximately 10,000 employees were affected by shutdowns. The cost of these measures and other disruption costs are being expensed as incurred, as opposed to being charged to projects.
    º  Additionally, certain Transportation suppliers have delayed, reduced or altogether stopped the manufacture, shipping and delivery of critical parts, further disrupting production.
    º  The revenues and earnings impact of the production slowdown and disruptions is expected to increase as the situation extended into April and May 2020.(2)
    º  Free cash flow has been negatively impacted in the first quarter by the engineering, production and supply chain disruptions resulting in an estimated $200 million to $300 million of cash inflows delays mainly from the postponement of key production and homologation milestones. The future impact on cash flows is being mitigated through various initiatives.
    º  As production gradually resumes, Transportation is working with customers and suppliers to reestablish new contract schedules.
     
  • The outlook for Transportation continues to be positive given its strong backlog, which stood at $33.1 billion at the end of the quarter.(2)
    º  Book-to-bill ratio for the first quarter was lower than expected at 0.4, due in part to the COVID-19 pandemic effect on the timing of order awards. Approximately 80% of orders in the first quarter came from services contracts, signalling projects and options exercised on rolling stock contracts, carrying lower execution risks.
     
  • During the quarter, Bombardier and its customer, Swiss Federal Railways (SBB), reached a commercial agreement leading to the title transfer and take-over by SBB of 32 trains in revenue service. This agreement reflects the significant in-service reliability improvement achieved since entry-into-service and significantly reduced the inventory balance and associated customer payment financing outstanding. 

About Bombardier 
With over 60,000 employees across two business segments, Bombardier is a global leader in the transportation industry, creating innovative and game-changing planes and trains. Our products and services provide world-class transportation experiences that set new standards in passenger comfort, energy efficiency, reliability and safety.

Headquartered in Montréal, Canada, Bombardier has production and engineering sites in over 25 countries across the segments of Aviation and Transportation. Bombardier shares are traded on the Toronto Stock Exchange (BBD). In the fiscal year ended December 31, 2019, Bombardier posted revenues of $15.8 billion. News and information are available at bombardier.com or follow us on Twitter @Bombardier.

Bombardier, Challenger, CRJ, CRJ900, Global and Global 7500 are trademarks of Bombardier Inc. or its subsidiaries.


The Management’s Discussion and Analysis and the Interim Consolidated Financial Statements are available at ir.bombardier.com.

bps: basis points
nmf: information not meaningful

(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and the Analysis of results section hereafter for reconciliations to the most comparable IFRS measures.
(2) See the forward-looking statements disclaimer at the end of this press release as well as the forward-looking statements section and the assumptions following same in Overview in the MD&A of the Corporation’s financial report for the three‑month period ended March 31, 2020, as well as the Strategic Priorities and Guidance and forward-looking statements sections in the applicable reportable segment in the MD&A of the Corporation’s financial report for the fiscal year ended December 31, 2019, for details regarding the assumptions on which the forward-looking statements are based.
(3) See the Impacts of COVID-19 Pandemic section in Overview in the MD&A of the Corporation’s financial report for the three‑month period ended March 31, 2020 for details regarding the Corporation’s response to the evolving COVID-19 pandemic and its impacts on employees, operations, the global economy and the demand for the Corporation’s products and services. We expect the ultimate significance of the impact on our financial and operational results will be dictated by the length of time that such circumstances continue, which will depend on the currently unknowable extent and duration of the COVID-19 pandemic and any governmental and public actions taken in response thereto. COVID-19 also makes it more challenging for management to estimate future performance of our businesses, particularly over the near term.
(4) Includes cash and cash equivalents of the aerostructures businesses presented under Assets held for sale totalling $43 million as of March 31, 2020 and $51 million as of December 31, 2019, respectively. Refer to Reshaping the portfolio section in Aviation section of the MD&A of the Corporation’s financial report for the three-month period ended March 31, 2020 and Note 17 – Assets held for sale in the Consolidated financial statements of the Corporation for more details on the transaction as well as the accounting treatments.
(5) Defined as cash and cash equivalents plus the undrawn amount under our revolving credit facility.
(6) Including 15 firm orders for CRJ900 as of March 31, 2020 and 20 firm orders for CRJ900 as of December 31, 2019. CRJ production is expected to conclude in the second half of 2020, following the delivery of the current backlog of the aircraft.
(7) Comparative figures are restated as a result of the formation of Bombardier Aviation, our reportable segment announced during the second quarter of 2019.
(8) The delivery for the three-month period ended March 31, 2019 included one Q Series aircraft. On May 31, 2019, the Corporation completed the sale of the Q Series aircraft program assets, including aftermarket operations and assets, to De Havilland Aircraft of Canada Limited (formerly Longview Aircraft Company of Canada Limited).
(9) Ratio of new orders over revenues.
(10) Including share of income from joint ventures and associates amounting to $10 million for the three-month period ended March 31, 2020 ($17 million for the three-month period ended March 31, 2019).