July 30, 2015: Bombardier reported lower net income on slightly higher revenues for the second quarter.
“Overall, the second quarter was in line with plan in terms of revenues, EBIT and deliveries, and our liquidity stands at $4.4 billion,” said Alain Bellemare, President and Chief Executive Officer. “After five months on the job, I have a better understanding of our challenges and opportunities. We are taking specific action, including the launch of our Bombardier transformation plan, a disciplined approach to cash management, and the strengthening of our leadership team to reshape the company and ensure our long-term success.”
Bombardier said it completed 2,000 of the 2,400 hours required for certification of the C Series, which will be delivered during the first half of 2016 to launch operator Swiss International.
During the earnings call, Bellemare outlined more details of the Transformation Plan designed to turn BBD around from its financial strains.
JP Morgan’s initial reaction to the press release:
Cash flow for the second half of the year will be affected by production rate of the Global 5000/6000, new orders, the Transformation Plan and other factors.
Certification of C Series is proceeding. Better than expected performance “is generating renewed interest,” said Bellemare. Sales is working to firm up the commitments, which currently outnumber firm orders.
Renewed efforts on the Q400 and CRJ have campaigns underway, he said.
“I’m glad that the focus has shifted to [C Series] orders now [from testing and certification],” Bellemare said. “The performance of the aircraft is…above expectations. Clearly the focus has shifted to increasing the backlog. We are basically filling up the pipeline, but it won’t happen overnight. The orders going forward have to be good for the airlines and good for us. We have about half a dozen customers who have shown interest over the last few weeks.
“The backlog that we have have sufficient orders to fill the production,” he said. “We should not forget this is a 7,000 aircraft market. We have the best aircraft for this class of aircraft for orders moving forward.”
Bellemare said the reaction from customers at the Paris Air Show was “super-positive.”
The investment of the C Series will comes down “significantly” as the program transitions from testing to production and delivery.
Bombardier faced a tough grilling from aerospace analysts, who questioned the dearth of orders for C Series and production rates and declining sales for business jets, returning to the topics again and again. BBD refused to provide guidance on a number of metrics or book:bill forecasts, citing transformation efforts that will take time, transition phase for business aircraft.
Global 7000 entry-into-service was reset to 2018, a delay of two years.
“We will do what we have to do to win a campaign,” Bellemare said of C Series. “In the end it has to make good business sense for us and good business sense for the airline…that makes good commercial sense going forward.”
Bellemare said BBD is “engaged” with customers who have commitments to convert “some of the options” into firm orders. “It’s a process that takes some time.”