Announces Other Strategic Actions To Streamline The Company And Drive Productivity

In its third quarter 2018 results report released Thursday, Bombardier announced a number of strategic actions, including the launch of an enterprise-wide productivity program. This program is expected to generate annual savings of $250 million at full run rate, which the company expects to realize by 2021. Bombardier has reached definitive agreements for the sale of non-core assets and the monetization of royalties, which is expected to generate approximately $900 million in net proceeds, increasing financial flexibility as the Company approaches the final – deleveraging – phase of its turnaround plan. Other highlights in the quarter include the certification of the Global 7500 business jet, paving the way for the aircraft’s entry into service in December 2018, and marking the end of the Company’s heavy investment cycle.

“With our heavy investment cycle now completed, we continue to make solid progress executing our turnaround plan,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “With today’s announcements we have set in motion the next round of actions necessary to unleash the full potential of the Bombardier portfolio. During the earnings and cash flow building phase of our turnaround, we will continue to be proactive in focusing and streamlining the organization, and disciplined in the allocation of capital. I am very proud of what we have accomplished, and very excited about our future.”

As part of the plan, the company entered into definitive agreements for (i) the sale of the Q Series aircraft program and de Havilland trademark to a wholly owned subsidiary of Longview Aviation Capital Corp. for approximately $300 million; and (ii) the sale of Business Aircraft’s flight and technical training activities to CAE and the monetization of royalties for approximately $800 million.

Both transactions are expected to close by the second half of 2019, following the usual regulatory approvals. Net proceeds from the transactions are expected to be approximately $900 million after the assumption of certain liabilities, fees, and closing adjustments.

Bombardier also launched a new enterprise-wide productivity program to further streamline, lean out and simplify the company. The initiative includes two actions. First, with the heavy aerospace investment phase successfully completed, Bombardier will right-size and redeploy its central aerospace engineering team. Key engineering team members will be redeployed to the business segments, with the largest group moving to Business Aircraft, to ensure they have all the necessary capabilities for future business jet development programs.

Bombardier will also establish a new Advanced Technologies Office (ATO), which will be led by François Caza, who has been appointed Bombardier’s Chief Technology Officer. The ATO will focus on systems design and engineering, including applying experience from Bombardier’s aerospace programs to its rail transportation business.

Among the results published by the company are:

• Business Aircraft’s third quarter performance shows solid execution on deliveries and sales, continued growth in the aftermarket, as well as the certification of the Global 7500 aircraft, the largest and longest range business jet in the industry.
• Transport Canada Type Certification of the Global 7500 aircraft was awarded on September 27, 2018, followed by FAA type certification, paving the way for entry into service in December 2018.
• Third quarter net order intake was strong, growing the backlog to $14.3 billion. Interest continues to grow in the Global family, including the new Global 5500 and Global 6500 aircraft offering.(4)
• During the quarter, revenues totalled $1.1 billion on 31 deliveries including a strong mix of medium sized aircraft. With 96 deliveries year-to-date, this represents more than 70% of planned deliveries for the year, tracking to full year guidance on deliveries and revenue.
• EBIT margin before special items during the quarter continued to trend above 8% driven by seasonal changes in aircraft mix, with year-to-date EBIT margin before special items of 8.5%.
• Subsequent to the quarter, on October 15, 2018, the Global 5500 and Global 6500 aircraft program completed 70% of total flight test hours required for certification, tracking to entry into service at the end of 2019.
• On October 3, 2018, we announced a further expansion of our service network with a new centre in Miami. Planned for inauguration in 2020, the new 300,000 sq. ft. centre will benefit our U.S. and Latin American customers and continue to fuel our growth.
• On November 7, 2018, the Corporation entered into a definitive agreement to sell its activities consisting of flight and technical training for Bombardier Business Aircraft carried out principally in training centers located in Montréal, Québec, and Dallas, Texas to CAE, a long-time Bombardier training partner. This transaction provides Bombardier’s Business Aircraft customers the benefit of CAE’s training expertise, while Bombardier focuses on aircraft development and services. Concurrently with the sale, Bombardier and CAE have entered into an agreement to extend their Authorized Training Provider (ATP) relationship whereby CAE will prepay all royalties under the agreement. Combined, the total value of both transactions is $800 million, including $645 million for the sale of the training activities. Net of fees, liabilities and normal closing adjustments, we expect net proceeds of approximately $650 million. Closing of the sale transaction is expected by the second half of 2019, subject to customary closing conditions and regulatory approvals.
• On November 7, 2018, the Corporation entered into a definitive agreement for the sale of the Q Series aircraft program assets, including aftermarket operations, to a wholly owned subsidiary of Longview Aviation Capital Corp., for gross proceeds of approximately $300 million. The agreement covers all assets and intellectual property and Type Certificates associated with the Dash 8 Series 100, 200 and 300 as well as the Q400 program operations at the Downsview manufacturing facility in Ontario, Canada. The transaction is expected to close by the second half of 2019, subject to customary closing conditions and regulatory approvals. Net proceeds for this transaction are expected at approximately $250 million net of fees, liabilities and normal closing adjustments.

Following the closing of the Airbus partnership on the C Series aircraft program earlier this year, and the agreement to sell the Q400 program announced on November 7, 2018, the company's full attention is turning to the CRJ program. As it continues to actively participate in the regional aircraft market with our established, scope compliant aircraft, the focus is on reducing cost and increasing volumes while optimizing the aftermarket for the approximately 1,500 CRJ’s in service around the world today.  As the company looks to return the CRJ to profitability, it will also explore strategic options for the program.

(Source: Bombardier news release. Image from file)

FMI: www.bombardier.com