Bombardier to Cut 2,500 Jobs to Counter Business-Jet Slump
Bombardier to Cut 2,500 Jobs to Counter Business-Jet Slump
(Bloomberg) -- Bombardier Inc. plans to eliminate 2,500 jobs at its aviation division following a slump in demand for business jets.
Manufacturing operations in Canada will bear the brunt of the cutbacks, to be carried out this year, Bombardier said in a release Friday. Overall, the group employs nearly 60,000.
Bombardier shares slipped 2.1% at 9:58 a.m. to trade at 47.5 Canadian cents. They have fallen more than 75% this year.
Two years of selling assets has left Bombardier particularly exposed to the vagaries of the private-jet market amid a wide-reaching recession. Demand in that market is forecast to drop 30% because to the pandemic, Bombardier said. The Montreal-based company said it would give an update on its outlook Aug. 6.
“Bombardier must adjust its operations and workforce to ensure that it emerges from the current crisis on solid footing,” the release said.
Cash Burn
Weakening markets are raising the pressure on recently installed Chief Executive Officer Eric Martel as the company exits its operations in commercial planes and rail equipment.
Bombardier burned through $1.6 billion of free cash flow in the first quarter, with as much as half of that coming from slow orders for planes and trains, temporary factory shutdowns and the inability to deliver aircraft amid government travel restrictions.
Bombardier, which got its start building snowmobiles in Quebec in the 1930s, announced the sale of its train unit to Alstom SA in February in the face of more than $10 billion in debt. The company is seeking to reduce debt to about $4 billion by the end of this year, it said at the time.
The decision to sell its transportation unit to Alstom, valuing the business at $8.2 billion, remains a key underpinning for its financial risk profile amid the uncertainty of coronavirus, which has disrupted operations and contributes to cash burn that may approach $3 billion this year, Bloomberg Intelligence analyst Matthew Geudtner wrote in a note last week.
The company saw its junk bonds rise to their highest levels in about six weeks amid a wider market rebound. Bombardier’s bonds have returned 20% this week and are among the top performers in the Bloomberg Barclays high-yield index, which is up about 2%. Bombardier notes are still down 24% this year.
The company’s 6% bonds due 2022 dropped 1% this morning to 77.2 cents on the dollar, trimming the gain this week to 16 cents. They yield 18.4%, according to Trace data.
The company said it would likely book a $40 million charge this year to cover costs related to the job cuts.
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