Bombardier Shifts Focus to New Business Jet as C Series Fades

(Bloomberg) -- Bombardier Inc. predicted that growth in its corporate-jet unit will help offset lost revenue from handing the keys of its marquee commercial-aircraft program to Airbus SE.

Business-aircraft revenue could increase 70 percent in the next three years, Bombardier said in statement Thursday. Overall sales are expected to rise to $20 billion in 2020, down from a previous forecast of $25 billion to account for excluding the new C Series jetliner from results once the Airbus deal closes.

The new outlook signals how Bombardier’s fortunes will depend on a smooth introduction of the Global 7000 business jet, which is due to enter service about a year from now. The $73 million aircraft, which can fly nonstop from London to Singapore, is sold out through 2021, according to the Montreal-based company.

The business-aircraft outlook “would suggest the company feels positive about achieving an on-time entry into service’’ for the Global 7000, Chris Murray, an AltaCorp Capital analyst, said by email. Bombardier trimmed its outlook for business-jet sales, however, to $8.5 billion in 2020 from a previous forecast of $10 billion.

Overall sales next year will be as much as $17.5 billion, Bombardier said in advance of a Thursday afternoon meeting with investors. The forecast, which assumes Bombardier still will continue to incorporate C Series sales into results all year, fell short of the $18.3 billion average of analysts’ estimates compiled by Bloomberg.

“We note that management has been typically conservative early on in the year and that with continued positive economic outlook, there may be opportunity to move to higher end of range as the year progresses,” Fadi Chamoun, a BMO Capital Markets analyst, said in a note to clients.

Airbus Deal

Bombardier in October agreed to hand over control of the C Series to Airbus in exchange for the European planemaker’s marketing heft and manufacturing expertise. Airbus has vowed to cut the program’s production costs and secure thousands of new orders. Excluding C Series results will lop about $3.5 billion from 2020 revenue, Bombardier said Thursday. The Airbus deal is expected to close at the end of next year.

Having hit the market more than two years late, the all-new aircraft -- which cost $6 billion to develop -- could be blocked from the world’s biggest aviation market if U.S. authorities confirm preliminary tariffs of 300 percent after a trade complaint by Boeing Co.

Bombardier plans to deliver about 135 business jets next year, 40 C Series planes and 35 of its turboprops and regional aircraft. Free cash flow will reach break even “plus or minus $150 million,’’ the company said. Bombardier forecast negative cash flow of $1 billion this year. 

Shipments of business jets and regional aircraft look “a bit lighter in 2018 that we had expected but have only a minor earnings and cash-flow impact,’’ said AltaCorp’s Murray.

Bombardier’s widely traded Class B shares fell 1.3 percent to C$3.04 at 12:52 p.m. in Toronto. The stock climbed 42 percent this year through Wednesday, while Canada’s S&P/TSX Composite Index gained 5.6 percent.

©2017 Bloomberg L.P.

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