Bombardier profit misses as pandemic weighs on transportation unit, jet deliveries

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FILE PHOTO: Bombardier's logo is seen on the building of the company's service centre at Biggin Hill
FILE PHOTO: Bombardier’s logo is seen on the building of the company’s service centre at Biggin Hill, Britain March 5, 2018. REUTERS/Peter Nicholls

November 5, 2020

By Allison Lampert and Sanjana Shivdas

(Reuters) – Bombardier expects higher deliveries of its flagship Global 7500 business jet through year’s end, after the plane and train maker missed estimates for third-quarter operating profit on Thursday, hurt by COVID-19-related disruptions.

Free cash flow usage was $706 million during the quarter, although Bombardier aims to break even during the second half of 2020.

Global 7500 deliveries should rise to 12 jets during the last three months of 2020, up from eight during the third quarter.

Montreal-based Bombardier is shedding assets, including its rail division to French train maker Alstom SA, to slash debt as it becomes a pure-play business jet maker.

Revenue from Bombardier’s transportation unit fell 2.5%, hit by the pandemic and several-low margin projects.

“We are fully aware of the challenges we face,” said Chief Executive Eric Martel.

While corporate aircraft deliveries are expected to decline industry-wide by 30% in 2020 due to the pandemic, plane makers are encouraged by revived activity, including a rebound in private flights.

Martel said business jet order activity is improving, especially for its mid-sized Challenger aircraft.

The company’s business aircraft order backlog, however, declined to $12.2 billion from $14.4 billion a year ago.

Corporate jet deliveries fell to 24 units in the quarter from 31 a year earlier. But revenue from business aircraft rose about 10% since higher-priced Global 7500s made up a third of deliveries.

Bombardier’s margins and earnings before interest, taxes, depreciation and amortization (EBITDA) took a hit on higher initial production costs for the Global 7500 jets and lower deliveries.

Chief Financial Officer John Di Bert said the Global 7500 should start to be profitable as we “get into 2021.”

Bombardier reported adjusted EBITDA of $176 million for the quarter ended Sept. 30, compared with $255 million a year earlier.

Analysts on average were expecting EBITDA to be $179.8 million, according to Refinitiv data.

Revenue fell 5.3% to $3.53 billion.

(Reporting By Allison Lampert in Montreal and Sanjana Shivdas in Bengaluru; Editing by Aditya Soni, Anil D’Silva and Jonathan Oatis)

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