Bombardier Misses Third Quarter Estimates; Expects Layoffs, Capacity Cuts

Reuters  |

Image source: Bombardier earnings presentation, Nov. 5, 2020

By Allison Lampert and Sanjana Shivdas

(Reuters) - Bombardier’s chief executive on Thursday said he expects layoffs as part of broader plans to cut excess capacity, after the plane-and-train maker missed on quarterly operating profits earlier in the day due to the coronavirus pandemic.

“In the weeks to come we will decide all the initiatives we need to do to reduce our cost base,” Eric Martel told reporters.

“It’s sure there will be layoffs that will come with this.”

Martel also said the company is cooperating with an investigation opened by the U.K. Serious Fraud Office in connection with a near decade-old sale of aircraft to Indonesian carrier Garuda.

Bombardier said deliveries of its Global 7500, which lists for around $73 million each, would rise to 12 jets during the last three months of 2020, up from eight during the third quarter.

Bombardier said free cash flow usage was $706 million during the quarter, and it aims to break even during the second half of 2020.

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

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Martel sees improved order activity for Bombardier’s mid-sized Challenger business aircraft, although pricing on large cabin jets “is actually a little bit lower this year” because plane makers had surplus inventory when the pandemic hit.

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.

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.

Bombardier stock traded 1.7% higher on Thursday.

Click to enlarge

Image source: Bombardier earnings presentation, Nov. 5, 2020

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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Source: Reuters

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