Bombardier Set to Increase Production in a Booming Market for Private Jets

MONTREAL — Bombardier Inc. plans to ramp up production over the next two years amid growing demand for private jets as the business jet maker tests how far it can push capacity.

MONTREAL — Bombardier Inc. plans to ramp up production over the next two years amid growing demand for private jets as the business jet maker tests how far it can push capacity.

After posting a surprise profit in its final quarter after ramping up production in 2021, the Montreal-based company aims to surpass last year’s 120 aircraft deliveries in 2022 and increase them by another 15-20% – up to 144 Global and Challenger aircraft – as early as 2023.

Bombardier’s new forecast calls for an 8% increase in business jet revenues to US$6.5 billion this year after consolidating its backlog to US$12.2 billion by December, up 1 US$.5 billion over the previous year.

“The increased and more balanced backlog is the result of increased demand which, combined with healthy pricing, gives us predictability and resilience at the right time,” Chief Executive Eric Martel said in a statement.

While the commercial aviation market has struggled amid the COVID-19 pandemic, business jet usage grew 42% in the United States and 33% in Europe in 2021, according to the United States Federal Aviation Administration and Eurocontrol.

Flight cancellations, distrust of virus exposure and rising wealth of the ultra-rich – the world’s 2,755 billionaires have seen their combined wealth rise by $5 trillion since March, according to a January report by Oxfam International – have helped stimulate demand for private jets. The taste for luxury has also seen buyers snap up pre-owned business jets, leaving the total number for sale at 3.6% of the global fleet, its lowest level since 1989, according to data companies. Jetnet IQ and Ascend marketplace – and making new products a more likely option.

Competition remains a potential obstacle, the Georgian company Gulfstream Aerospace Corp. and Dassault Aviation of Paris announcing their intention to market new aircraft. Martel acknowledged the uncertainty over whether faster production lines were needed to keep pace.

“That’s the question we ask ourselves regularly,” he told investors on a conference call Thursday, noting that the company is planning between $200 million and $300 million in capital spending this year.

“We will balance our decision between price, order book and supply chain,” he said. “There is a lot of stress in the supply chain.”

Bombardier has streamlined its operations in recent years to become a pure business jet manufacturer following the sale of its rail and commercial aircraft divisions.

The company aims to increase capacity by expanding its service centers in Singapore and the London area and building new facilities in Miami and Melbourne this year following the construction of service and maintenance stations in Berlin, USA. United and in Dubai in 2021.

As expected, deliveries fell to 38 in the fourth quarter from 44 a year earlier, due to a more even distribution of Global 7500 completions throughout the year, Bombardier said.

Last year marked its first full year of positive free cash flow – a closely watched figure that measures what’s left after asset operating and maintenance expenses – since 2010. year-to-date rose 7% to US$6 billion.

The increased activity helped boost Bombardier’s services revenue by 44% in the last quarter over the previous year, with nearly 5,000 of the company’s business jets now roaming the skies.

However, a thorn in its side returned this year when two lenders turned to a US court demanding compensation after Bombardier sold key assets in recent years.

In a case filed with the New York Supreme Court, Antara Capital Master Fund and Corbin Opportunity Fund seek redress and damages for alleged breach of contract. They say Bombardier’s divestitures – including the sale of its rail business to Alstom for US$3.6 billion last year and its remaining stake in the Airbus jetliner program, formerly known as C Series, in 2020 – violated covenants on a US$250 contract. million debentures maturing in 2034.

The submission reiterates claims from a legal battle Bombardier settled with multiple lenders last May by changing the terms and conditions of eight debt tranches due to expire between 2022 and 2034.

The company, which keeps its accounts in U.S. dollars, said Thursday it expects adjusted earnings to rise 29% to $825 million this year.

It reported net income of US$238 million or 9 cents per diluted share for the quarter, compared to a net loss of US$337 million or 18 cents per diluted share in the last three months of 2020. exceeded analysts’ expectations by $57 million. loss, according to financial data firm Refinitiv.

The company’s fourth quarter revenue was $1.77 billion, down 25% from $2.34 billion in the fourth quarter of 2020.

On an adjusted basis, Bombardier said it earned three cents per share in its latest quarter, compared with an adjusted loss of 20 cents per share a year earlier and expectations for a loss of three cents.

This report from The Canadian Press was first published on February 10, 2022.

Companies in this story: (TSX:BBD.B)

Christopher Reynolds, The Canadian Press

Note to readers: This is a corrected story. An earlier version incorrectly stated Bombardier’s net loss for the fourth quarter of 2020.

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