Bombardier CEO expects layoffs, capacity cuts after earnings miss

Business

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.

Bombardier is working on plans to cut costs and capacity as the company sheds assets, including its rail division to French train maker Alstom SA, to become a pure-play business jet maker.

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

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 was flat in afternoon trading.