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Abu Dhabi, UAESunday 16 December 2018

Bombardier sees shift to ‘growth cycle’ on new luxury jet

Global 7500 luxury jet, which will debut in the coming days, will add at least $2.5bn a year in revenue by 2020

Alain Bellemare, president and chief executive of Bombardier. REUTERS
Alain Bellemare, president and chief executive of Bombardier. REUTERS

Canadian aerospace and transportation company Bombardier, which has been reeling under a weaker cash-flow forecast and a heavy debt load, says it’s about to transition to a new phase of sales growth.

The Global 7500 luxury jet, which will debut in the coming days, will add at least $2.5 billion a year in revenue by 2020, Bombardier said.

The company is also seeking a $1bn revenue boost from new rail contracts and a $750 million increase from providing more parts and services.

“Today, Bombardier is a much stronger company,” chief executive Alain Bellemare said.

“Our heavy investment cycle is now complete and we are now transitioning to a growth cycle.”

Mr Bellemare is trying to regain investor confidence after a disappointing cash-flow forecast last month spurred the biggest rout among Canadian industrial companies. As he pitches investors on a brighter future for the company’s rail and private-jet divisions, he’s also pulling Bombardier back from its long-standing focus on commercial aircraft.

Bombardier has tumbled 28 per cent this year, compared with a 1.9 percent advance of a Standard & Poor’s index of Canadian industrial companies.

“We did everything the right way,” said Mr. Bellemare. The executive team is “fully committed to the turnaround and long-term success of Bombardier.”

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With development work on new jet programs now completed, Bombardier said it’s earmarking about $800m next year for “sustainable” capital expenditures. That’s about half the annual average of the past five years.

Business-jet deliveries will climb at least 11 per cent next year following the debut of the Global 7500, Montreal-based Bombardier said in a statement. The aircraft, carrying a list price of $73m and able to fly non-stop from New York to Dubai, is the company’s biggest business plane. It will compete with US-based General Dynamics’ Gulfstream G650.

Bombardier plans to ship 15 to 20 of the Global 7500 planes next year, with a majority of deliveries occurring in the second half, said David Coleal, president of Bombardier’s business aircraft unit. “Deliveries will rise to as many as 40 in 2020.”

The company also confirmed its 2020 financial objectives, which include revenue of at least $20bn and free cash flow of $750m to $1bn. Investors and analysts focus on cash flow because of the company’s need to pay interest on its debt, which was about $9.5bn on an adjusted basis on 30 September.