Pierre Beaudoin knows all too well how volatile the global aerospace market remains, but despite tough calls looming at Bombardier – including whether a new round of production cuts is necessary – he’s keeping his eye on longer-term opportunities.
The president and chief executive officer of the Montreal-based plane and train maker convinced the company’s board recently to invest in two new luxury long-range business jets, even though signs of a recovery in the business jet sector remain weak.
“When you invest in airplanes, you can’t look at today,” Mr. Beaudoin told investors and analysts Thursday at an “investor day” in Toronto.
Emerging markets in China, India and Russia offer huge potential for a new generation of long-range business aircraft that can whisk passengers around the world, he said.
“These are long-range airplanes for international corporations and wealthy individuals who travel globally,” he said.
Bombardier is expected to spend more than $1-billion (U.S.) to develop the two new business jets – the Global 7000 and the Global 8000 – that will help keep it in the game against rival long-range corporate jet maker Gulfstream Aerospace Corp.
On the commercial side, Bombardier is betting big on a new entry in the crucial 100- to 150-seat segment – the C Series, which bumps it up against giants Boeing Co. and Airbus SAS.
In the shorter term, it’s grappling with the uncertainties of a still-challenging aerospace market. “It’s a very nervous market at this point,” Mr. Beaudoin said on a conference call for analysts Thursday.
Bombardier Aerospace president Guy Hachey said the recovery in aerospace remains choppy, especially for business jets. “It’s been an up and down market,” he said.
Bombardier is aggressively pitching potential customers for its regional jets and turboprops as well as its business jets, he said on the conference call. Winning some new orders will be crucial in deciding in the new year as to whether or not the company will maintain its current production rates through the second half of 2011, he said.
“The results of these [sales] campaigns will determine whether we change the production rate or not,” Mr. Hachey said.
A key contributor to Bombardier’s more positive long-range outlook is the growing role emerging markets are playing in the aerospace sector.
So far this fiscal year, three-quarters of new business jet orders are from outside the U.S., he said.
The level of those orders, however, was not high in the third quarter. Bombardier reported 13 new net orders for business jets, a number that is “somewhat disappointing,” National Bank Financial analyst Cameron Doerksen said in a research note.
On the rail side, Bombardier Transportation posted a strong quarter in terms of orders.
Overall, Bombardier said profit in the third quarter came in at $143-million, or 8 cents per share, down from $168-million, or nine cents, in the same period for the previous year.
Revenue slipped to $4-billion from $4.6-billion.
Total aerospace revenue in the third quarter was $1.8-billion, down from $2.1-billion.
Bombardier Transportation posted revenue of $2.2-billion, down from $2.5-billion in the year-earlier period.