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Bombardier Inc.'s incoming chief executive Eric Martel is pictured in Montreal in this file photo from Dec. 5, 2019.

Ryan Remiorz/The Canadian Press

Eric Martel will be quickly tested as Bombardier Inc.’s new chief executive, with the company’s share price falling to lows not seen in more than a quarter-century and its business prospects clouded by the fallout from the COVID-19 pandemic.

The possible pain that lies ahead for the former Hydro-Québec boss could be every bit as harsh as that faced by his predecessor, observers say. With a corporate shrinking under way that will see Bombardier try to complete the planned sale of its train unit to France’s Alstom SA and emerge as a pure-play business-jet manufacturer next year, there remains little room for error in its final transformation toward a less-indebted future.

Global financial contagion caused by the novel coronavirus outbreak could kill new orders and throw off Bombardier’s plans. The company could also find itself a takeover target if its share price fails to recover, analysts said.

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“It’s a pretty precarious position,” said Isabelle Dostaler, dean of business at Memorial University of Newfoundland. “We’re in the middle of a crisis and it’s going to be difficult on airlines and transportation. Stock markets are going crazy. So it’s not looking good at all. If [Mr. Martel] does poorly, it’s not going to be his fault.”

Bombardier shares shed nearly 23 per cent Thursday to close at $0.64 on the Toronto Stock Exchange amid a broader market sell-off caused by fears about the impact from the coronavirus. The stock has declined through 18 of the past 20 trading sessions, hitting a low not seen since at least 1995.

Mr. Martel will replace current CEO Alain Bellemare on April 6, Bombardier said in a statement late Thursday. With Mr. Bellemare’s five-year turnaround plan nearing completion, the board, including Mr. Bellemare, unanimously concluded it was the right time for a new leader to take the helm, the company said.

The new CEO comes into a company that is much smaller and with a much simplified business structure as Bombardier sells or shuts down assets that represented 65 per cent of its former revenue, including the train business. His key challenge in the months ahead is to finalize three planned asset sales that are necessary to meet coming debt maturities starting next year.

But Mr. Martel takes over in the throes of a global health emergency. And that threatens to dampen demand for what will be the company’s last remaining product line: highly discretionary luxury business jets.

“Business jet sales just don’t do well in times of economic uncertainty and scary stock market gyrations,” industry consultant Brian Foley wrote in Forbes. “Some who were considering a plane purchase will now wait and see where things are headed, looking for any semblance of financial market stability before pulling the trigger.”

Bombardier is somewhat shielded from the economic turmoil because it has staked much of its future profitability on the all-new Global 7500, a US$75-million plane that is sold out through 2021 and tends to attract buyers that are more immune to economic shocks. But its smaller and less pricey jets are more vulnerable as clients weigh spending cuts, especially if uncertainty drags on.

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One thing to watch is what happens in the market for preowned aircraft. Right now, the international inventory for used jets is tight, which means that if people were to start selling their planes the system could absorb that. If it persists, however, and a glut of used planes floods the market, that will affect sales of new planes.

“Notwithstanding current market volatility associated with the coronavirus outbreak, we believe [investors] will need additional details on the growth potential and resiliency of the business jet division, the regulatory risk around the proposed [train] divestiture and Bombardier’s strategy with respect to debt repayment before the stock starts to recover,” Desjardins analyst Benoit Poirier said.

Ultimately, Bombardier could consider privatizing or divesting the remaining business-jet unit once it finalizes the train sale if its stock performance does not improve, Mr. Poirier said. The company held talks with Textron Inc. about a deal for its business-jet franchise, but decided to divest its rail unit instead.

For Mr. Martel, it will be a return to Bombardier, where he worked as an executive for more than a decade. He was in charge of the business-jet unit when Mr. Bellemare was brought in as CEO in 2015.

Although the two men have known each other for a long time, there was almost immediate friction as Mr. Bellemare sought to impose changes that other executives felt undermined their own work, said one source familiar with the internal dynamic at Bombardier. The Globe and Mail is not naming the source because they were not authorized to speak about the matter.

Mr. Martel left soon after to take the top job at Hydro.

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