Bombardier reports flat revenue, lower profit in first quarter

Bombardier officials’ emphasis on a Thursday morning conference call was on improved liquidity, a launch customer for its delayed and costly CSeries airliner and plans to spin off a minority stake in its train business.

New Bombardier Inc. chief executive Alain Bellemare might have said the word “Learjet” no more than once had it not been for analyst and media questions prompting him to say something about the Canadian company’s smaller business jets manufactured and assembled in Wichita.

That was aviation forecaster Rolland Vincent’s take on Bombardier’s conference call following the release of its first-quarter 2015 financial results.

“What is the plan for the Learjet product line?” Vincent asked rhetorically in an interview after the call. “It’s not clear at all.”

What is clear, Vincent said, is that Bellemare and his executives are focused on their bigger aircraft development programs, primarily the CSeries and to a lesser extent the Global 7000/8000 long-range business jets.

“The priorities really are all hands on deck for the CSeries, and it has been that way now for some time,” Vincent said. “The CSeries is just causing sort of this total management focus. There’s a huge investment here and this has to work.”

Early on Thursday, Bombardier released its first-quarter earnings, showing the company’s revenue for the period that ended March 31 was $4.39 billion, up slightly from $4.35 billion in the first quarter of 2014.

Net income was $100 million, down from $115 million in the first quarter of 2014. Bombardier’s liquidity improved to $6 billion at the end of the quarter, up from $2.2 billion at the end of 2014.

In conjunction with its earnings release, Bombardier said that Lufthansa’s Swiss International Airlines will be the first customer to take delivery of its CS100 airliner in the first half of 2016, following the plane’s certification by the end of 2015.

Bombardier said it also is seeing softening demand in Latin America, China and Russia for its large-cabin Global business jets, which Bellemare said will result in production rate decreases.

And the company said it would make an initial public offering of a minority stake in its train business in the fourth quarter of 2015.

Of Bombardier’s four segments of business, commercial aircraft accounted for the highest revenue gain year over year – 41 percent – followed by business aircraft at 4 percent.

Revenue was unchanged in its aerostructures and engineering services segment, and down 10 percent in the transportation, or rail, segment.

During the first quarter, Bombardier Business Aircraft delivered 45 jets, compared with 43 in the first quarter of 2014. The company did not specify how those deliveries were split between its Learjets or larger Challenger and Global Express jets. It also said orders for the quarter totaled 19, compared with 46 a year ago.

Bellemare said the decline in orders largely reflected slumping interest in its Canadian-built Global jets, which means the company will lower its production rates on the Global 5000 and 6000.

“The softness is on the Global side,” he said. “That’s where the adjustment will be made.”

Bellemare added that it’s too soon to know how the adjustment will affect workers on the Global airplanes.

He said, however, that he doesn’t expect falling demand for the Global 5000 and 6000 to affect orders for its new 7000 and 8000 jets, which are bigger and fly farther.

“The backlog is very strong” for the Global 7000/8000, Bellemare said, adding that he expects orders to increase once those airplanes enter service. “It’s going to be a very good program.”

That sort of goes to the heart of Wichita, and more specifically the suspension of the Learjet 85.

In January, Bombardier announced it was suspending development of the composite fuselage, midsize jet. The action resulted in the layoff of 620 Learjet workers in Wichita and 380 others in Mexico, and a pretax charge to Bombardier of $1.4 billion. Some analysts think that because the company took a large financial hit, the pause was really a move to permanently end development of the airplane.

“I think they’re squarely focused on their highest-margin and highest-priced programs, which are the Globals,” Sterne Agee CRT analyst Peter Arment said in an interview. “It doesn’t mean they’re abandoning the Learjet franchise. … Unfortunately (the Learjet 85) has taken a back seat to larger platforms.”

During Thursday’s conference call, Bellemare reiterated that the “Lear 85 is still on pause. We’re still assessing what we will do moving forward and how we will proceed with the Lear 85.”

Bellemare also tried to quiet speculation about a possible sale of Learjet.

“Learjet is not for sale,” he said.

Vincent said he doesn’t expect to hear much about Learjet from Bombardier in the near term. The focus, he said, will remain on more pressing matters, like getting the CSeries production ramped up and getting the airplane into the hands of customers.

“I think it’s going to be kind of steady as it goes in Wichita,” Vincent said.

This story was originally published May 7, 2015 at 7:48 AM with the headline "Bombardier reports flat revenue, lower profit in first quarter."