Bombardier's Challenger jet manufacturing facility in Dorval, Que. The company hiked its financial forecast on free cash flow to greater than US$1-billion for the year while reaffirming its guidance on other key metrics.Christinne Muschi/The Canadian Press
Bombardier Inc. BBD-B-T says demand for its private jets remains strong and its strategy to generate more profit from servicing aircraft is paying off as the company reported its highest free cash flow in nearly two decades during its latest quarter.
The Canadian manufacturer of Challenger and Global jets on Thursday reported a 20-per-cent increase in net income for the three months ended March 31, to US$53-million, or 45 US cents a share, on revenue of US$1.6-billion. Adjusted earnings before interest, taxes, depreciation and amortization came in at US$246-million, just shy of the US$250-million analysts expected.
Free cash flow, which is the money a company generates after covering operating expenses and capital expenditures, rose US$664-million year-over-year to US$360-million. The company hiked its financial forecast on free cash flow to greater than US$1-billion for the year while reaffirming its guidance on other key metrics.
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“Market conditions remain favourable for business aviation,” chief executive Eric Martel said on a call with analysts, adding he’s confident about what lies ahead. “While we continue to operate in a very dynamic geopolitical environment, our performance this quarter demonstrates the resilience and diversification of our business.”
The number of people who can afford a Bombardier jet or fly with a fleet operator is growing, while momentum is building in the defence sector and investments in the services unit are bearing fruit, Mr. Martel told reporters on a later call. He said the only region in the world where sales activity is slow at the moment is the Middle East, which is at war.
The CEO has led a stunning recovery for Bombardier that has seen the plane maker claw its way back from near collapse only a decade ago. After selling its train division, and its turboprop and regional jet units, and handing its C Series airliner program to Airbus SA, Bombardier now has a market capitalization that tops US$23-billion.
The company’s strategy boils down to a single product: selling and servicing private jets for commercial and military applications. It delivered 24 aircraft during its latest quarter and won several new orders, including a major deal with private aviation operator Vista for 40 Challenger 3500 jets.
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Sales for Bombardier’s service and maintenance business climbed 25 per cent over the same quarter a year ago, to US$617-million. The company’s backlog of orders booked but not yet delivered stands at US$20.3-billion.
Bombardier partners with Swedish defence company Saab AB as well as American manufacturer L3Harris on surveillance aircraft. And it’s in negotiations with Saab about the possibility of building the Swedish company’s Gripen fighter jets in Canada under licence.
The plane maker’s defence business is small but growing, passing US$1-billion in revenue last year. It hasn’t made public any new sales and profitability targets for the unit.
Bombardier generates most of its revenue from U.S.-based customers while assembling and shipping out its planes largely from factories in Canada. Its products remain tariff-free under the Trump administration’s exemption for goods stamped compliant under the United States-Mexico-Canada Agreement.
How long that holds remains to be seen. The U.S. Department of Commerce is now wrapping up a Section 232 investigation into imports of commercial aircraft and related parts to determine if they threaten national security. And President Donald Trump has threatened to penalize Canada’s aerospace industry in past social-media posts.
“Although we cannot rule out future tariff threats for Bombardier, we reiterate our view that putting tariffs on aerospace components would be counterproductive to the U.S. given its large trade surplus in the sector,” National Bank analyst Cameron Doerksen said in a recent note. American companies also rely on global supply chains that cannot be shifted in a short period of time, he said.