Bombardier chief executive Eric Martel speaks the company's plant in Montreal on April 24, 2024.Ryan Remiorz/The Canadian Press
Éric Martel returned to Bombardier Inc. BBD-B-T as chief executive officer five years ago and found a heavily indebted company still in the throes of crisis. Now, as he sets one of Canada’s industrial giants back on course, he’s staring at yet another mess in the making.
U.S. President Donald Trump has threatened Canada with an import tariff of 25 per cent on goods brought into the United States, giving the Trudeau government a reprieve of 30 days to settle concerns over illegal immigration and drugs. With Bombardier generating about US$5-billion of its US$8-billion revenue from U.S.-based customers in 2023 and assembling and shipping out its planes largely from factories in Canada, analysts say the hit to the company could be significant.
Bombardier on Thursday announced it would suspend its financial forecast and objectives for the year as it reported fourth-quarter and annual earnings. The company said the situation is fluid and that it needs time to further analyze the possible impact to its business.
“We need to exercise caution until we see how this all unfolds,” Mr. Martel told analysts on a call Thursday. “[But] caution doesn’t mean hitting the brakes. We continue to see favourable market conditions.”
For Bombardier, any lengthy turmoil could be a problem. Mr. Martel has brought investor and employee confidence back to a company that nearly crumbled under the weight of US$10-billion in debt. The risk now is that its turnaround is unwound by developments outside its control.
The stakes for Quebec are high. The province is one of the world’s five biggest aerospace hubs and Bombardier is one of five main manufacturers building there, together with Airbus, Bell Textron Canada, CAE Inc. and Pratt & Whitney Canada. Premier François Legault is desperate to avoid a sales collapse that would force his government to fund the industry in a bid to keep jobs.
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Mr. Martel and chief financial officer Bart Demosky hatched a five-year blueprint for recovery in March, 2021, that hinged on cementing Bombardier’s share of new aircraft sales, cutting costs, paying down debt, and dramatically increasing the company’s aircraft repair and service capability. They’re also building out Bombardier’s defence business, and see that unit being able to triple its revenue to more than US$1-billion in the second half of the decade.
Since Mr. Martel started, Bombardier has boosted annual adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to US$1.36-billion from US$200-million, while EBITDA margins are up to 15.7 per cent from 3.5 per cent, figures released Thursday show.
The company is selling more aircraft (146 in 2024) and generating cash ($232-million last year). After selling its commercial jet and train businesses, it is now a pure-play luxury jet manufacturer.
Increased demand for private jet travel during the COVID-19 pandemic changed the game. Business travellers said goodbye to first class on regular airlines and booked private charters instead. Those who already had their own planes valued them even more. Private-jet flight hours climbed and sales for new planes surged as used jets became harder to find.
Industry data show the top five business-jet makers today enjoy an order backlog worth US$50-billion at last count, up from US$27.3-billion in 2020.
How much of that will come undone remains to be seen. A Trump presidency has ushered in the possibility of tax cuts and less regulation on emissions, which is considered to be a positive for the industry in general, according to industry analyst Rolland Vincent of Jetnet iQ. Demand for planes remains solid and limited availability of preowned jets is bolstering the market, he said in a presentation.
“U.S. tariffs could dent or delay 60 per cent of Bombardier sales, but we doubt they’re permanent,” Morningstar Research analyst Nicolas Owens said in a note this week. “While we can’t rule out a protracted trade war, we view the tariffs as a negotiating tactic.”
Bombardier might see any damage limited by a few factors. Its jets are equipped with engines and parts made by U.S. companies, such as GE Aerospace and Honeywell, Desjardins Capital Markets analyst Benoît Poirier said in a recent note. The company also makes some of its big structural pieces in the United States, such as the wings for its Global 7500 jet, further complicating any straightforward application of tariffs.
Bombardier also has a presence in the United States, with about 1,000 employees, and does business with the U.S. military.
Mr. Poirier is betting that the Trump administration will focus more on sectors such as automotive, where tariffs could resonate more with the average voter, rather than high-end business jets, which could in theory bypass tariffs anyway by delivering planes outside the United States or other legal manoeuvres.
Mr. Martel expressed confidence that the company can weather the storm even as it prepares for different scenarios. The company had available liquidity of US$2.1-billion at the end of the year, a sizable base of customers outside the United States and a US$2-billion service business that won’t be affected by any import taxes.
And orders being made now are for planes that won’t be delivered until the end of 2026 at the earliest, by which time this situation could be resolved, he said.
“Our customers are usually very sophisticated people, very knowledgeable about markets and the economy. And they see this [tariffs] as a very low risk of happening,” Mr. Martel said. “When I talk to them, the vast majority, if not all of them, are saying, ‘You know, if ever it happens, it’s not going to last very long.’ And I’m of the same opinion.”