Bombardier profits fall, Embraer preparing for new aircraft product, AerCap signs debt facility

Bombardier Inc reported its fourth quarter profits fell almost 43% year-on-year to USD179 million – slightly below market expectations. Its shares fell 2.1% yesterday.

The aircraft and train manufacturer stated the overall financial results for the fourth quarter and the year ended 31-Jan-2010 were “good…in a difficult economic environment”. Full-year revenues eased to USD19.4 billion, compared to USD19.7 billion in the previous fiscal year, while EBIT fell to USD1.1 billion, compared to USD1.4 billion last fiscal year. Net income fell to USD707 million, compared to USD1 billion previously.

The manufacturer took the downturn “as an opportunity to fine-tune the way we operate, in order to execute better and cut costs intelligently”, said President and CEO, Pierre Beaudoin.

Bombardier Aerospace’s earnings and backlog slumps

At Bombardier Aerospace, full year revenues totalled USD9.4 billion compared to USD10 billion last fiscal year, while EBIT slumped to USD473 million, or a 5.1% margin, compared to USD896 million, or 9%, for the same period last year. Bombardier Aerospace’s backlog was carved down to USD16.7 billion as at 31-Jan-2010, compared to USD23.5 billion at the same date last year.

The group recorded 11 net orders (213 gross orders and 202 cancellations) in fiscal year 2010, compared to 367 net orders (423 gross orders and 56 cancellations) the previous fiscal year. Deliveries totalled 302 aircraft, versus 349 last fiscal year, including 121 commercial aircraft, compared to 110 aircraft in the previous year, increasing its market share to 44% this year from 37% last year.

Bombardier Aerospace expects to deliver approximately 15% less business aircraft and 20% fewer commercial aircraft in fiscal year 2011, compared to the previous fiscal year. 

In Mar-2010, Bombardier issued CAD1.5 billion of unsecured long-term debt maturing in calendar years 2018 and 2020. The proceeds are intended to be used to repurchase approximately CAD1 billion of existing long-term debt maturing from calendar years 2012 to 2014, thus extending Bombardier’s debt maturity profile. The balance of approximately CAD500 million will be used for general corporate purposes.

Updates on new programmes

Bombardier stated the development of new aircraft programmes is “evolving as planned”.  Flight testing on the CRJ1000 NextGen aircraft resumed in Feb-2010 and its entry into service is scheduled for 2H2010. The CSeries’ Complete Integrated Aircraft Test Area (CIASTA) systems testing facility in Mirabel (Canada) and the wing-manufacturing facility in Belfast are also under construction.

In Feb-2010, Republic Airways signed an agreement to purchase 40 CSeries CS300 aircraft, with options for an additional 40 CS300 aircraft. The value of this contract, based on list price, is USD3.1 billion which could increase to USD6.3 billion if all options are exercised. Including this order, the backlog for the CSeries family of aircraft now stands at 90 firm orders.

Meanwhile, Pluna (a Uruguay-based regional airline) confirmed the purchase of another seven CRJ 900s at a cost of "nearly" USD200 million, which will bring its total fleet to 14 of the type. Pluna will receive three aircraft this year, adding to its existing seven CRJ 900s already in operation, with the remaining four aircraft to be delivered in 2011.

Embraer revamps management, preparing for new airliner product

After spending the last decade focusing on developing its business jet offerings, Embraer is now turning its attention back to the commercial aircraft market, creating a new position – Executive VP New Programs, Airline Market – and naming Mauro Kern to the post. Succeeding Mauro Kern as Executive VP – Airline Market, is Paulo César Silva.

It is the company’s clearest indication yet that a new product is in the works. The market is ready for a new generation airliner – especially at the lower end of the Boeing and Airbus range with pressure mounting on both the mainline OEMs, as well as traditional regional airline manufacturers, to develop new programs. Adding to the mix are program offerings from Russia, China and Japan.

Boeing and Airbus have both put off the next step change in narrowbodies until the middle of the next decade. However, the market is exerting pressure for a solution before then. The pressure paves the way for successful introduction of the Bombardier CSeries which certainly has the market buzzing.

Thus Embraer’s moves signal its re-engagement on the commercial side after introducing no less than seven business jets during the decade and largely achieving its goal to become a major player in that field. In the past few years, the company has expressed less enthusiasm for developing a new airliner, preferring instead to wait for new engine developments and a clearer message from the market as to what is wanted.

The changes in senior management are effective immediately, said the company, adding the move was designed to “enhance its ability to assure full customer satisfaction and expand its business dynamics, while reinforcing the strength and productivity of its internal operations.”

In addition, the company has created a new position – Chief Operating Officer – naming Artur Coutinho to the post responsible for industrial operations, procurement, technology, organization development and human resources. Finally, Antonio Julio Franco takes over the newly created position of Executive VP, Personnel Planning and Development, and is succeeded by Hermann Ponte e Silva in his former position of Executive VP, Organisation and Human Resources.

AerCap signs corporate debt facility

Elsewhere in the aviation supply chain, lessor AerCap yesterday announced it has signed a corporate debt facility agreement for USD120 million with UBS as lead arranger. The facility has a term of five years and will be used for general corporate purposes.

Paul Rofe, Group Treasurer of AerCap stated, “with this corporate facility from UBS we have further diversified our sources of capital. This facility provides financing for general corporate purposes and allows AerCap to pursue additional investment opportunities. With the conclusion of this facility we have now closed USD350 million of new debt in 2010 which brings the total amount of debt accessed by us in the last 24 months to USD5.3 billion”.

AerCap’s shares soared 7.1% yesterday.

Selected Aviation suppliers’ daily share price movements (% change): 05-Apr-2010

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