Bombardier's business and commercial aircraft divisions posted profits in the second quarter of 2019 as the company boosted deliveries and shifted its business further from commercial aerospace.
The company's commercial aircraft unit posted a second quarter profit before interest and taxes of $226 million, reversing a $668 million loss in the same period last year.
Bombardier's business aircraft division earned a profit of $84 million in the second quarter, down 22% from $108 million one year earlier.
During a 1 August earnings call, chief executive Alain Bellemare insists Bombardier's strategy of divesting its commercial aircraft holdings will pay off.
"With the closing of Q400 transaction and the agreement to sell the CRJ programme to [Mitsubishi Heavy Industries], our three underperforming commercial aircraft programmers have been successfully addressed," Bellemare says. "This allows us to full focus on business aviation."
The divestitures started last year when Bombardier passed to Airbus majority ownership of the then-struggling CSeries programme, now called the A220.
In June Bombardier sold the Dash 8 turboprop programme to Longview Aviation Capital for $300 million and announced a deal to sell the CRJ programme to Mitsubishi for $550 million. Bombardier expects that deal will close in the first half of 2020.
"We have retired major risk," Bellemare says. The efforts are enabling Bombardier to squeeze cash out of "under-performing and non-core assets".
Bombardier has also in recent years eliminated $2 billion in exposure stemming from CRJ-related "residual value guarantees" – deals under which it compensates aircraft buyers if aircraft values decline to less than specified levels, Bellemare says.
He also says the A220 has fared well under Airbus, noting the European airframer has secured 300 new A220 commitments and orders since taking the programme's helm.
"We have continued to make solid progress on our turnaround journey. We are pleased with our momentum in aerospace where our transformation is progressing ahead of plan," says Bellemare.
Bombardier's commercial aircraft unit delivered 17 aircraft in the second quarter, including 11 CRJ900s and six Q400s. That is up 70% from 10 deliveries in the same period last year.
The unit's revenue slipped 16% year-on-year in the second quarter to $516 million, partly reflecting the loss of revenue from the CSeries programme.
Bombardier's $226 million second quarter commercial aircraft profit includes a $219 million cash infusion from the purchase by Longview of the Dash 8 programme, a financial filing shows.
Bombardier chief financial officer John Di Bert disclosed the five-CRJ-order cancellation during the earnings call. The company's CRJ backlog now stands at just 36 CRJ900s.
Bombardier expects to clear the backlog and shutter production within 12-15 months, leaving Mitsubishi with the CRJ's type certificates and the programme's global aftermarket operation.
BUSINESS JET DELIVERIES TICK UP
Bombardier's business jet division generated $1.4 billion in second quarter revenue, up 6% year-on-year, and delivered 35 aircraft, up from 34 in the same period one year earlier, the filing shows.
Second quarter business jet deliveries included two light jets, 17 mid-size jets and 16 large jets.
Bombardier does not generally specify deliveries by aircraft type but says second quarter deliveries included two of its flagship Global 7500. That aircraft entered service in December 2018.
"Our financial performance was right on plane for the second quarter and is tracking to our full-year guidance," Bellemare says of the business aviation unit.
Starting in the third quarter Bombardier will roll its business and commercial aviation financial results into a single division called Bombardier Aviation.
It anticipates that unit will generate $8 billion in revenue this year, down from a previous estimate of some $9.7 billion. Bombardier documents attribute the decline partly to the five CRJ order cancellations.
Bombardier predicts it will deliver 175-180 business and commercial aircraft this year, including 15-20 7500s.
The company delivered 173 total aircraft last year, filings show.
Story corrected on 12 September to note that Bombardier expects the CRJ sale to Mitsubishi Aircraft will close in the first half of 2020.