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Business jets help Bombardier to break even

A strong recovery in business jet sales should offset weakening regional jet deliveries and allow Bombardier Aerospace to break even for the year, despite reporting an operating loss for the first half of the Canadian company's 2004-5 financial year.

Bombardier still plans to deliver roughly the same number of aircraft this year as it did in 2003-4, when it shipped 324 units, but is increasing business jet deliveries as it slows regional jet production because of the threat of bankruptcies at major customers Delta Air Lines and US Airways.

Halfway through a three-year restructuring programme, aerospace and transport company Bombardier has reported net income for the second quarter ended 31 July of $23 million [US] on revenues of $3.9 billion, up 10% from a year earlier. "We are back in the black," says chairman Paul Tellier. "At the halfway point in our turnaround plan, we are where we expected to be."

Second-quarter manufacturing revenues fell 23% to $959 million for regional aircraft, but rose 31% to $456 million for business aircraft. Regional aircraft deliveries dropped to 52 from 66 a year earlier, with CRJ200 deliveries falling by a third to 26. Business jet deliveries increased to 29 from 19 a year earlier.

Overall, aerospace revenues in the second quarter slipped by just under 5% to $1.95 billion, but a strong Canadian dollar combined with increased costs associated with financing support for US regional aircraft customers pushed Bombardier Aerospace to an operating loss of $12 million compared with a $19 million profit a year earlier.

Bombardier is seeing the benefit of diversifying between business and regional aircraft, says Tellier. In the first six months, 60 business jet orders were booked, up from 24 a year earlier.

"Prices were up also and the used inventory was way down," he says, adding that the regional jet market remains a challenge.

Bombardier reduced CRJ200 production rates in the second quarter, anticipating lower demand from North American customers. Last month, 19 CRJ200s scheduled for delivery to US Airways beginning in the third quarter were deferred to the 2005-6 and 2006-7 fiscal years and 23 CRJ200s were converted to CRJ700s.

US Airways and Delta are still scheduled to take 12 CRJs each over the second half of the 2004-5 fiscal year, says Bombardier Aerospace president Pierre Beaudoin. Delta has confirmed it needs the aircraft, he says, and is in talks with the manufacturer on arranging alternative financing to enable deliveries to continue should the airline file for Chapter 11 bankruptcy protection.

GRAHAM WARWICK / WASHINGTON DC

 

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