Bombardier Now a 'Pure Play' Business Aviation Company

 - January 29, 2021, 11:32 AM
Now a pure-play business aviation company, Bombardier is still facing a $4.7 billion debt-load with the sale of its transportation unit to Alstom. However, a ramp-up in Global 7500 deliveries will help generate cash. (Photo: Bombardier)

Bombardier emerged today as a pure-play business aviation company following the completion of the sale of its transportation unit to French rail giant Alstom. The sale, which had cleared all the necessary approvals by late last year, brought in $3.6 billion in net proceeds, including $600 million in Alstom shares.

This was less than the $4 billion anticipated last fall, leaving the remaining business aviation manufacturing and services-oriented company with $4.7 billion in debt. Bombardier had originally targeted a remaining $2.5 billion debt-load following the sale, but last fall had upped that estimate to $4.5 billion after the pandemic had taken a toll on the company’s business activities.

Bombardier cited transportation’s lower-than-expected fourth-quarter cash generation, as well as “disagreements between the parties as to certain adjustments which Bombardier intends to challenge” for the slightly smaller proceeds. The transportation deal followed a chain of sales of Bombardier’s other businesses over the past year, including the remaining stake in the A220 line, as well as its aerostructures work and the CRJ family.

“With this transaction now complete, Bombardier begins an exciting new chapter focused exclusively on designing, building, and servicing the world’s best business jets,” said Bombardier president and CEO Éric Martel. Considering the business aviation portfolio, customer service network, and employee base, he added, “We have a strong foundation to build upon as we use the proceeds from the transaction to begin addressing our balance sheet challenges through debt paydown.”

Addressing the anticipated remaining debt late last year, Martel said that the company was planning to take aggressive steps, with details forthcoming following the sale of the transportation unit.

A Bears of Wall Street group at investment analyst Seeking Alpha noted the sale enabled Bombardier to avoid a liquidity crisis but questioned whether the Canadian manufacturer would be able to compete effectively against rivals that will have more diversified streams of revenue, and thus, more resources.

Through the first three quarters of last year, Bombardier saw deliveries slide by 20 units, to 70 aircraft. But Martel was encouraged that the market appeared to have been stabilizing and that deliveries of the flagship Global 7500 was ramping up to a dozen units in the fourth quarter, helping bolster revenues. Bombardier will announce its fourth-quarter results on February 11.