Q2 2013 BOMBARDIER INC Earnings Conference Call - English
Aug 01, 2013 AM EDT
BBD.B.TO - Bombardier Inc
Q2 2013 BOMBARDIER INC Earnings Conference Call - English
Aug 01, 2013 / 02:00PM GMT
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Corporate Participants
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* Shirley Chenier
Bombardier Inc. - Director, IR
* Pierre Beaudoin
Bombardier Inc. - President, CEO
* Pierre Alary
Bombardier Inc. - CFO
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Conference Call Participants
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* Walter Spracklin
RBC Capital Markets - Analyst
* Steve Hansen
Raymond James - Analyst
* Joe Nadol
JPMorgan - Analyst
* Fadi Chamoun
BMO Capital Markets - Analyst
* Turan Quettawala
Scotiabank - Analyst
* Cameron Doerksen
National Bank Financial - Analyst
* Benoit Poirier
Desjardins Capital Markets - Analyst
* Robert Spingarn
Credit Suisse North America - Analyst
* David Newman
Cormark Securities Inc. - Analyst
* Peter Arment
Sterne, Agee & Leach - Analyst
* Ron Epstein
Bank of America-Merrill Lynch - Analyst
* David Tyerman
Canaccord Genuity - Analyst
* Stephen Trent
Citi - Analyst
* Anthony Scilipoti
Veritas Investment Research - Analyst
* Deepak Kaushal
GMP Securities - Analyst
* Chris Murray
PI Financial Corp. - Analyst
* Danielle Ward
JPMorgan - Analyst
* Scott Deveau
National Post - Media
* Marie Tison
La Presse - Media
* Matt Angelique
Laissez-faire - Media
* Molly McMillin
Wichita Eagle - Media
* Francois Shalom
The Gazette - Media
* Francois Pottier
Laissez-faire - Media
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Presentation
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Operator [1]
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Good morning, ladies and gentlemen, and welcome to the Bombardier conference call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Ms. Shirley Chenier, Senior Director, Investor Relations. Please, go ahead, Ms. Chenier.
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Shirley Chenier, Bombardier Inc. - Director, IR [2]
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Thank you, Operator. Bonjour. Good morning and welcome to Bombardier's conference call intended for investors and financial analysts.
(interpreted) I also welcome the media representatives who are with us today. You will have an opportunity to ask questions later during this call when we open the media question period.
Shortly Mr. Pierre Beaudoin, President and Chief Executive Officer, and Mr. Pierre Alary, Senior Vice President and Chief Financial Officer, will discuss Bombardier's financial results for the second quarter ended June 30, 2013.
(interpreted) This conference call is broadcast live on the internet and is also interpreted in French and in English.
You can access the broadcast on our website at Bombardier.com and the webcast archive of the interpreted version of this call will be available within the next 24 hours. Slides for this presentation in English and French are equally available on our website. All of dollar values expressed during the conference call are in US dollars unless stated otherwise.
I also wish to remind you that during the course of this conference call we may make projections or other forward-looking statements regarding future events or the future financial performance of the corporation. Several assumptions were made by Bombardier in preparing these statements and we wish to emphasize that there are risks that actual events or results may differ materially from these statements. For additional information on such assumptions, please refer to the MD&A released today. Please also note that I'm making this cautionary statement on behalf of each speaker whose remarks today will contain forward-looking statements.
Pierre Beaudoin will now begin the presentation.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [3]
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Welcome, everyone. Bonjour. To start I'd like to say we had a good second quarter with overall increase in revenue, EBIT, and backlog. In aerospace, revenue was stable and the EBIT margin was in line with our guidance. In business aircraft we continued to capture strong market share in the stable market. As for the CSeries, the integration of the aircraft CPU and engines on the first flight test vehicle is running smoothly and the latest software upgrade continues to be successfully implemented.
However, these highly technical steps are taking more time than initially anticipated. We are comfortable at taking the time to ensure system integration before first flight to take place in coming weeks.
Transportation had a very strong quarter on the order front with a book to bill of 1.5. It also increased its revenue, EBIT, and free cash flow.
I would also like to welcome Lutz Bertling, our new President of Bombardier Transport, a strong addition to our leadership team.
Now, I will let Pierre Alary go through the results.
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Pierre Alary, Bombardier Inc. - CFO [4]
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Good morning. Aerospace revenue for the quarter totaled $2.3 billion, the same level as last year. EBIT before special items totaled $107 million or 4.7% of revenues in line with our guidance and which compared to $99 million or 4.4% last year. For transportation, revenues totaled $2.2 billion compared to $1.8 billion last year. This increase is due to the ramp up in production of contracts received in Europe, North America, and Asia-Pacific. Overall, there's been no significant currency impact.
EBIT margins at $150 million or 6.9% compared to $115 million or 6.3% last year. The increase is mainly due to the higher gross margin in system signaling services and higher absorption of SG&A partly offset by a lower margin and rolling stock and lower share of income from SSA.
On a consolidated basis, revenues totaled $4.4 billion an increase of 8% compared to last year. EBIT before special items was at $257 million compared to $214 million last year. Net financing expense amounts to $36 million compared to $29 million last year. And with an effective income tax rate of 28.6% the adjusted net income totaled $158 million or $0.09 per share compared to $167 million or $0.09 per share last year.
As expected, we used cash flow in the second quarter. Aerospace used $459 million of cash which is better than last year's usage of $504 million and the use of cash is essentially due to our significant investment program which amount to $534 million in this quarter. Transportation used $21 million of cash in the second quarter compared to last year usage of $44 million. And for the full year we expect free cash flow to be in line with our guidance. At the end of Q2, our short-term capital resources totaled $4.5 billion including cash and cash equivalents of $3.1 billion.
It is also worth noting that the pension deficit reduced by $640 million in the last six months, mainly due to increases in discount rates and good return on our plant assets.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [5]
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So, to conclude, our results for the second quarter were good and in line with our guidance. We have a record backlog of $65.5 billion which represents about four years of manufacturing revenue. And we continue to invest in new products which will put us in a very solid position for the years to come. Thank you.
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Shirley Chenier, Bombardier Inc. - Director, IR [6]
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Thank you, Pierre. We'll now start the question period for analysts and investors. In order to keep the duration of this call reasonable, I would ask you to limit yourself to one question to give everyone a chance to participate. If you have any remaining questions at the end and as time permits, you can get back in queue. If not, you can contact me after this conference call. We can now start with the first question. Operator?
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Questions and Answers
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Operator [1]
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(Operator Instructions) Walter Spracklin, RBC Capital Markets.
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Walter Spracklin, RBC Capital Markets - Analyst [2]
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My first question is on the CSeries. I'm just interested in the timing on the EIS side. Obviously there's been a couple days here on first flight and you kind of left it open though as when your official view on EIS is. I guess my question revolves around cost. If we do see entry into service, let's say theoretically moves into a late 2014 potentially early 2015, just hypothetically, does that mean that your 200 basis point drag that you'd been guiding for aerospace for this year or for next year would no longer apply? Also on the cost side, what does that do to your total program costs? I think the latest is $3.5 billion. How would that change if we do see an EIS pushed out to a later 2014 timeframe?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [3]
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Let me start by saying that there is nothing that has changed about the entry into service. Of course we expect the first flight in the next few weeks and from there we've always said that we plan the flight test for 12 months but it is a flight test program. We're learning during the flight test and we'll have to keep you informed on what kind of progress and of different milestones during the flight test. But it is a flight test and it's scheduled for 12 months.
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Walter Spracklin, RBC Capital Markets - Analyst [4]
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Under the hypothetical though that it didn't make that 12 months and it got pushed in next year, 2015, would the 200 basis points that you highlighted, that drag, would that no longer apply if it were pushed out?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [5]
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It's very hard to answer a question like this when you say hypothetical. It depends on the assumptions specifically, et cetera. When we give guidance and we gave guidance earlier this year as to 2014 and that's based on a certain assumptions we have. We obviously don't revise those on a daily basis. We'll revise that with our annual guidance at year end.
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Walter Spracklin, RBC Capital Markets - Analyst [6]
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Then on the program cost question, did these delays effect your program costs from the $3.5 billion that you'd flagged for the total program cost initially?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [7]
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Not in a material way.
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Operator [8]
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Steve Hansen, Raymond James.
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Steve Hansen, Raymond James - Analyst [9]
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Just looking at the net order count for the quarter and it strikes me that the cancelations were relatively high in the quarter. I was wondering if you could give us a break down as to why that might be?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [10]
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The break down, it's a question of some customers who realigned in those timelines. Some customers wanted to be later on or have been replaced by a new customer within the current quarter. There's nothing specific.
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Pierre Alary, Bombardier Inc. - CFO [11]
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There's no specific pattern. Some swaps, customers moved from one aircraft to another. But nothing specific. Nothing unique I would say.
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Operator [12]
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Joe Nadol, JPMorgan.
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Joe Nadol, JPMorgan - Analyst [13]
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Pierre Alary, I think I heard you say that you're maintaining your guidance for aerospace cash flow for the year. Just wondering if you could give a little more detail on the cash from operations part? You're at about $100 million through six months. I think your guidance is $1.4 billion. I noted that advances were down a little bit during the quarter. Just what's your line of sight to getting that $1.4 billion? It seems like you'd need a lot of advances coming in to get there.
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Pierre Alary, Bombardier Inc. - CFO [14]
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Yes. We do. And what we're experiencing, the first two quarters are in line with what we were expecting within our guidance. In fact I did -- I've been specific on the guidance with respect to free cash flow but there's no change in our guidance overall. But having said that the first two quarters follow the pattern we're expecting and in fact if you look at the cash flow from operating activity, we're doing better on a cumulative basis than last year to the tune of $340 million better. So, the pattern is that -- do we expect to have an increase in advances from customers from this point? The answer is yes. But that was -- that's based on the original guidance.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [15]
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That also follows the pattern we have regularly.
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Joe Nadol, JPMorgan - Analyst [16]
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I understand. Just looking for -- is this commercial orders you're expecting? CSeries orders? Is it business jets? Is it contractual advances based on orders you've already received or is it new orders? Any kind of color?
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Pierre Alary, Bombardier Inc. - CFO [17]
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The answer is that it's all of the above. There's progress payments we're expecting that are based on orders that have already been signed last year and previous year. That's scheduled. There's coming from new orders and from new orders on effectively every platform.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [18]
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But business aircraft are generally better than commercial.
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Operator [19]
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Fadi Chamoun, BMO Capital Markets.
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Fadi Chamoun, BMO Capital Markets - Analyst [20]
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Good morning. So, looking at your aerospace EBIT margin guidance for next year which is 8%, at this stage, how much of the revenues that you need to get to 8% are in the backlog? I mean, I would suppose with the aircraft side of the business, aviation and everything else, you're probably pretty close to where you need to be from a visibility point of view. Just wondering how do you see that outlook now?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [21]
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Let me answer this. In part you look at the backlog of business aircraft. It's quite healthy. Depending also on the product line you're looking at, like the pattern that we've been talking about does not change. It's stronger on the larger aircraft than it is on the smaller. So, overall I think the market so far permits us to continue with our guidance.
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Fadi Chamoun, BMO Capital Markets - Analyst [22]
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You don't essentially see any big holes in the skyline that you would need to fill to get to that 8%?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [23]
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There are still aircraft left to sell. That's a normal pattern. Like I said, this market continues to be the same that we spoke about in Q1 of last year, the bigger aircraft are selling stronger than the smaller aircraft. So, in other words there's more Learjets to sell than there is Globals.
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Operator [24]
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Turan Quettawala, Scotiabank.
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Turan Quettawala, Scotiabank - Analyst [25]
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I guess for the first one, I just wanted to ask the last question as a follow-up maybe. Can you give us some sense on does the commercial side of the business at all impact this with the CRJ orders and the Q400 backlog also looking a little bit weaker here?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [26]
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For this year? For next year?
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Turan Quettawala, Scotiabank - Analyst [27]
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Next year's margins. That's right. Sorry.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [28]
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Again, in commercial aircraft we see the skyline's forward. We don't see anything that's changed that would have us review our view of next year.
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Turan Quettawala, Scotiabank - Analyst [29]
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Great. Thank you. Just also, quick question on -- I know the EIS timing for the CSeries you haven't officially changed that but just trying to understand here, can you give us a sense of how long potential delay would start causing problems with regard to penalties maybe with the airlines?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [30]
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I can't start to speculate. The potential delay for me is a hypothesis. What we do is with the airlines is we keep them informed of how we're making progress in the test, they're all very informative. Where do we stand with the first flight? What are the tests we still have to do? Then we look at the deliveries and we look at the test schedule. The test schedule is 12 months. We'll keep them informed all the way through. So, I'm not going to speculate which airline would have -- it would vary based on the potential delay that's in the hypothesis.
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Turan Quettawala, Scotiabank - Analyst [31]
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I guess based on where you are right now I guess there's no risk of that happening? Is that fair to say?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [32]
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No. The airlines are all very supportive of the program that we have and where we are in our schedule.
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Operator [33]
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Cameron Doerksen, National Bank Financial.
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Cameron Doerksen, National Bank Financial - Analyst [34]
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Good morning. I guess my question's on transportation. There's been pretty good growth year over year in BT. It was especially strong on the system and signaling side. Was there something unusual going on in the quarter or is that close to a sustainable level that we'll see in the system and signaling sides specifically?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [35]
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Well, this quarter was particularly strong in systems and there is some question of the timing of certain elements within the system because it's more spiky. But it is growing although this quarter -- the growth in this quarter would be on the high side.
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Pierre Alary, Bombardier Inc. - CFO [36]
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I would say we see a quite a few projects in the system side. When you're dealing in emerging markets or markets where they have not had transit systems before, they very often ask for the manufacturers to be responsible for putting the whole system in place including working with civil. I see as a trend forward as we're developing our business and new markets, I see more systems for us.
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Operator [37]
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Benoit Poirier, Desjardins Capital Markets.
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Benoit Poirier, Desjardins Capital Markets - Analyst [38]
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Good morning. I was wondering if you could provide an update on the marketing campaign for the regional side, especially with AMR and Garuda and also whether you're ramping down the Q400 production and any risk on that side?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [39]
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On the first part, once you name American has an active campaign which we are very active at answering questions that they have and AMR will make a decision. We expect AMR to make a decision shortly. I can't tell you more than that. But this is a competitive campaign. As far as Garuda, I think you're referring to them exercising options?
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Benoit Poirier, Desjardins Capital Markets - Analyst [40]
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Yes.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [41]
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This is something the airline has said publicly that they would do. At this point they have not exercised the options but of course we are in discussion with them regularly. They're taken delivery of their aircraft, they like the aircraft. I'm hoping they'll exercise the option shortly.
As far as the Q400, we've given guidance for this year. We have not given guidance for next year. There are some active campaigns on the Q400. The product is appreciated. It just entered into service -- one jet, as you know. I think we're making good progress on the campaigns that are active.
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Operator [42]
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Robert Spingarn, Credit Suisse.
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Robert Spingarn, Credit Suisse North America - Analyst [43]
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A couple questions on commercial. First of all, Pierre, what are you seeing here at the late stages of ground testing that you had not anticipated two months ago? Could you give us a little bit more specificity on that?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [44]
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Yes. It's not things -- I thanks not tests that we had not anticipated. It's when we make tests, there's the earned value that we plan in the day of the test is not quite at the level we had anticipated. So, for example, we're doing a test and then we discovered that the wires were not -- are plugged upside down. Okay. It's not a big deal but we have to go back and understand why it happened and then it takes us two days rather than half a day. So it's a whole bunch of --
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Pierre Alary, Bombardier Inc. - CFO [45]
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We have to find the wire.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [46]
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We have to find the wires.
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Pierre Alary, Bombardier Inc. - CFO [47]
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We have to move the wires.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [48]
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Nothing specific came up but a lot of small stuff that means that what we have planned in a day sometimes takes three, four, five days and of course delays first flight. Like we've said to our team, it's not a question of rushing. This has to be done very well. We have to learn what we need to learn to get a good flight test program. It's not only about the first flight. So, if it takes more time, it takes more time.
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Robert Spingarn, Credit Suisse North America - Analyst [49]
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That being the case, how do we think about the cushion in the 12 month flight test program? Are we tight there? Do you have adequate cushion? Because I could see something similar happening.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [50]
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First of all, the test you do for the first flight test vehicle is a lot more intensive than what we would do to get the other aircrafts to fly. This is the first time we're learning all these integrated tests that we have at suppliers. At Bombardier we're learning how they behave on the aircraft. So, we're taking a lot more time. It does not necessarily affect the flight test. So, don't link one to the other. That would be my answer.
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Pierre Alary, Bombardier Inc. - CFO [51]
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And the different flight test vehicles do different tests. On one series of tests we could be delayed and it has no impact on the other series because they can be done concurrently. Sometimes it takes longer. Sometimes it takes less time than we originally planned. There are plusses and minuses.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [52]
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The first thing you learn on this aircraft, the first thing that happens with the team is we go back and look at the other flight test vehicles, see if we need to make a modification. If we've made the same mistake on the other ones. So, we're learning to get the other airplanes ready. So, I think one is not related to the other.
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Robert Spingarn, Credit Suisse North America - Analyst [53]
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But would you characterize the 12 month flight test as a tight schedule or do you have a fair amount of cushion? Not necessarily relating it to the tests for first flight but in and of itself is it a tight program?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [54]
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It always depends on the amount of aircraft you put into the flight program. As you know in the CSeries there are five CS100 and two CS300 and then there's some additional tests on the first production airplane. So, for me when we look at this schedule, yes, it's a busy test schedule for one year but we've planned it and it's doable. But like I said, this is flight test. So, as we learn and we achieve milestones, we'll keep our customers informed while we make progress and of course we'll adjust if we need to adjust. But I've got no reason this morning to say that the 12 months is not realistic.
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Robert Spingarn, Credit Suisse North America - Analyst [55]
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Then just wanted to ask you, Embraer launched its new aircraft during the Paris air show and I wanted to get your thoughts on how this alters the competitive landscape and do you see this aircraft as competing with the CSeries?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [56]
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First of all, their program covers regional and goes up in size into the category where the CSeries is. It's an aircraft that doesn't come before 2018 and 2020 for the regional version. There's lots of time as the CSeries will be on the market. As we've said before we have a big time advantage on our competitor and it's a derivative. They did their best with what they had at making an aircraft that's just a derivative. So, without -- I don't want to get into it on the call but I'm sure our marketing people can give you all the advantage the CSeries has because it's a new airplane. Embraer did their best with modifying an airplane.
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Operator [57]
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David Newman, Cormark Securities.
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David Newman, Cormark Securities Inc. - Analyst [58]
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Just a question maybe for Pierre Alary. You had a new positive variance on RVG and credit guaranteed provisions. What's at work there and how material is it to the BAE margins? I do believe that the maturities begin to kick in in the next few years. Is this something that we can expect as you're obviously perhaps managing the RVG well and we might see reversals on that front? Any comments?
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Pierre Alary, Bombardier Inc. - CFO [59]
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Yes. First of all, it was not -- the reversal itself was not important. It's disclosed in the '14 provision and the reversal is $7 million. So, in itself it's not material. Effectively we're working on reducing the risk overall with RVG and LVG and reducing the risk. As a result we're building some cases to turn to profit or reverse in a sense some of the provision that is required.
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David Newman, Cormark Securities Inc. - Analyst [60]
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Do you anticipate this could be as you get into the program and assuming you're doing a good job of managing it, that this could actually become more of a contributor to margin?
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Pierre Alary, Bombardier Inc. - CFO [61]
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Certainly the team that we have on task to derisk or look at those aspects and looking at the assets and what not, that's definitely their objective is to be able to fulfill those obligations at a lower cost than what we have provided for.
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David Newman, Cormark Securities Inc. - Analyst [62]
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Very good. The last one for me, the Lear 85, when do you expect first flight? Perhaps, Pierre Beaudoin, for the FTV one is still obviously being built and obviously I guess in your guidance overall for the year you're calling on a lot of smaller business jets so the 70-75, is that still intact for the end of the year?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [63]
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Let me start by the second part of your question. The answer is yes. The 70-75 is still scheduled to deliver for the end of the year. I believe we said Q4. It's scheduled to deliver this year. For the 85, we're making good progress with this program. As we said before there's been some challenge in the composite structure but that's largely behind us. Now we're getting ready for first flight and it is scheduled to happen this year.
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Operator [64]
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Peter Arment, Sterne Agee.
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Peter Arment, Sterne, Agee & Leach - Analyst [65]
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This question really is more following back up on the CRJ demand, Pierre. Some of the higher profile campaigns, I'm thinking Delta last year and American this year, we can somewhat track, but how do we think about CRJ demand kind of more globally in some of the international markets that you compete in? Can you give us more color of what you're seeing and when we would expect to see some additional orders?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [66]
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Of course there's a lot of focus on the big American campaign and what happened now is the major airlines ordered airplanes and of course the AMR campaign is one that's still outstanding. As you know it's a competitive campaign and we're there with our product and we feel that we have a significant advantage. So, we'll see what the airline decides and when.
And then after that, you should see also the regional airlines that support the main airlines. If they decide to -- if they get additional routes from the airlines, of course they'll look at ordering airplanes. The main volume remains the US with the campaigns that you know.
But we are developing international markets. You've seen our success with Garuda and our success in China and I would say -- and of course in Russia our product now is certified. We're working very hard on these campaigns, getting the regional jets known and appreciated for the types of routes that they have and I expect to see some continued success internationally with the CRG. There's nothing -- nothing was announced lately but I think there are good campaigns in the works right now.
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Operator [67]
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Ron Epstein, Bank of America-Merrill Lynch.
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Ron Epstein, Bank of America-Merrill Lynch - Analyst [68]
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So, just maybe back on the commercial side again, when we think about demand in the market, it seems like there's just a huge amount of orders for the 737 sized airplane, the A320. And when you look down at maybe the A319, 7377, it seems like there's a little bit less demand. What's holding you back from going forward and just doing a -- not to put a name on it but a CS500 that puts you right in that segment where demand seems to be surging? That's one question, then a follow on if I may?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [69]
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First of all, I think we have two very good products we're working on with a unique market where we'll be offering a unique airplane in the market where we're the only manufacturers. We feel there are 7,000 units in this market over 20 years. And our competitors that look at that market also say there's 7,000 units. So, it's not a forecast that Bombardier does alone. Actually we see 6,800 -- 6,900 to be precise. So, there's a market there.
What the airlines are saying is that they have a need for smaller aircraft but at a seat cost that competes with the bigger aircraft. That's what the 319 does or the 7300 does not do, it's too expensive for them to be competitive from a seat cost perspective. The CS300 does that very well. We're able to address routes that today it's very difficult for them to address competitively. That's the market we'll focus on because I think we have a unique product.
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Ron Epstein, Bank of America-Merrill Lynch - Analyst [70]
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Then just as a follow on, just for clarity, I think one of the earlier questions was someone asked about if there's a potential delay in entry into service. I think you mentioned that that won't have an impact on cost or not very much. Help me understand that. How can a delay in entry into service not have an impact on the cost of the program?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [71]
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The question was the delay in first flight today, does it have a material cost, a material effect on the cost of the program. We said not material. Of course if the flight test program will be longer than planned, then we'll spend more money on the program. But I don't want to speculate on this at this point. We've scheduled the flight test for 12 months.
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Operator [72]
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David Tyerman, Canaccord Genuity.
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David Tyerman, Canaccord Genuity - Analyst [73]
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I was wondering if you could give an update on the market demand for business jets. I would observe that excluding the big orders, your normal order type of business seems to have slowed down in the last -- at least the last couple of quarters, maybe three quarters. So, I'm wondering are we in a much slower situation across the business jet area or should this pickup at some point?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [74]
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The way we monitor the market is two ways, of course the orders and then what's in the backlog of discussions, the pipeline we see of orders. The pipeline is very healthy. What has taken more time this year is closing deals. We have a strong pipeline so that the positive about this market and there's a lot of very active discussion. The concern we have is deals are taking a long time to close. I would say generally we're in a stable market if you look compared to last year with some growth in the larger aircraft. But we want to follow closely that these active discussions in the pipeline get to a contract.
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Operator [75]
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Stephen Trent, Citi.
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Stephen Trent, Citi - Analyst [76]
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Just a question from me on the transportation side. Certainly in the Latin America side of the fence, both Brazil and Mexico are talking up potential rail projects, subway projects and high speed rail projects. I believe you guys have production in Queretaro in Mexico as well as in San Paolo in Brazil. Could you just give us some color on what you're seeing there and what you see as the potential for Bombardier transportation?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [77]
------------------------------
I see great potential for Bombardier transportation. Like you said, in Mexico we're very active with a factory in transport in Cancun and a factory in Queretaro. We know the market very well. We follow this market very well and I think with the projects they're talking about like the high speed line to Queretaro, we're very much following this and working with the customer what's the ideal product.
There's another one they're talking about, a line to Toluca to the airport which would be also a type of product that I think Bombardier -- we would be very competitive. So, Mexico has great potential just to name two projects and the current President also said there was a priority for Mexico to implement some mass transit in the country and he specified some projects like the two I just named. So, I think this will represent a great opportunity.
For Brazil, our focus is on the monorail that we're starting to implement in San Paolo. This is a unique product because it's got the capacity of a metro but it's a monorail so it's easier to put in place than a metro from an infrastructure perspective. So, with the success of this first project that's starting now and we're going to start to deliver trains and the infrastructure is making good progress, we then have a showcase to show in Brazil a system that can deliver what they're looking for as capacity to move a lot of people without disturbing the city for the long-term by digging tunnels. So, I think we have a great product and great potential in that country.
------------------------------
Operator [78]
------------------------------
Anthony Scilipoti, Veritas Investment.
------------------------------
Anthony Scilipoti, Veritas Investment Research - Analyst [79]
------------------------------
I'm just looking at the presentation you have for the adjusted net income, Pierre. And maybe you could just walk us through to understand how your rationale for what's included and what's excluded to these numbers. I guess I'm on page nine of the MD&A.
------------------------------
Pierre Alary, Bombardier Inc. - CFO [80]
------------------------------
In this quarter the first adjustment we're making is in relation to the net financing expense in relation to the retirement benefit obligation. So, we're excluding this one because on the US GAAP it's calculated differently. A lot of our competition is US GAAP so therefore we identified that statistically this was an element to be more comparable.
The next one is the net change in provision arising from change in interest rates. So, we have a number of provisions within the balance sheet that need to be net present value and as the interest rates are fluctuating on a quarter to quarter basis we kind of exclude that fluctuation because it's not part of the really the business and the provision is there to cover what is needed. And it's going up or down, our experience has been going both ways and it's not the reflection of the business, the core business.
And obviously when we have some special item like the interest portion of the special item which is the litigation, the successful resolution of the litigation. So, we're going to get back the capital that we've paid in the past. So, that's part of the EBIT as it was part of the EBIT originally and there's an interest component. So, we believe that interest component is not a reflection of the current quarter business.
That's basically how we go about it. It's to help you to -- it's us identifying what we believe is non-core and non-reflective of the current operation and that's basically to help the reader of the financial to get to the core business result.
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Anthony Scilipoti, Veritas Investment Research - Analyst [81]
------------------------------
I think that's good that you provide it and the special item adjustment. It's just the pension one. You're right. There's a slight difference to US GAAP but historically that's always been included in the earnings that you've presented.
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Pierre Alary, Bombardier Inc. - CFO [82]
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It's been included in the past few years under IFRS and under IFRS the calculation was made differently. It was done using the discount rate on the liability and using the expected return on the asset which was basically bringing a neutral impact on the interest. But by us identifying it you have the information. We believe that brings it to the core business and that's why we do it.
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Operator [83]
------------------------------
Deepak Kaushal, GMP Securities.
------------------------------
Deepak Kaushal, GMP Securities - Analyst [84]
------------------------------
I have a broader industry question. There have been a number of tragic incidences for operators in both the rail and aviation business this year. I was just wondering if could comment if you're seeing any increased scrutiny from regulatory and safety authorities and if there are any changes and how this might impact the industry and the business?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [85]
------------------------------
First, I think you're referring to the series of events in the train business and the rail business this summer in Europe. Of course this is very tragic and we're concerned when these events happen. They seem to be all -- of course all of the causes are different of these events from operator's mistakes to -- all of these events are under investigation right now but they seem to have all different causes. Do we see additional scrutiny at this point? We'll have to follow this but we feel that at least in the Spanish situation that the equipment was not in cause at all.
------------------------------
Deepak Kaushal, GMP Securities - Analyst [86]
------------------------------
Just a quick follow-up also on the transportation business, you did announce a big order for locomotive. I'm just wondering if those are standard design locomotive, if there's any custom work there and if this changes your margin mix when you gave your 8% target for EBIT given the higher margins that come with locomotives?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [87]
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You're referring to the framework agreement with Deutsche Bank?
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Deepak Kaushal, GMP Securities - Analyst [88]
------------------------------
Correct.
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Pierre Beaudoin, Bombardier Inc. - President, CEO [89]
------------------------------
This relates to a new design which we're doing in the context of this framework. Of course based on the locomotive that we have today, but there's quite a few modifications and that's why they give it to us in a framework. And we only got the first tranche of the -- from an order perspective but if you look at the framework it's about 400 locomotives. So, it justifies large modifications to the current locomotive.
------------------------------
Deepak Kaushal, GMP Securities - Analyst [90]
------------------------------
Again, does that change the mix of margin that you anticipated when you gave your target for 8% EBIT margins for transportation?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [91]
------------------------------
No. I think this is very good news because it gives us the basis to quote these types of locomotives to other customers.
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Operator [92]
------------------------------
Chris Murray, PI Financial.
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Chris Murray, PI Financial Corp. - Analyst [93]
------------------------------
Just another follow-up I think a little bit on the business jet market. A couple parts to this. This morning you guys came out and announced 96% year over year growth for the first six months in fractional and jet cart sales. I guess what I'm trying to figure out is there any read throughs we should start to figure out at least into he lower end of the market? The second part of this question, it's just a little bit of a follow-up on your comments that deals with a little bit more time to close, can you give us an idea of what's maybe causing that? Is it something related to pricing or the availability of financing with customers?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [94]
------------------------------
I've always said frac jets are a leading indicator of the industry. What we're seeing since November last year is that customers are flying at a very high rate above their contract agreement with us. They're consuming their contract faster than the hours that they have. So, that's very good news because it indicates to us there's a lot of interest in flying private and usually it's a sign that there is a leading indicator towards a more traditional sales of aircraft or sales of complete aircrafts. So, I think that's what you should read in the communique is that flag jet fractional business, flag jet in particular is growing again.
As far as closing the orders, there's nothing specific that I want to point to. It's just the customers are there and they're shopping for aircraft. So, as compared too when it was very slow, that's not the case anymore. We have a great pipeline. But they're being careful in their evaluation as the market is I would say just starting to pick up.
------------------------------
Operator [95]
------------------------------
Danielle Ward, JPMorgan.
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Danielle Ward, JPMorgan - Analyst [96]
------------------------------
My question is on the 2016 Euro bonds that you have outstanding. These are callable at this point in time and I'm wondering if you have any plans for these notes, whether you're thinking about refinancing or paying any of the issue down with cash on balance sheet in the near-term?
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Pierre Beaudoin, Bombardier Inc. - President, CEO [97]
------------------------------
It's 2016. So, that's a few years down the road. We're currently in a significant investment period which kind of reduced the $2 billion. It's going to reduce by $500 million over the next two years. So, I would say that our options are open and we're reevaluating the capital structure from time to time. But there's no specific orientation on that 2016 bond.
------------------------------
Operator [98]
------------------------------
Joe Nadol, JPMorgan.
------------------------------
Joe Nadol, JPMorgan - Analyst [99]
------------------------------
Just had a couple of follow-ups. First on the Lear 70 and 75, Pierre, Cessna delayed as I'm sure you saw, the entry into service of three of their aircraft here because of the Garmin flight deck. And they said on their call they said that they were first in line to get their aircraft out the door. So, I was just wondering about your confidence level. I heard you say you reaffirmed Q4 deliveries but just wondering how to bridge that gap.
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [100]
------------------------------
I guess they're first in line at Cessna. I don't know how to interpret that. We're making good progress. Testing is going well. We've accomplished -- I don't think we have 100 hours of testing left to do. It's -- we're making good progress and we plan to deliver in Q4.
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Joe Nadol, JPMorgan - Analyst [101]
------------------------------
Then just one more on the transportation side. Lutz has been there I guess a few months now and my understanding about what he's doing is kind of a top to bottom review and getting comfortable. Is that still going on? In other words is he signing off on -- for I guess for what that means or what we can take this as? Is he signing off on all the contractual estimates at completion each quarter now? Or is he still in that review mode?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [102]
------------------------------
Right now he's touring the organization. As you know Bombardier transportation has plants in many countries, that are many sites to see, it's quite a large team, getting familiar with all the contracts also and as you know we constantly look at our contracts and make sure that we're aligned -- the results are clearly in line with our expectations. So, of course he's getting familiar with this including the whole organization at this point.
------------------------------
Operator [103]
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Robert Spingarn, Credit Suisse.
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Robert Spingarn, Credit Suisse North America - Analyst [104]
------------------------------
I wanted to ask about the fractional improvement as well. The first question's been answered but perhaps is there any detail you can offer as to where across the fractional portfolio the strength is. You mentioned wealthy individuals coming back into the market. Are you seeing it at the higher end, supplemental lift for corporations?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [105]
------------------------------
It's spread all over. What we do see though is corporations adopting cards as a general rule because it gives them good easy access to supplemental lift rather than buying a fraction which is I guess a longer-term commitment. That comment specifically for supplemental lift but we also see a lot of corporations looking at fractional as a good alternative to owning. So, I think overall the business of fractional today we offer more product than we did in the past meaning anything from a 25 hour card to a leased aircraft to a complete owned and fractional aircraft. We'll even manage aircraft for customers that own 100% of the aircraft and include these aircraft in our fleet so the product portfolio is very broad and I think this is what is giving us a very good growth right now because when we sit in front of a customer we don't offer only one type of really good portfolio products.
------------------------------
Robert Spingarn, Credit Suisse North America - Analyst [106]
------------------------------
The reason I ask the question is to try to isolate the different demand drivers and stratify the fractional because ultimately what we're interested in seeing is if this will translate to lighter jet demand for whole aircraft. Can you say you have a line of sight to that happening at the Learjet level?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [107]
------------------------------
the growth in fractional is not happening only in light jet. For example our strongest product in fractional is the Challenger 300. I would not relate light jet to the growth in fractional. I would more relate to the growth in fractional as a good sign that the industry's starting to grow again overall.
------------------------------
Operator [108]
------------------------------
David Tyerman, Canaccord Genuity.
------------------------------
David Tyerman, Canaccord Genuity - Analyst [109]
------------------------------
I have a question on RVGs. I was looking at Republic Airways this quarter's transcript and something jumped out at me when I was reading it. The CEO was quoted as saying he's expecting roughly 600 small RJs to come out of the market in the next three plus years. That sounds like a large number that might be hard to place and may have negative impacts on residuals. Is that trend trigger RVG losses? I was wondering if you could comment on that?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [110]
------------------------------
I would say I don't think it's news that a lot of jets are going to come out of the US market. That's why we have an active theme of marketing these products in new markets such as Africa and Russia. We're also looking at freighters for the CRJ 200. Looking at different business applications like shuttles, like complete convert to business aircraft. We've been very, very active there and just -- take Russia, we have about 100 airplanes in Russia flying with different airlines which builds the business for larger CRG in time and also creates a market for the CRJ 200. So, we need to continue to work on that but I don't think what he said is any use. I can't comment whether it's 600 or 300 or looking at that on individual airlines. But there is quite a few airplanes coming out of the US market.
------------------------------
Pierre Alary, Bombardier Inc. - CFO [111]
------------------------------
Maybe to put that in perspective, remember maybe four years ago or so the same kind of statements were made that 400 units were to be coming back on the market over a 12 to 18 period and effectively a lot has been coming back but have been marketed somewhere else and there's been no impact really.
------------------------------
David Tyerman, Canaccord Genuity - Analyst [112]
------------------------------
You actually think you could put 600 planes into all those secondary markets over a three or four year timeframe? It just seems like an absolutely enormous number and way larger than anything in the past.
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [113]
------------------------------
First of all I'm going to speak about the CRJ. There may be some smaller ERJs that are going to be hard to place like 35 passenger ERJs. That's probably part of the volume, these large operator, Embraer airplanes also. But the CRJ we have already 100 in Russia and it's a very well appreciated airplane. I think there's definitely a market for these types of airplanes at the lease rates they're going at in these new markets. So, the specific volume for me would be hard to comment but we look at it account by account. Where the airplanes are going to come out and we make a plan. We've been public, for example, that we're working on a very detailed plan with Delta. So, I see there is a market and we're going to address the airplanes that are coming out of the US markets we'll find homes for them.
------------------------------
Shirley Chenier, Bombardier Inc. - Director, IR [114]
------------------------------
Operator, do we have any more questions?
------------------------------
Operator [115]
------------------------------
There are no further questions at this time.
------------------------------
Shirley Chenier, Bombardier Inc. - Director, IR [116]
------------------------------
So, this concludes the question period intended for investors and analysts. We will now begin the question period for media representatives. Operator?
------------------------------
Operator [117]
------------------------------
(Operator Instructions) Scott Deveau, National Post .
------------------------------
Scott Deveau, National Post - Media [118]
------------------------------
Just wanted to ask about the last two delays in the first flight. I was curious why you were so certain that the plane was ready to fly up until the week before both delays were announced and how we might look at future delays. Would they come that quick or that soon before it's meant to occur?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [119]
------------------------------
Like I said, we're making really good progress on getting to first flight. This is what we have to do is very complex. As we see issues come up, we correct them. Sometimes it takes more time than anticipated. There's nothing significant to report. We announced the delays when we judged that it was not possible anymore to make that specific date and now what we're saying is that we're weeks away from first flight, not being able yet to pinpoint a date.
------------------------------
Scott Deveau, National Post - Media [120]
------------------------------
You can't pinpoint a date? You can't say it will fly by the end of August or the end of September at this point?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [121]
------------------------------
We're weeks away and we're making very good progress.
------------------------------
Scott Deveau, National Post - Media [122]
------------------------------
I was also kind of curious about the entry into service date. I mean, I know that you said that it's going to -- it's a 12 month flight program but why are you so hesitant to say that with every successive delay the entry in service wouldn't be delayed if they move in tandem?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [123]
------------------------------
You're trying to relate the first flight to the test program?
------------------------------
Scott Deveau, National Post - Media [124]
------------------------------
Yes. If the first flight's delayed by eight months, say, why wouldn't entry into service be delayed by eight months?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [125]
------------------------------
First of all, we've always said it's 12 months after first flight. So, that does not change. If we have a delay of two months from first flight, the entry into service will be two months delayed.
------------------------------
Scott Deveau, National Post - Media [126]
------------------------------
So, they do move in tandem then?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [127]
------------------------------
they only move in tandem as far as the schedule starts with first flight. So, the schedule of 12 months from first flight. That does move in tandem. What I said was not related is not because we have delay of first flight means that the 12 months schedule is going to suffer delay. The two are not related. In fact, what we learn in applying to first flight test vehicle is learnings that we're applying to the other vehicles.
------------------------------
Operator [128]
------------------------------
Marie Tison, La Presse.
------------------------------
Marie Tison, La Presse - Media [129]
------------------------------
(interpreted) I'd like to know in terms of hiring to build the CSeries aircraft when is most hiring going to happen and now with the delays when are people going to be hired to build the CSeries aircraft?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [130]
------------------------------
(interpreted) There's a large team working on the CSeries. In terms of production we'll make that decision during the flight test program because we want to make sure that we don't start manufacturing before we get a very good handle on the aircraft. So, we'll have those discussions later in the year.
------------------------------
Marie Tison, La Presse - Media [131]
------------------------------
(interpreted) How many people will you be hiring?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [132]
------------------------------
(interpreted) I don't think we've given exact figures. I can look at what we've disclosed already but I don't think we've given exact figures.
------------------------------
Operator [133]
------------------------------
(interpreted) Matt Angelique, Laissez-faire.
------------------------------
Matt Angelique, Laissez-faire - Media [134]
------------------------------
You've started building the plant at Maribel. Could you tell me how much money will be invested in building that plant? And when production will start in the plant?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [135]
------------------------------
(interpreted) Production will start obviously when we start building the CSeries which is once the 12 months flight test program is over which will start after first flight. Flight testing -- there are risks related to the flight testing but we've scheduled 12 months so we'll be starting production in the existing facilities, existing hangers, and then gradually we'll be moving into the new facilities. I can't give you the exact dates when we'll be starting production in those facilities. We haven't disclosed the amounts.
------------------------------
Operator [136]
------------------------------
Molly McMillin, Wichita Eagle.
------------------------------
Molly McMillin, Wichita Eagle - Media [137]
------------------------------
My question has to do with can you characterize the demand for the Learjet products and a little bit on the progress of the 85s?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [138]
------------------------------
With the -- demand in the smaller aircraft remains soft. Now with the Learjet we have quite a bit of innovation on the 70-75 so demand is good but in a soft market for the 70-75. And as far as the Lear 85 progress, we're getting ready for first flight and we have scheduled that for this year.
------------------------------
Molly McMillin, Wichita Eagle - Media [139]
------------------------------
I'm told there is some staff reductions at the Learjet plant. Can you tell me a little bit about that?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [140]
------------------------------
We're adjusting the amount of people in line with the progress with the assembly schedule and the fact that we had to delay the deliveries of the 70-75 to the fourth quarter and of course on the progress of the Lear 85 that was slightly delayed from the fact that we had some challenge with the composite material but today that's behind us and we're getting ready for the first flight.
------------------------------
Molly McMillin, Wichita Eagle - Media [141]
------------------------------
Do you know how many people or how many positions you had to cut or how many people you may have to lay off?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [142]
------------------------------
The exact amount -- we could get back to you. But I don't think we've announced this at this point.
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Operator [143]
------------------------------
(interpreted) Francois Shalom, The Gazette.
------------------------------
Francois Shalom, The Gazette - Media [144]
------------------------------
On EIS, as you said recently, some of these technologies are more complex than you had expected or some of the interaction was more complex than you had expected. I'm just wondering wouldn't it be better for Bombardier's to give yourselves another cushion for EIS rather than announce successive delays like you did with first flight?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [145]
------------------------------
First of all, Francois, we didn't say that it was challenging from a technology perspective. It's just taking more time than anticipated. Of course it's a very complex product. We've always said we have a flight test schedule for 12 months. And that's the schedule we have. It is flight test. So, as we progress, we'll keep our stakeholders informed. I think that's the best way to approach this.
------------------------------
Francois Shalom, The Gazette - Media [146]
------------------------------
Why not if you've already experienced this on several occasions, these delays with first flight, wouldn't it be rationale for you to expect the same thing with EIS?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [147]
------------------------------
Like I said before, the two are necessarily related. What we're doing on the first flight test is lots more complex than the type of test we'll do too get the other flight test vehicle in the air. We're learning from this first aircraft. And we're applying to the other aircraft. So, I don't think you can relate the two. It is flight test. So, there is risk involved. But I'm speaking too about our schedule. The schedule test.
------------------------------
Francois Shalom, The Gazette - Media [148]
------------------------------
The other thing for Bombardier transportation, I'm wondering if you can comment on the investigation for bid rigging in Brazil. There were some documents seized I believe in your office in Brazil. Can you comment on that at all?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [149]
------------------------------
All I can say is that we have a very strict business practice and very high ethical standards. Brazil is conducting an industry-wide investigation into allegation of cartel and related activities in public tender situations. We are collaborating fully with the authorities and make sure that they get all the information necessary. I just want to repeat again, Bombardier has very high ethical standards and we'll support the authorities at making sure they do a thorough investigation.
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Francois Shalom, The Gazette - Media [150]
------------------------------
What do you expect to come out of this investigation?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [151]
------------------------------
I'm not going to speculate on what I expect to come out of this investigation. We will support the authorities in this investigation.
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Operator [152]
------------------------------
(interpreted) Francois Pottier, Laissez-faire.
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Francois Pottier, Laissez-faire - Media [153]
------------------------------
(interpreted) Could you give a little bit more detail about regional aircraft? The impact -- what's the impact right now on the EBIT of the aerospace?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [154]
------------------------------
(interpreted) We don't disclose profitability by product line.
------------------------------
Francois Pottier, Laissez-faire - Media [155]
------------------------------
(interpreted) Do you have some kind of benchmark that could help us a little bit?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [156]
------------------------------
(interpreted) You could take deliveries of regional jets. That will give you an idea of the commercial revenue so you can take the commercial revenue and that will give you an idea of the impact of commercial aircraft on the business of aerospace.
------------------------------
Francois Pottier, Laissez-faire - Media [157]
------------------------------
(interpreted) Embraer is launching a new -- I don't want to say a new family of aircraft but a new line of aircraft. Some of us feel those aircraft will be -- or might be -- will be at least more competitive than CRJ. Ultimately could that lead Bombardier to question or decide to invest more in CRJ or to abandon that family of aircraft?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [158]
------------------------------
(interpreted) Our aircraft are very competitive right now. We have a strong advantage over Embraer in terms of performance. In fact, Embraer has already tried to fight back by tweaking the aircraft they have right now but we feel our aircraft continues to have major -- to offer major advantages over Embraer. They've announced major modifications to a plane they're calling E2 for 2020 for the regional version is 2020. The advantage for us is we'll be observing that very closely and we'll make sure we remain competitive.
------------------------------
Francois Pottier, Laissez-faire - Media [159]
------------------------------
(interpreted) Should that mean new investments in the CRJ family when the CSeries is in place?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [160]
------------------------------
(interpreted) What that means is we'll make sure we remain competitive.
------------------------------
Francois Pottier, Laissez-faire - Media [161]
------------------------------
(interpreted) One final thing. It seems there were a number of CRJ models that were going to be marketed or that were coming back on the market. You're helping to resell?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [162]
------------------------------
(interpreted) Like all manufacturers of commercial aircraft, our job is to make sure that those products continue to fly around the world after their first lifecycle is completed with the first customer. So, CRJ 200s, some of them are coming out of the American continent and we're working with customers for new markets, new uses, for example converting CRJ 200 into a freight aircraft. So, that's the kind of thing that an aging aircraft can do very well because somebody who is carrying cargo often can't pay for a new aircraft because it's only used once or twice a day. So, that's a normal cycle. We've seen it with a number of aircraft throughout the world.
------------------------------
Francois Pottier, Laissez-faire - Media [163]
------------------------------
(interpreted) Is that what you were referring to when you were talking about Russia earlier?
------------------------------
Pierre Beaudoin, Bombardier Inc. - President, CEO [164]
------------------------------
(interpreted) Russia is a market where they're using CRJ 200 for carrying passengers with Russian airlines. This is not a cargo application, but a passenger application.
------------------------------
Shirley Chenier, Bombardier Inc. - Director, IR [165]
------------------------------
Operator, do we have any more questions?
------------------------------
Operator [166]
------------------------------
There are no further questions at this time.
------------------------------
Shirley Chenier, Bombardier Inc. - Director, IR [167]
------------------------------
Thank you, all, for being with us today. Have a good day, everybody.
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Editor [168]
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Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.
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