Q1 2015 BOMBARDIER INC Earnings Conference Call-English
May 07, 2015 AM EDT
BBD.B.TO - Bombardier Inc
Q1 2015 BOMBARDIER INC Earnings Conference Call-English
May 07, 2015 / 11:30AM GMT
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Corporate Participants
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* Shirley Chenier
Bombardier Inc. - Senior Director, IR
* Alain Bellemare
Bombardier Inc. - President & CEO
* Pierre Alary
Bombardier Inc. - SVP & CFO
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Conference Call Participants
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* Walter Spracklin
RBC Capital Markets - Analyst
* Robert Springarn
Credit Suisse - Analyst
* Cameron Doerksen
National Bank Financial - Analyst
* Fadi Chamoun
BMO Capital Markets - Analyst
* Turan Quettawala
Scotia Capital - Analyst
* Tim James
TD Securities Inc. - Analyst
* Benoit Poirier
Desjardins Securities - Analyst
* Konark Gupta
Macquarie Capital Markets - Analyst
* Alma Habibi
JP Morgan - Analyst
* Kristine Liwag
Bank of America-Merrill Lynch - Analyst
* David Tyerman
Canaccord Genuity - Analyst
* Manish Somaiya
Citigroup Global Markets, Inc. - Analyst
* Darryl Genovesi
UBS Securities LLC - Analyst
* Peter Arment
Sterne Agee - Analyst
* Deepak Kaushal
GMP Securities - Analyst
* Doug Dawson
Bank of America-Merrill Lynch - Analyst
* Noah Poponak
Goldman Sachs - Analyst
* Steve Hansen
Raymond James - Analyst
* Stephen Trent
Citigroup Global Markets, Inc. - Analyst
* Allison Martell
Reuters - Analyst
* Jerry Siebenmark
The Wichita Eagle - Analyst
* Frederic Tomesco
Bloomberg News - Analyst
* Editor
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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 to over Ms. Shirley Chenier, Senior Director, Investor Relations. Please go ahead, Ms. Chenier.
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Shirley Chenier, Bombardier Inc. - Senior Director, IR [2]
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Thank you, operator. Good morning and welcome to Bombardier's conference call intended for investors and financial analysts. I'd also like to welcome the representatives of the media here and you'll have an opportunity to ask your questions later on during the Q&A part for media. Shortly, Mr. Alain Bellemare, President and Chief Executive Officer; and Mr. Pierre Alary, Senior Vice President and Chief Financial Officer, will discuss Bombardier's financial results for the first quarter ended March 31, 2015. This conference call is broadcast directly through the Internet and it's translated into French and English. You can access the broadcast on our website at www.bombardier.com and the webcast archive of the integral version of this call will be available later today.
Slides for this presentation in English and French are equally available on our website. All dollar values expressed during this 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 am making this cautionary statement on behalf of each speaker whose remarks today will contain forward-looking statements.
Alain Bellemare will now begin the presentation.
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Alain Bellemare, Bombardier Inc. - President & CEO [3]
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Thank you, Shirley. Welcome to everyone and thank you for joining us this morning. This is my first call as CEO of Bombardier. I am very pleased to be with you to share my views on the Company. I'm very excited to have joined Bombardier and as you can see, we have accomplished a lot in the past three months. The first quarter results were generally positive with revenues, EBIT, and deliveries coming in on target. We also successfully completed the first two components of our financing plan with an equity and bond issue, both oversubscribed selling more than $3 billion. This raises our total liquidity to more than $6 billion as of March 31. And we already started to act on the third component of this bond as we are preparing an IPO for a minority stake in BT by the end of the year obviously subject to market conditions.
As it relates to the Swiss story, I am thrilled to confirm Swiss International Air Lines, a division of Lufthansa, as the first operator for a CS100 aircraft. And this quarter, we also had a very successful first flight of the CS300. The aircraft moved for close to five hours, the longest first flight ever for Bombardier. We strengthened our leadership team at Commercial Aircraft with the appointment of Fred Cromer as President and Colin Bole as Senior Vice President of Sales. I visited many of our locations, met our business leaders across the globe, I spoke to many customers and employees, and I have engaged in operational reviews in each of the business segments. I believe that Bombardier is a great company. With $20 billion in revenue and market leadership position in both trains and planes, we have scale and excellent customer reach.
Not to say that we don't have our challenges; but we are addressing them, we're taking action, and we're moving fast. I will now turn it over to Pierre who will walk through the financials in more details.
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Pierre Alary, Bombardier Inc. - SVP & CFO [4]
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Thank you, Alain. Good morning to everyone. Revenues for the quarter at $4.4 billion were slightly higher than last year despite an unfavorable currency impact. EBIT before special items of $237 million represents an increase of 8.2% over last year. I would like to remind you that the depreciation of the euro, which impacted Bombardier Transportation, is a translation impact so our margin as a percentage of sales remain unaffected by this fluctuation. However, they had a negative impact on total backlog bringing it down by $1.9 billion this quarter compared to the backlog at year-end. For the other parts of our business, our hedging policy minimizes the fluctuation impact. However, over time a lower Canadian dollar has a positive impact on margins for our segments in aerospace.
Our hedging program is described on page 20 and 21 of our Annual Report. Excluding the foreign exchange impact of $308 million, overall revenues show an increase of 8% over the same period of last year. Adjusted EPS was $0.09 for the quarter compared to $0.08 for the same period last year. As for cash flow, we saw a $170 million improvement over the same period last year. Free cash flow usage was $745 million for the quarter including $379 million in net addition property, plant, and equipment and tooling; and this is consistent with our usual pattern of heavier cash consumption in the first quarter. As of March 31, our total liquidity of $6 billion consisted of $4.7 billion in cash and cash equivalents plus another $1.3 billion of available revolving credit facilities.
The increased liquidity to $6 billion takes into consideration the successful refinancing plan which we recently executed. Both the net equity issue of $822 million and the new debt financing of $2.22 billion were oversubscribed. Of the $3.1 billion raise, $750 million was used to redeem senior notes due in 2016 on April 30. This repayment is not included in the March 31 balance. Consequently, we have no material debt maturities before 2018. In addition, we have extended the terms of all of our bank facilities by an additional year to 2017 and 2018. Now, looking at our segment. Business Aircraft has seen a slight increase in revenues and EBIT before special item was in line with the same period last year.
Revenues for Commercial Aircraft were up significantly as a result of the higher level of deliveries compared to the same period last year. For Aerostructures, revenues were stable with an increase in EBIT mainly due to timing of a favorable long-term contract adjustment as well as accelerated delivery. In the Transportation segment, excluding the FX impact of $308 million, revenues were up 4%. Our order backlog remains strong at $65.8 billion, a slight decrease compared to year-end. $1.9 billion being due to the foreign exchange impact at Transportation and the rest due to deliveries and revenues being hired and order intake at Business Aircraft as well as at Transportation.
Now, I will turn it back over to Alain.
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Alain Bellemare, Bombardier Inc. - President & CEO [5]
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Thank you, Pierre. I will now share my observation for each business segment starting with Business Aircraft. We have best-in-class products with our Global, Challenger, and Learjet families. Our Global 7000/8000 will be an exciting addition to our successful Global platform, development is underway and we are currently assembling the first flight test vechile. We also presently completed the first flight of the Challenger 650. This is a great product update of the proven Challenger 600 platform with more than 1,000 aircraft in service today. We have announced changes on the management side with the appointment of Peter Likoray as Senior Vice President of Sales. Peter has more than 25 years of experience with Bombardier and has an impressive network throughout the industry.
The market has seen some softness in certain regions; especially in Latin America, China, and Russia; and this has resulted in a lower order intake. So accordingly, we are planning to adjust our production rates in line with demand and the team is currently assessing the resulting impact on the workforce. Business Aircraft is a great segment with strong brands and we will take the best possible actions to preserve and create value for our customers. In Commercial Aircraft, we are delighted to confirm Swiss International Air Lines, a division of Lufthansa, as our first operator of the CS100. Lufthansa is really a world class airline with tremendous experience in introducing new aircraft. We will be working closely with them to ensure the smooth enter into service in the first half of 2016.
We completed over 1,500 hours of flight test on the CS100 representing more than half of the total flight test program and the performance of the aircraft is excellent. Certification of the CS100 is targeted for the end of 2015. We also completed the first flight of CS300. This was a highly successful flight of five hours and the plane reached its max altitude of 41,000 feet. We added strong leaders to our team with deep commercial aerospace knowledge and expertise. We appointed Fred Cromer as President and Colin Bole as Senior Vice President of Sales and Asset Management. We also brought in Plane View Partners led by industry expert Henri Courpron as a strategic advisor to support our commercial aircraft team.
In rail transportation, we are a global market leader with the most comprehensive offering of products and services in the industry. We like our rail business, which benefits from favorable mega trends such as population growth, urbanization, and environmental awareness. In light of the ongoing industry consolidation, we have been proactively reviewing our strategic options for our rail business and we have decided to prepare for the IPO of a minority stake in BT by the end of the year. When completed, the IPO is expected to crystallize the value of BT and further strengthen our financial position while preserving flexibility to participate as we wish in future industry consolidation.
So let me be very clear, Bombardier Transportation is not for sale, we like this business. It will remain part of Bombardier and its results will continue to be consolidated within Bombardier. Now, to conclude. Although I'm still in review mode, I recognize we have challenges and a lot of work to do. Nonetheless as you can see, we are moving fast and are taking significant actions to improve our performance. I believe Bombardier is a great company with talented and passionate people and strong potential and I'm committed to building a strong partnership with the Street and I look forward to a transparent dialog in the future.
On this, I thank you and we will open the line for questions.
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Shirley Chenier, Bombardier Inc. - Senior Director, IR [6]
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Thank you, Alain. So, we will now start the question period for analysts and investors. So as usual, in order to keep the duration of this call short and in this particular circumstance to one hour because of the AGM, 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 if time permits, you can get back in queue and if not, you can contact me or Yan after the AGM. So, 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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(Spoken in French) (Operator Instructions) Walter Spracklin, RBC Capital Markets.
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Walter Spracklin, RBC Capital Markets - Analyst [2]
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Welcome, Alain, to the conference call. I guess my first question here is on BT. You mentioned that it's not for sale, you are IPOing a portion minority interest, but that it's not for sale. And you also mentioned as part of the strategy is that it would allow you to continue or give you the flexibility to participate in consolidation. Can you tie that together for us? How does the IPO allow you to participate in consolidation if you're strict on the view that it is not a division that's for sale?
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Alain Bellemare, Bombardier Inc. - President & CEO [3]
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It's very clear, I mean the goal right now is to crystallize the value of the business. This is a great business, we like it, we like the industry in which it operates. We have great technology, we have a lot of new products, there is runway for margin expansion. And what we want to do here is like go to market, have the right value for the business, and eventually look at what is going to happen from a consolidation standpoint. You know that there has been a significant start of consolidation in China and we want to make sure that we keep our options open from a strategic standpoint and look at potential partnership down the road if it does make sense. But for the time being, we believe that the IPO is the best way for us to do two things; unleash the value of that business and strengthen our financial position in line with our financing plan.
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Walter Spracklin, RBC Capital Markets - Analyst [4]
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Okay, I'll leave it there. Thank you.
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Operator [5]
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Robert Springarn, Credit Suisse.
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Robert Springarn, Credit Suisse - Analyst [6]
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Welcome, Alain. A quick question for Pierre however. On the allocation of the debt between the two businesses, I think you have about $5 billion in net debt at quarter end, how should we think about allocating that between the two businesses?
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Pierre Alary, Bombardier Inc. - SVP & CFO [7]
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All of the debt is at Inc. level so at the holding in Canadian operation if you'd like. So, that's all of the bond. And so as we get prepared for the IPO, we'll review the capital structure and determine what's the appropriate level of debt to hold within BT.
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Robert Springarn, Credit Suisse - Analyst [8]
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Pierre, is there a target level for a ratio on the BT business would you say, a peer target or something that we can use for the leverage ratio?
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Pierre Alary, Bombardier Inc. - SVP & CFO [9]
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Looking at IPO of BT, obviously we'll look at the capital structure and define what is the ideal capital structure for the business given its level of advances, given the cash needed to operate, and whatnot. But typically, you shouldn't expect a high leverage level.
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Robert Springarn, Credit Suisse - Analyst [10]
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Okay. And then just, Alain, a clarification on the biz jet reduction you were talking about, which programs and to quantify that?
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Alain Bellemare, Bombardier Inc. - President & CEO [11]
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What we're seeing right now is we're seeing that our Challenger line is still pretty strong, especially the 350 is going extremely well and the 600 family is pretty consistent and we're seeing softness on the Global side, the 5000/6000, and that's where the adjustment will be made.
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Robert Springarn, Credit Suisse - Analyst [12]
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Okay. Thank you.
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Operator [13]
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Cameron Doerksen, National Bank Financial.
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Cameron Doerksen, National Bank Financial - Analyst [14]
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My question is I guess on guidance items. You've withdrawn your segmented cash flow guidance, I don't see any commentary in the financial statements on anything to do with the margin or your aircraft delivery guidance, you just addressed that on the business jet side. But just any comments on whether that guidance still holds or whether you're going to provide us with an update at a future date?
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Pierre Alary, Bombardier Inc. - SVP & CFO [15]
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We've effectively removed the guidance on the free cash flow by segment. What we did is we basically viewed the benchmark of our peers and what is being done out there especially in the new context of the new segment we have and have concluded that what we've seen with our fleet and what our peers are doing is basically consolidated free cash flow guidance, which we will provide at a later date. With respect to the other guidance that we have presented with our year-end result, they still stand as they are.
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Alain Bellemare, Bombardier Inc. - President & CEO [16]
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I think that [John] and I and the team are really looking at the way that we want to report guidance moving forward. So, the benchmark is progressing well and in terms of the full-year guidance as you can understand, I want to complete my review and then I'll come back to you for the full year.
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Cameron Doerksen, National Bank Financial - Analyst [17]
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Okay. Just to clarify, the Commercial Aircraft delivery guidance for now is unchanged or we may see a change on the business jet side because of the lower production rate on Globals?
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Pierre Alary, Bombardier Inc. - SVP & CFO [18]
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Well, the guidance also or the assets shown on commercial side delivery guidance remain. It is the same with Business Aircraft as any change in production would mostly affect the following year.
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Cameron Doerksen, National Bank Financial - Analyst [19]
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Got it. Okay. Thanks very much.
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Operator [20]
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Fadi Chamoun, BMO Capital Markets.
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Fadi Chamoun, BMO Capital Markets - Analyst [21]
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Alain, I understand specs that you're still sort of in the initial stages of your review. I wanted to ask on business aviation, the margin being around 7%, which are well below some of the peers out there which are in the mid-teens to low-teens. Have you sort of been able at this stage to identify how you can close that gap and sort of the timing for the Company to close that gap relative to these peers and what would be the path to get there? Would it be improving the marketing and the pricing side of it or improving the manufacturing? If you have any color on that, it will be great. Thank you.
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Alain Bellemare, Bombardier Inc. - President & CEO [22]
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So, we started to do the review on the Business Aircraft side and clearly it's all of the above. It's about looking at what we need to do from a pricing standpoint, how we better serve customers by leveraging our affirmed aftermarket network in a more efficient manner. So you're absolutely right, I think there's tremendous runway for margin expansion in Business Aircraft. We have a little bit of a mix issue with the Learjet family, but there's no reason why the margins are where they are today versus peers. So, I said that before as an opportunity for further margin expansion and today from what I can see, I believe that we'll be able to do much better. Now that will take a little bit of time because we need to put the right path in place, we also need to make sure that we adjust our production rate in line with the market demand and that's what we have just announced today. So, I think that by taking all these actions one step at a time, we will regain better margins in Business Aviation.
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Fadi Chamoun, BMO Capital Markets - Analyst [23]
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Thank you.
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Operator [24]
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Turan Quettawala, Scotia Bank.
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Turan Quettawala, Scotia Capital - Analyst [25]
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I guess my question is on the book-to-bill ratio, it was fairly I guess in both segments mainly Business Aircraft and Transportation and there's a lot going on here in the last few months. Maybe you can talk a little bit about how you expect order flow to pan out here in the rest of 2015?
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Pierre Alary, Bombardier Inc. - SVP & CFO [26]
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Well, in terms of book-to-bill on the Transportation side, as you know first of all, one quarter doesn't make the year especially on the new orders level as it is very lumpy. You looked at last year book-to-bill, $8 billion in the first quarter was totally exceptional on the high side that time, now it's on the low side so you really have to look at the full year. And we have provided guidance that we expect the book-to-bill above 1 and we still see a book-to-bill above 1 for the full year. On the aerospace side, on the Commercial and Business Aircraft, we're not providing book-to-bill. That's not part of our guidance.
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Turan Quettawala, Scotia Capital - Analyst [27]
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Okay. I guess maybe just a quick follow-up on the Global program. Can give a sense of how the 7000/8000 is going? How far away are we from the first flight? I know you are assembling the first flight test vehicle. And maybe a little bit of sense on how long that flight test program could be? And just as a follow-on, I know you did talk about softness in the Global program, will that affect that program at all?
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Alain Bellemare, Bombardier Inc. - President & CEO [28]
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I missed the last piece of the question, could you just repeat it, please?
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Turan Quettawala, Scotia Capital - Analyst [29]
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I guess what I meant to say was I know you mentioned the softness in the Global program and the adjustment there on the production rate, I'm asking if that will affect the Global 7000/8000 program at all from a timing standpoint?
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Alain Bellemare, Bombardier Inc. - President & CEO [30]
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That's a good question. The answer is no. We have a very strong order book right now on the 7000/8000. The program is progressing well and the first aircraft is currently being assembled. We do not comment on specific dates when it comes to the 7000/8000, but what we will also do here is take the opportunity like readjusting the rate on the 5000/6000 and get ready for a ramp up on the 7000/8000. So right now, the 7000/8000 is still tracking well. I'm sure it's going to be a great program and we'll be providing more information as we move forward.
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Turan Quettawala, Scotia Capital - Analyst [31]
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Perfect. Thank you very much.
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Operator [32]
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Tim James, TD Securities.
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Tim James, TD Securities Inc. - Analyst [33]
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I just want to keep at the Global question here. Would a revision lower of Global production in 2015 not make it more challenging to reach Business Aircraft margin guidance for the year and yet it remains unchanged or should we assume that as with the production guidance that the margin guidance will also be subject to change?
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Pierre Alary, Bombardier Inc. - SVP & CFO [34]
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Well, the guidance on the Business Aircraft and Commercial Aircraft in terms of the number of deliveries and the profitability level are not being changed, they stand as they are. And in relation to the change in production rate, the change in production rate only takes effect in terms of when we deliver the aircraft 12 to 18 months after we announce it basically so that's why it has no impact on 2015 deliveries.
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Tim James, TD Securities Inc. - Analyst [35]
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Okay. So, it's that time delay between production and delivery and revenue recognition then that will prevent any impact on margins for 2015?
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Pierre Alary, Bombardier Inc. - SVP & CFO [36]
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Yes, exactly.
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Tim James, TD Securities Inc. - Analyst [37]
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Okay. Thank you.
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Operator [38]
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Benoit Poirier, Desjardins Capital Markets.
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Benoit Poirier, Desjardins Securities - Analyst [39]
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Alain, you mentioned obviously you're still in the review mode, but you made a clear statement about BT, the IPO of the minority stake. I was wondering if you see some opportunities to monetize or create some value in other business segment among the Bombardier Aerospace whether Learjet, Commercial, or Aerostructure; is there any opportunity so far?
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Alain Bellemare, Bombardier Inc. - President & CEO [40]
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Well, like we said, we're looking at all strategic options so it could be. But right now, to be honest, it's not on our radar screen. What we've communicated this morning is our primary focus. We believe that again the IPO of the minority stake in BT will trade value. We believe it also sends the right signal in term of our willingness to participate in the industry consolidation that is actually ongoing so I think we want to make it clear. We like the business, we believe it's a great business, and we want to keep being part of this. And as for the other potential divestiture options, we will see. But for a time being the focus is more on program execution; the CSeries, the 7000/8000; making sure that we do what is right on the Transportation side, and looking at how we improve our cost structure moving forward.
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Benoit Poirier, Desjardins Securities - Analyst [41]
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Okay. Thanks for the time.
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Operator [42]
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Konark Gupta, Macquarie Capital.
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Konark Gupta, Macquarie Capital Markets - Analyst [43]
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Welcome Alain. Actually it's just a clarification before I ask my question. So are you holding your previous segmented free cash flow guidance and can we assume the corporate free cash flow could be flattish from last year?
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Pierre Alary, Bombardier Inc. - SVP & CFO [44]
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In terms of the free cash flow guidance by segment, that's the guidance that we're withdrawing. And again as we've looked at what is being done at our peers group and basically there is no cash flow for segment being presented so we're withdrawing that guidance.
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Konark Gupta, Macquarie Capital Markets - Analyst [45]
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When do you anticipate providing the guidance for the free cash flow?
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Pierre Alary, Bombardier Inc. - SVP & CFO [46]
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As Alain completes his review, we will be more precise in terms of the timing as we conclude the review and we'll get back to you when we're ready.
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Konark Gupta, Macquarie Capital Markets - Analyst [47]
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Okay. So, my question is basically on Commercial Aviation so congratulations for signing Swiss as launch customer. So on the CS100, the tooling will it end with certification or does it end with EIS?
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Pierre Alary, Bombardier Inc. - SVP & CFO [48]
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First of all, it will be continued tooling even after the EIS in the sense that we are still working on the 300 and the [100] is like six months after, but it's basically with entry into service.
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Konark Gupta, Macquarie Capital Markets - Analyst [49]
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It will be with entry into service. And the operating loss was quite small in the Commercial Aviation segment compared to your guidance for full year. So how do we think about the trajectory over the next three quarters?
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Pierre Alary, Bombardier Inc. - SVP & CFO [50]
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Again our guidance stands so effectively we mentioned as part of our guidance that the EBIT level should be negative $200 million in Commercial. And effectively you're right, the level is very close to neutral so therefore you should expect negative EBIT coming along over the next quarters. And some of them or what explains the variance is basically also as we ramp up on the CSeries and we have to take the net realizable value provision so we'll see that rolling over the next few quarters.
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Konark Gupta, Macquarie Capital Markets - Analyst [51]
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Pierre, is it more weighted toward second half than first half you would say?
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Pierre Alary, Bombardier Inc. - SVP & CFO [52]
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We are not providing specific guidance per quarter so it's going to be gradual.
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Konark Gupta, Macquarie Capital Markets - Analyst [53]
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Okay, that's great. Thank you very much.
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Operator [54]
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[Alma Habibi], JP Morgan.
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Alma Habibi, JP Morgan - Analyst [55]
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On slide number 10 Transportation update, can you elaborate what you mean by strength in Bombardier's financial position? More specifically, what's contemplated here in terms of use of proceeds from the IPO? And on a consolidated basis, would we expect total debt to come down pro forma for the IPO?
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Pierre Alary, Bombardier Inc. - SVP & CFO [56]
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Well, when we see the IPO of BT, obviously as we do an IPO some money would be able to come back to Bombardier Inc. so therefore strengthening the position of Bombardier Inc. Now as to specifically how that will unfold, we're preparing so we're getting ready to work on the IPO so it's when we're going to do the IPO that these components will be disclosed.
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Alain Bellemare, Bombardier Inc. - President & CEO [57]
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Just as a reminder. On the last call we said like our financing plan has different pieces to that, suspending the dividend was one piece and then raising equity and raising debt. And we had announced back then that we would do strategic or look at strategic options to further strengthen our liquidity position. So, that is in that respect that we're also launching the IPO of the minority stake in BT.
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Alma Habibi, JP Morgan - Analyst [58]
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As we see it today, pro forma for the IPO, would it be fair to assume total consolidated debt will be lower?
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Pierre Alary, Bombardier Inc. - SVP & CFO [59]
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Again, as we work and as we prepare, one of the elements we set as part of that plan was in view of deleveraging so you could expect a certain level of deleverage.
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Alma Habibi, JP Morgan - Analyst [60]
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Thank you. That's all I had.
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Operator [61]
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Ron Epstein, Bank Of America-Merrill Lynch.
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Kristine Liwag, Bank of America-Merrill Lynch - Analyst [62]
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It's actually Kristine Liwag calling in for Ron this morning. For the CSeries program, can you provide more color on the size and scope of your current sales campaign? And then for the new sales team, can you share their mandate and maybe their sales targets before their entry into service of the CS100?
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Alain Bellemare, Bombardier Inc. - President & CEO [63]
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As is today, what we had announced is what we have. So, I mean there hasn't been much change to the backlog. The team is just starting so I give them a bit of time to get themself organized. Obviously I see we are at a very good point. I used to say earlier that we are at an inflection point and the reason for that is because we are getting very good performance out of the aircraft. The CS100 is flying well, performance is great; CS300, the early performance is excellent. So, we feel that we have sufficient data right now to go and talk to airlines about the real potential benefits of the aircraft. We are about like 55% completed on the flight test program so we're tracking well. We do have a plan to certify the aircraft before the end of the year. And these two new leaders, Fred and Colin, have tremendous expertise in commercial aviation.
They have like deep knowledge and they have a very strong network of customers. So we're going to give them a bit of time to get themself organized, to re-energize the sales group, and develop a sales plan. The last thing that I want to add is adding Swiss, a division of Lufthansa, as the first operator is a big deal. I mean they have done that before, they are very good at introducing new aircraft, they are very technically savvy, they have like a very deep technical knowledge and expertise. So having an operator, an airline like that is going to be very, very good for the CSeries. So, overall I think that we are making progress; we have a stronger team, I mean the aircraft is performing well, we have a plan now and we're tracking towards certification, and the new team will come up with a plan to re-energize sales.
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Kristine Liwag, Bank of America-Merrill Lynch - Analyst [64]
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And as a follow-up to that. From your conversations with airline consumers today, what's generally the biggest pushback that you're getting from securing a deal; is it the price, is it residual value risk, is it the schedule of the aircraft? Can you just provide a little bit more detail on that?
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Alain Bellemare, Bombardier Inc. - President & CEO [65]
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Well, I would say not that long ago clearly schedule was a little bit of an issue. The multiple delays didn't help the sales team, but again we need to look at where we are today. The aircraft is flying well and actually our dispatch reliability is progressing also extremely well so we believe that the entry into service is going to be smooth. So, we are in a much different place today than we were a year ago. So when we talk to airline now we have like data that we can use, we can have good discussion. It's about having confidence and we are. We now have confidence in the product, in the product performance, in our ability to service it in the field. So, I think that we're in a much different place today than we were a year ago.
------------------------------
Kristine Liwag, Bank of America-Merrill Lynch - Analyst [66]
------------------------------
Thank you.
------------------------------
Operator [67]
------------------------------
David Tyerman, Canaccord Genuity.
------------------------------
David Tyerman, Canaccord Genuity - Analyst [68]
------------------------------
I just wanted to ask about the Global reduction. Since this is by far the most profitable part of the Company, I was wondering if you could help us understand how big a reduction we're talking about for next year, is this very small or is this going to really make a big difference to your profitability?
------------------------------
Alain Bellemare, Bombardier Inc. - President & CEO [69]
------------------------------
Well, it's too early to tell exactly what it's going to do from a financial impact next year because we're still in the middle of it. I wanted to be forward coming and tell you what we're thinking of doing. If I look at the production rate today versus the worldwide demand, clearly there has been an impact. We've got a significant presence in Russia, in China, in Latin America and these markets have been softer than we would like to. So to which level, we're still fine-tuning it as we speak. What would be the impact, obviously we need a bit more time here to fully manage the production rate reduction and what it will mean financially. But I wanted to make sure that people understand that we will do what is right for the program. It's an amazing aircraft family. The Global 6000 is the best aircraft in its class and I want to make sure that we do preserve the value of our platforms moving forward.
------------------------------
David Tyerman, Canaccord Genuity - Analyst [70]
------------------------------
Since I couldn't get an answer on that, can I ask a question on the corporate and other elimination? Could you let us know, you've give us guidance in all the other areas in the previous release which was helpful. In this area there wasn't any guidance. Should we be thinking of EBIT elimination of $80 million to $100 million to a year, kind of where it was last year and where it was in Q1?
------------------------------
Pierre Alary, Bombardier Inc. - SVP & CFO [71]
------------------------------
We will not provide guidance specifically on the corporate elimination because it could be quite unpredictable. A portion of it is the spend at corporate level, which is predictable. But on the other element, it's basically elimination of transaction between Aerostructure and the two other aerospace segments and those eliminations could be negative, could be positive so it's a question of the timing as to the profit. Just for example when you sell some component from Aerostructure to let's say Commercial Aircraft and there's a profit; until the actual aircraft at the end is sold to the customer, that profit is eliminated so it's a negative adjustment and once we then deliver the aircraft, it's going to be a positive adjustment. So, it's going to fluctuate a lot.
------------------------------
David Tyerman, Canaccord Genuity - Analyst [72]
------------------------------
Okay. Thank you.
------------------------------
Operator [73]
------------------------------
Manish Somaiya, Citigroup.
------------------------------
Manish Somaiya, Citigroup Global Markets, Inc. - Analyst [74]
------------------------------
Pierre, I have two clarification questions for you. First is on the cash flow and just to be clear, we're removing the segment level guidance but you're still keeping the consolidated cash flow guidance that you had provided earlier?
------------------------------
Pierre Alary, Bombardier Inc. - SVP & CFO [75]
------------------------------
Yes, we will be providing the consolidated cash flow guidance at a later date.
------------------------------
Manish Somaiya, Citigroup Global Markets, Inc. - Analyst [76]
------------------------------
So I guess the guidance that you provided in the past, is that still something that we can incorporate or is that you're withdrawing that guidance?
------------------------------
Pierre Alary, Bombardier Inc. - SVP & CFO [77]
------------------------------
I'm withdrawing those guidance. Withdrawing the guidance that we provided with the fourth quarter results in relation to the specific segments. This is being withdrawn. We will not provide the actual for segment anyhow.
------------------------------
Manish Somaiya, Citigroup Global Markets, Inc. - Analyst [78]
------------------------------
Right. So, you're removing the segment level guidance and you're removing the consolidated guidance?
------------------------------
Pierre Alary, Bombardier Inc. - SVP & CFO [79]
------------------------------
Not removing the consolidated guidance because we did not have the consolidated guidance, but going forward we will provide the consolidated guidance.
------------------------------
Manish Somaiya, Citigroup Global Markets, Inc. - Analyst [80]
------------------------------
Okay, that's helpful. Second is on the debt paydown, I think someone had asked the question on debt paydown. But when I look at the structure, there's not really a whole lot of prepayable debt so should we just assume that the cash just remains on the balance sheet from the IPO of BT?
------------------------------
Pierre Alary, Bombardier Inc. - SVP & CFO [81]
------------------------------
As we proceed with the IPO, we'll review what is the proper structure for BT, what is the cash coming into Inc., and what we should do with that cash at that point in time.
------------------------------
Manish Somaiya, Citigroup Global Markets, Inc. - Analyst [82]
------------------------------
Okay. And then just one question for Alain. Alain, welcome to Bombardier. On the CSeries, I think you noted earlier that the program has had successes in terms of where it is. I guess the question is as you market the plane, are you still offering launch pricing on CSeries or are you beyond that?
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Alain Bellemare, Bombardier Inc. - President & CEO [83]
------------------------------
Obviously we are still at an early stage of the program, we expect that we're going to be able to start getting a little bit more traction on the pricing side given the performance of the aircraft. Now we can demonstrate that the aircraft is really bringing real significant value to airline operators. There's a market dynamic out there. We want to maximize our pricing as much as we can. We want to do the right thing in term of increasing our backlog as well so it's always a fine balance. We don't want to give the aircraft away. We know that there is like tremendous value and now we can prove it so we can have good discussions and we will try to maximize the pricing we get on the aircraft.
------------------------------
Manish Somaiya, Citigroup Global Markets, Inc. - Analyst [84]
------------------------------
Okay. Thank you.
------------------------------
Operator [85]
------------------------------
Darryl Genovesi, UBS Securities.
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Darryl Genovesi, UBS Securities LLC - Analyst [86]
------------------------------
Just wanted to get a little bit more color on the CSeries flight test program. I think you had and I guess this predicts your involvement. But at one point there were some guidance out there for I think a 2,400 hour flight test program. It seems like the commentary today would perhaps imply something more than that in kind of the 3,000 hour range. Am I reading that right? Has that moved up and if so, what's driving that?
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Alain Bellemare, Bombardier Inc. - President & CEO [87]
------------------------------
No, I think that we're more like the range you had previously is about right. We're talking about 2,400 hours of flight test time on the CS100. Maybe there's confusion with the CS300 and we're about like 1,500 hours on the CS100. So, we're pretty much tracking in line with what I said. We're like roughly 50% to 60% completed on the CS100 towards certification.
------------------------------
Darryl Genovesi, UBS Securities LLC - Analyst [88]
------------------------------
Okay. And then also I think it was at the 2014 Investor Day, the latest update on the trajectory and the development spending would have had it coming down to kind of the sub $1 billion level in 2016 and then maintaining at that level. Is that still the plan or does it seem like perhaps that's going to be difficult to reach at this point?
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Alain Bellemare, Bombardier Inc. - President & CEO [89]
------------------------------
That plan is clearly to bring our E&D development cost down, right now we're tracking as per plan. As with any new and complex program we don't know, but so far I mean there's no red flag out there. Certification is progressing well and in 2016 the focus will be on the CS300 from a development and certification standpoint and following that, I mean we should start seeing our development cost coming down significantly.
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Darryl Genovesi, UBS Securities LLC - Analyst [90]
------------------------------
Okay. And then one last one, if you don't mind. On the ultimate CSeries production rate, I think Pierre Beaudoin had talked about eventually getting to kind of 10 a month production rate within three years of entry into service. Is that your view on the market or is that view still kind of developing ?
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Alain Bellemare, Bombardier Inc. - President & CEO [91]
------------------------------
The later. I'm really trying to understand what is the best ramp up rate. Obviously now we have our launch operator, we're going to look at what are the other customers modeling that. We'll work with the customers closely and we'll do the best possible ramp up. Obviously we want to ramp up [in cadence] as soon as we can and that's something that we're working on with the team right now.
------------------------------
Darryl Genovesi, UBS Securities LLC - Analyst [92]
------------------------------
Alright, great. Thank you very much.
------------------------------
Operator [93]
------------------------------
Peter Arment, Sterne Agee.
------------------------------
Peter Arment, Sterne Agee - Analyst [94]
------------------------------
Alain, I guess specifically circling back on the Global and talking about demand, you gave us some color there and I understand the [softness] in Russia is certainly hurting things. In Latin America, China, and some of the other regions where you're seeing softness; is this kind of primarily related to the backlash we seeing, the weakness in the energy market or are you seeing kind of a competitive dynamic now with your chief competitor out there with a couple of new aircraft in the market since the end of last year? Thanks.
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Alain Bellemare, Bombardier Inc. - President & CEO [95]
------------------------------
Well, I think there's a little bit of both. To be honest with you, I mean we're seeing reduced softness. Our position in these international markets is very good, very strong; we got great customer reach; our competitors are also aggressive out there. So, I would say the primary driver of that is more related to the softness, I think it's more to the first part of your comment. And that's the reason why we want to adjust the rate, we want to make sure that we preserve the value of our Global franchise. We believe it is the best aircraft out there and our customers and the people who are flying the aircraft love the aircraft as well. So, I think that it's important for us to take the right actions at the right rate moving forward so we have the right number of aircraft delivered year-after-year and work closely with our customers to make sure that we gain our fair share of the market.
------------------------------
Peter Arment, Sterne Agee - Analyst [96]
------------------------------
Thank you very much.
------------------------------
Operator [97]
------------------------------
Deepak Kaushal, GMP Securities.
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Deepak Kaushal, GMP Securities - Analyst [98]
------------------------------
Alain, now that you've had some time to take a look at the internal operations and the people at Bombardier, I was wondering if you could give us some insight into your assessment of the culture in the organization. What are the positives and negatives and what are some of the areas that you see needing to improve and then some of your plans for that? Thank you.
------------------------------
Alain Bellemare, Bombardier Inc. - President & CEO [99]
------------------------------
The thing that I find very good is the passion that exists in the organization. People are very, very proud to work for Bombardier and they want to do the right thing. So, this is very positive. We have very deep knowledge. If you look at the products that we are putting out there and the certification complex development and certification of aircraft and we know how to do that. Obviously there has been challenges because of the workflow; the workflow was very high at Bombardier with the Learjet 85, the Global 7000/8000, and the CSeries. But if you look deep in the trenches, you would see a lot of very knowledgeable people who know their stuff extremely well. So, that is the portion that I do like. I think it's a strong foundation on which we can continue to build. We want to prosper culture of performance, we want to make sure that what we commit to is delivered on, we want to make sure that we focus on delivering strong results for you, for our shareholders, but also for our customers. So, I think that that is the portion where we will put more emphasis moving forward; the focus on performance and making sure that what we commit to doing, we actually do.
------------------------------
Deepak Kaushal, GMP Securities - Analyst [100]
------------------------------
Okay. And if I may ask a follow-up just on CSeries. I was wondering if you could give us an update on progress in North America in terms of active campaigns and when you might expect to see the CS100 make its debut in the North American market with a customer?
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Alain Bellemare, Bombardier Inc. - President & CEO [101]
------------------------------
I will repeat what I said before, it's too early for me to tell right now. We've got the new team on board and they are coming up with like a sales and marketing plan. We're looking at all the options, all the opportunities, where does it make sense and where is it that the CS100 and CS300 would bring the most value to airline customers, and then we will aggressively go after these potential customers. So too early to tell, but we'll keep you posted as we make progress.
------------------------------
Deepak Kaushal, GMP Securities - Analyst [102]
------------------------------
Okay. We're looking forward to progress. Thank you so much.
------------------------------
Operator [103]
------------------------------
Doug Dawson, Bank of America-Merrill Lynch.
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Doug Dawson, Bank of America-Merrill Lynch - Analyst [104]
------------------------------
So I know there's opportunities around the Transportation business, I know it's very early stages and that some of those opportunities will be exciting. I think one of the concerns that bondholders have and this is more of kind a question for you guys. The sensitivity around the aircraft side being potentially left separated from the transport side could create cyclical problems in the future for the aircraft business. You have most aircraft companies that have teamed up like Boeing has their defense business and Cessna has Textron industrial and Gulfstream has GD's military business. How do guys think about if BT were to separate the standalone aerospace business would fare with the leverage that it has?
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Alain Bellemare, Bombardier Inc. - President & CEO [105]
------------------------------
So I mean it's a very good question, very good comment; and you're right and that is the reason why we're talking about a minority stake in BT and also it's the reason why we're saying that we like the rail and train business and we want to participate in the consolidation of the business. Pure play is interesting, but like having the ability to have businesses that can upset each other during different cycles is also a huge benefit. And like I said, if you look at the Transportation business where it is today, a lot of investment has been done in that business over the years.
We're coming at a point right now where some of the new platforms are entering market or will soon enter market. It's a little bit what we've seen on the aerospace side; a lot of investment, a lot of programs, has been a little bit challenging. But at the same time, I think that the opportunities moving forward is very positive. So, there's tremendous value in that business and we want to make sure that we find the best possible way to unleash the value while still preserving the ability for us to be part of that business moving forward. So that's the reason why I said Bombardier Transportation is not for sale, we like this business and we want to continue to be part of it.
------------------------------
Doug Dawson, Bank of America-Merrill Lynch - Analyst [106]
------------------------------
Great. That was very helpful. Thank you very much.
------------------------------
Operator [107]
------------------------------
Noah Poponak, Goldman Sachs.
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Noah Poponak, Goldman Sachs - Analyst [108]
------------------------------
I just wanted to go back to the Globals because I'm trying to better understand what's actually happened here because you grew production about 30% last year and about 50% over the last two years and I realize that facts can change and you have to change based on that. But it's traditionally not that suddenly volatile of a market so why was production increasing so much while backlog wasn't and are you at all concerned with the impact to residual values or customer satisfaction or anything like that from this amount of volatility in your supply?
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Alain Bellemare, Bombardier Inc. - President & CEO [109]
------------------------------
The rate went up because there was demand for it. I mean we had like big orders and we had to step-up the production rate up to support that demand. And if you look at where we are today and you look at it moving forward and you look at the order intake, then you need to make sure that we keep adjusting production in line with demand. So, this is not abnormal so this doesn't happen all the time and yes, we want to make sure we do protect the value of that strong brand moving forward. So for that reason, we want to make sure that we're always in line with the market demand.
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Noah Poponak, Goldman Sachs - Analyst [110]
------------------------------
And you built about 50 aircraft a year give or take from all of I guess call it 2008 or 2009 to maybe two years ago so call it five years. Is that kind of the level that you need to get back to to right size or is it not quite that drastic?
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Alain Bellemare, Bombardier Inc. - President & CEO [111]
------------------------------
Like I said, we're not going to comment on where we're going to adjust the production rate, I mean we don't want to make comment on the level of that. But you can see what the deliveries have been, we are more in the 80ish range so I mean it's pretty high rate right now. I mean it represents about 50% of that segment of the market so it's very, very strong and it has gone up. If you go back to 2011, 2012, 2013; you've seen the ramp up and like I said, the ramp up was driven by very large orders. We just need to make sure now that we adjust that in line with what the market can support moving forward.
------------------------------
Noah Poponak, Goldman Sachs - Analyst [112]
------------------------------
Okay. Thanks very much.
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Operator [113]
------------------------------
Steve Hansen, Raymond James.
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Steve Hansen, Raymond James - Analyst [114]
------------------------------
Just as it relates to the liquidity enhancement plan and the BT IPO, I'm just curious whether you could share with us the expected range of proceeds that you're planning or hoping to take in and how that relates to the size of the minority stakes you're expecting to float whether it be at 30% or 49%?
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Alain Bellemare, Bombardier Inc. - President & CEO [115]
------------------------------
It's too soon to tell. I mean as we said, I mean we're preparing for it. The team is actively working to make sure that we put the right structure in place and that we're ready to launch the IPO at the right time. But at this point, I mean it would be too much speculation and we're not ready for this.
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Steve Hansen, Raymond James - Analyst [116]
------------------------------
What about the exact size of the stake that you're expecting to float?
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Alain Bellemare, Bombardier Inc. - President & CEO [117]
------------------------------
Well, that's the same thing. I mean we've talked about a minority stake so our intention is to keep it relatively low and we will see when the time is right the exact level at which we will go depending on market conditions.
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Steve Hansen, Raymond James - Analyst [118]
------------------------------
Okay, very helpful, guys. Thanks.
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Operator [119]
------------------------------
Stephen Trent, Citi.
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Stephen Trent, Citigroup Global Markets, Inc. - Analyst [120]
------------------------------
And I apologize for dialing in late, I had another call so you may have already mentioned this and forgive me for asking again if that is indeed the case. Just very quickly on the plan for the partial IPO of the Transport division, any color with respect to what drove your thinking to go for an IPO as opposed to looking for a strategic or a financial investor kind of sticking within the private markets?
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Alain Bellemare, Bombardier Inc. - President & CEO [121]
------------------------------
Private placement could be an option as well. I mean we're looking at all options, but we believe right now that the best path that we can control and get ready for and actually extract the real value of Bombardier Transportation is the IPO route and that is the reason why we are announcing the preparation of an IPO for a minority stake in BT. So there's other alternatives as you said, we're not excluding them, it's a possibility. One thing that we know is we know that the IPO option is a very good option, it is the best option available for us today. We preserve full flexibility to do what we want moving forward and we will see where it goes. But one thing that we do know is we don't want to sell Transport.
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Stephen Trent, Citigroup Global Markets, Inc. - Analyst [122]
------------------------------
Okay, got it. Very helpful and I'll stick to your rule about one question. Appreciate that.
------------------------------
Shirley Chenier, Bombardier Inc. - Senior Director, IR [123]
------------------------------
Thank you, operator. I think this concludes the question period intended for investors and analysts. So, we will now begin the question period for the media representatives. Operator?
------------------------------
Operator [124]
------------------------------
(Spoken in French) (Operator Instruction) Allison Martell, Reuters.
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Allison Martell, Reuters - Analyst [125]
------------------------------
On the Global program, do you anticipate that the soft demand you're seeing there is going to improve once the new Globals are in service and do you still expect that in 2016, 2017?
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Alain Bellemare, Bombardier Inc. - President & CEO [126]
------------------------------
I'm sorry, missed the first part of your question, could you repeat it please?
------------------------------
Allison Martell, Reuters - Analyst [127]
------------------------------
Do you anticipate the demand for the Globals will actually improve once you have the new model on the market and the second part is about the timeline for that?
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Alain Bellemare, Bombardier Inc. - President & CEO [128]
------------------------------
Well, we clearly have a strong backlog on the 7000/8000. It's going to be a very good aircraft. There's very strong interest for that platform so as we get closer to first flight and then entry into service, we do expect demand to increase.
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Allison Martell, Reuters - Analyst [129]
------------------------------
And is that also 2016, 2017?
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Alain Bellemare, Bombardier Inc. - President & CEO [130]
------------------------------
I mean the demand is already there today. Like I said, the backlog is already very strong. It's about managing the production ramp up of this new aircraft. And as I said earlier, we will take the opportunity of adjusting the rate on the current 5000/6000 to get the production ready for the ramp up of the 7000/8000. So, that will be done obviously over the next two years. So in terms of getting customer interested and seeing more orders coming in, yes, it will be over that 2016, 2017, 2018 time frame.
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Allison Martell, Reuters - Analyst [131]
------------------------------
I meant to ask when do you expect the plane to go into service?
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Alain Bellemare, Bombardier Inc. - President & CEO [132]
------------------------------
At this stage, we're not commenting on this.
------------------------------
Allison Martell, Reuters - Analyst [133]
------------------------------
Thanks.
------------------------------
Operator [134]
------------------------------
Jerry Siebenmark, The Wichita Eagle.
------------------------------
Jerry Siebenmark, The Wichita Eagle - Analyst [135]
------------------------------
Alain, can you talk a little bit more about when you were answering a question earlier about margins in Business Aircraft, can you expand a little more on what you meant by there is a little bit of a mix issue in Learjet and where the Company is in terms of the pause on the Learjet 85 and whether or not you're going to lift it? Thank you.
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Alain Bellemare, Bombardier Inc. - President & CEO [136]
------------------------------
Starting with the last piece, the Learjet 85 is still on pause. We are still assessing what we will do moving forward and how we will proceed with the Learjet 85, what is the best way of moving forward with that. What I meant by the mix, it's clear that when you look at the lower end of Business Aircraft, the small and medium size aircraft, the margins are not as attractive as what you get in the upper in the large and ultra long range aircraft segment. That's what I meant by that mix. So, the Learjet family is dilutive to our overall Business Aircraft segment.
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Jerry Siebenmark, The Wichita Eagle - Analyst [137]
------------------------------
Thank you.
------------------------------
Operator [138]
------------------------------
(interpreted) (inaudible).
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Unidentified Participant [139]
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(interpreted) How much money are you trying to get through selling BOMB BT?
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Alain Bellemare, Bombardier Inc. - President & CEO [140]
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(interpreted) First of all, I'd like to clarify something, BT is not for sale.
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Unidentified Participant [141]
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(interpreted) No, what I meant was the IPO, how much you will be getting through the IPO?
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Alain Bellemare, Bombardier Inc. - President & CEO [142]
------------------------------
(interpreted) Well, as was mentioned during the previous conference call, at this point in time we're not commenting that part of our plan. We are getting ready to come up with an IPO for a small stake within BT and at the right point in time, we'll come back and tell people what we intend to do. At this point in time, it is too early to say. We would be speculating and we don't want to speculate.
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Unidentified Participant [143]
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(interpreted) And the money that you'll be getting in, is this to refund part of your debt or what would you be doing with the money?
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Alain Bellemare, Bombardier Inc. - President & CEO [144]
------------------------------
(interpreted) And once again, it's too early to comment. It could be a mix, a combination of both.
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Unidentified Participant [145]
------------------------------
(interpreted) I mean right now you can use 100% of free cash flow from BT and do whatever you want to do, but the BT subsidized aerospace, was is it already separate in terms of management?
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Alain Bellemare, Bombardier Inc. - President & CEO [146]
------------------------------
(interpreted) Well, we manage the cash flows in a consolidated basis taking into account the needs of each component and we will go on doing so. So, we look at things globally taking into account the needs of each of the units.
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Unidentified Participant [147]
------------------------------
(interpreted) This is in line with the question by the analysts at the end of the call with bondholders. You won't be able to use the cash from BT for Aerospace, did you or did you not do that previously?
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Alain Bellemare, Bombardier Inc. - President & CEO [148]
------------------------------
(interpreted) Well, as I said, each company unit was managed based on their own need. That's how we did things. Now as to the question that was asked by an analyst, the key is what we're talking about a minority stake for this IPO. In other words, Bombardier would still be in charge and would consolidate the financial statements the way we used to do.
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Unidentified Participant [149]
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(interpreted) But choosing to consolidate cash flow is one thing, but using the cash flow per se is a different issue. One last question if I may. Readjusting the production rate, would that have an impact on Montreal? How many jobs might be impacted or threatened?
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Alain Bellemare, Bombardier Inc. - President & CEO [150]
------------------------------
(interpreted) Our teams are now assessing the impact on jobs. It is possible that some jobs might be impacted in Montreal. At this point in time, we still do not know how many such jobs might be impacted so it's too early to say. Our teams are working on this.
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Unidentified Participant [151]
------------------------------
(interpreted) Thank you. I will see you at the General Annual Meeting.
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Operator [152]
------------------------------
(interpreted) (inaudible).
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Unidentified Participant [153]
------------------------------
(interpreted) So, I'm following up on the question that (inaudible) asked. How many employees right now are working on the production in (inaudible) of the Global 5000/6000 aircraft?
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Alain Bellemare, Bombardier Inc. - President & CEO [154]
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(interpreted) We won't comment on this as I said. This morning we announced that we are adjusting our production rates so sure enough there might be some impact on the jobs, but it's too early to know exactly what those might be because as I said, the teams are identifying the impacts in terms of jobs and their employees.
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Unidentified Participant [155]
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(interpreted) What's the production rate right now?
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Alain Bellemare, Bombardier Inc. - President & CEO [156]
------------------------------
(interpreted) Same answer, which we are saying is that we are not commenting on this, but you can see how many planes we are delivering, how many aircraft. And last year as you can see, we delivered about 80. It's approximately the same range basically for this year, but we won't comment about the future production rate.
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Unidentified Participant [157]
------------------------------
(interpreted) Who answered just now?
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Alain Bellemare, Bombardier Inc. - President & CEO [158]
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(interpreted) Alain Bellemare.
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Unidentified Participant [159]
------------------------------
(interpreted) I wanted to be sure who was answering. Thank you very much.
------------------------------
Operator [160]
------------------------------
(interpreted) Frederic Tomesco, Bloomberg.
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Frederic Tomesco, Bloomberg News - Analyst [161]
------------------------------
(interpreted) Mr. Bellemare, I would like to check with you here the strategic review that you've launched now, do you think that this might be done by the end of the year? What's the timeline?
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Alain Bellemare, Bombardier Inc. - President & CEO [162]
------------------------------
(interpreted) Yes, we do hope to be done by the end of the year. As you can see, we've already made a lot of progress working with our teams and we've identified the opportunities and the challenges. We're now trying to see what measures need to be taken. So to answer your question, we hope that over the next two months we will be in a position to have a clear picture of what we will be doing.
------------------------------
Frederic Tomesco, Bloomberg News - Analyst [163]
------------------------------
(interpreted) After the Learjet, you mentioned the Learjet 85, which is still in pause mode; but as to the future of your Lear division per se within Bombardier, what's the picture?
------------------------------
Alain Bellemare, Bombardier Inc. - President & CEO [164]
------------------------------
(interpreted) As was said in the past, the Learjet division is very interesting for Bombardier. Maybe it doesn't create as much value as the other business units, but at this point in time we have no specific plans for our Learjet family and we will go on assessing and looking at our options.
------------------------------
Frederic Tomesco, Bloomberg News - Analyst [165]
------------------------------
(interpreted) So right now you're still saying that it is not for sale?
------------------------------
Alain Bellemare, Bombardier Inc. - President & CEO [166]
------------------------------
(interpreted) No, Learjet is not for sale.
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Frederic Tomesco, Bloomberg News - Analyst [167]
------------------------------
(interpreted) Thank you.
------------------------------
Shirley Chenier, Bombardier Inc. - Senior Director, IR [168]
------------------------------
Have any more questions?
------------------------------
Operator [169]
------------------------------
There are no further questions registered at this time.
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Shirley Chenier, Bombardier Inc. - Senior Director, IR [170]
------------------------------
Thank you all for being with us today. (spoken in French)
------------------------------
Alain Bellemare, Bombardier Inc. - President & CEO [171]
------------------------------
And have a great day.
------------------------------
Operator [172]
------------------------------
(spoken in French) The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.
------------------------------
Editor, [173]
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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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