Bombardier Inc and Airbus SE Announce Partnership on the C Series Aircraft Program

Oct 17, 2017 AM CEST
BBD.B.TO - Bombardier Inc
Bombardier Inc and Airbus SE Announce Partnership on the C Series Aircraft Program
Oct 17, 2017 / 12:15AM GMT 

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Corporate Participants
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   *  Alain M. Bellemare
      Bombardier Inc. - CEO, President and Director
   *  John Di Bert
      Bombardier Inc. - CFO and SVP
   *  Patrick Ghoche
      Bombardier Inc. - VP of IR

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Conference Call Participants
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   *  Fadi Chamoun
      BMO Capital Markets Equity Research - MD and Analyst
   *  Konark Gupta
      Macquarie Research - Analyst
   *  Robert Michael Spingarn
      Crédit Suisse AG, Research Division - Aerospace and Defense Analyst
   *  Ronald Jay Epstein
      BofA Merrill Lynch, Research Division - Industry Analyst
   *  Walter Noel Spracklin
      RBC Capital Markets, LLC, Research Division - Analyst
   *  Yilma Abebe
      JP Morgan Chase & Co, Research Division - Executive Director and Senior High Yield Analyst

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Presentation
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Operator   [1]
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 Good evening, ladies and gentleman, and welcome to the Bombardier conference call. Please be advised that this call is being recorded. At this time, I'd like to turn the discussion over to Mr. Patrick Ghoche, Vice President, Investor Relations, for Bombardier. Please go ahead, Mr. Ghoche.

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 Patrick Ghoche,  Bombardier Inc. - VP of IR   [2]
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 Thank you. Good evening, everyone, and thank you for joining us for this special conference call announcing our partnership between Bombardier and Airbus on the C Series. Our CEO, Alain Bellemare; and CFO, John Di Bert will make introductory remarks describing how this partnership helps realize the full potential of the C Series. We'll then open up for questions and conclude the call within the 30-minute period.

 This conference call is broadcast live on the Internet. For copies of supporting documents in both English and French or to retrieve the webcast archive of this call, which will be available later tonight, please visit our website at bombardier.com. All dollar values are expressed during this call are in U.S. dollars unless stated otherwise.

 I also wish to remind you that during this call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the corporation. I bring your attention to Page 2 of our presentations.

 I'll now turn it over to Mr. Alain Bellemare for his opening remarks.

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [3]
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 Well, good evening, everyone, and thank you for joining us for this special conference call announcing the partnership between Bombardier and Airbus. This is a very exciting moment for us, and we are very pleased to announce that there will be a new partnership on the C Series between Bombardier, Airbus. This is game changing for Bombardier. It makes the C Series program and our company stronger. It allows us to fully unlock the value of our investment in the C Series. And by combining Airbus' global range and scale with Bombardier's state-of-the-art aircraft, we will create tremendous value for our customers, suppliers and shareholders. We will also secure jobs and new opportunities for our employees around the world and for the Canadian aerospace industry.

 The C Series is a remarkable, enduring achievement. Around the world, it is recognized as the most innovative aircraft in its class. The in-service performance has met or exceeded all promises, and it is receiving outstanding reviews from airlines, customers and passengers. And most importantly, the C Series journey is just beginning. With Airbus, we now have the right strategic partner to make it a commercial success and take it to new heights. I can tell you that in just a few -- 2 -- the last 2 hours since our press release went out, I have received very positive calls and messages from a number of airlines and stakeholders. So we are very excited about the commercial momentum this partnership will generate.

 Just a few words on why we see Airbus as the right partner. First, the C Series is highly complementary to the existing product portfolio, a great product fit. Airbus also shares our commitment to innovation and our focus on customer service and operational excellence, which will be good for airline customers. They also bring additional resources such as an Alabama manufacturing center to serve U.S. customers. Aircraft produced at this facility would not be subject to duties under the pending U.S. investigation. Airbus joining the C Series program is also a strong endorsement of the aircraft performance, the market potential and the opportunity for long-term value creation. And that value creation applies to all stakeholders. It creates value for everyone: for our customers, suppliers, employees, airlines, flying public as well as for Québec, Canada, Northern Ireland, U.K., China and Airbus. This value creation comes from leveraging Airbus' supply chain and taking advantage of their global marketing and support networks. With these synergies, all the ingredients are in place to more than double the value of the program.

 Okay, let me stop here and turn it over to John to discuss the terms of the deal and put this transaction in the context of our 2020 plan.

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [4]
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 Good evening, everyone. Let me first expand on the partnership's value creation for a moment. From my perspective, it's twofold. On the commercial front, Airbus' endorsement strengthens and accelerates our plan by giving it renewed commercial momentum. There's a large market for this aircraft, and we are now better equipped to capture it. On the industrial front, the supply chain expertise brought by our new strategic partner will generate significant synergies, otherwise not obtainable on our own. The power of these cost savings will contribute to improving Bombardier's financial metrics over time. What that means for our shareholders and bondholders is that we can continue executing our 2020 plan, while we fully participate in the C Series value creation. This partnership supports our 2020 objectives by growing our confidence in our breakeven scenario for the C Series. It also removes uncertainties related to the U.S. market access. And with the synergies to be realized and our continued investments in the C Series, we see an enhanced cash flow profile for Bombardier, in line with our $2 billion cash commitment from the time we certified the program in 2015.

 Now let's look at the agreement. Airbus will continue -- will contribute significant value through procurement, sales and marketing, fleet maintenance and customer support synergies to the C Series LP. In return, Airbus will own 50.01% stake in the JV. Bombardier and Investissement Québec will respectively own approximately 31% and 19% of the program. The transaction also calls for Bombardier to continue investing in the program as necessary through 2021 as per our existing 5-year plan.

 While we agreed to continue funding the program up to $700 million over the first 3 years, should it be necessary, we will obtain in exchange Class B common shares in the partnership. Additionally, similar to the transaction realized with Investissement Québec, we will be issuing warrants to Airbus at a price of CAD 2.29 exercisable over 5 years. The transaction also includes reciprocal call/put rights between the partners. The headquarters of the C Series assembly, manufacturing and engineering services and R&D activity will remain in Québec. From a timing perspective, we anticipate that our partnership agreement with Airbus, including all regulatory approvals, will be finalized in the second half of 2018.

 Let's put today's announcement in the -- in context for Bombardier. For the past 2 years, we've been executing on our turnaround plan following a path to return the company to profitable growth. We set clear goals and objectives and they have not changed. We successfully derisked the business and made significant progress on our growth programs. And now, we're focused on rebuilding earnings to achieve our 2020 targets. You've seen our margins trending favorably towards those goals. In 2017, we are already driving 8% margin across the board. While much of our focus has been internal on improving our own operations, our cost structure and our program execution, we've also been proactive with respect to assessing our strategic options. And you can see that today in this announcement. The alliance with Airbus makes Bombardier stronger. It improves the C Series position in an attractive market, and we participate in the value creation. It builds upon the actions we've already taken. It puts us in a much better position to delever the company in the third phase of our turnaround plan. So finally, our ultimate goal of unleashing the full value of the Bombardier portfolio, including from the C Series, continues.

 As we said, with Airbus as our partner, we will be able to enhance and unlock the full potential of this remarkable aircraft. Together, we will firmly establish the C Series in the marketplace and make it a commercial and financial success. Simply put, the C Series program is now positioned to reach incredible new heights that would not have been possible alone.

 Okay, let me stop here and turn it over to Alain for some concluding remarks.

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [5]
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 Thank you, John, and let me conclude by simply saying that today's announcement is the start of an exciting new chapter for Bombardier. I am confident that we have the right partner and that the C Series is now better positioned for future success. We are very excited about this opportunity and what it means for our customers, the commercial aerospace industry and our shareholders. Together, Airbus and Bombardier will be able to offer the best single-aisle solutions around the world, and we will be able to deliver sustainable value to our shareholders. Okay, let me stop here and open it up for questions.

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Questions and Answers
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Operator   [1]
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 (Operator Instructions) The first question is from Fadi Chamoun of BMO Capital Markets.

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 Fadi Chamoun,  BMO Capital Markets Equity Research - MD and Analyst   [2]
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 Congratulation, looks like a good deal for Bombardier. So just one clarification. When you said the $750 million, is this in excess of what you've committed to the program over the next 2 years?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [3]
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 So I'll take that one, Fadi. It's $700 million of investment commitment that really is fully aligned with our cash breakeven plan for 2020 on the C Series. If you recall, early 2016 or late '15 when we gave our first 5-year plan, we talked about a $2 billion investment to cash breakeven for the C Series. The commitment of the additional $700 million is only if necessary to fund shortfalls in cash flow. And we remain more than ever, frankly, convinced and confident that we have a clear path to breakeven 2020 with Airbus as a partner and this deal accelerates and improves our business. And I don't see the majority of that $700 million investment being actually catalyzed.

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 Fadi Chamoun,  BMO Capital Markets Equity Research - MD and Analyst   [4]
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 Okay. That's great. And does your outlook for Aerostructure and how Aerostructure participates in this program changed at all as a result of this?

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [5]
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 Well, I think this is very positive because I mean it's security of volume. To be honest, that's what that is. I mean, you guarantee that there will be more volume under the Airbus umbrella, which is going to be good for the Aerostructure business. I don't -- I think that it does increase the value of the Aerostructure business that we have.

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 Fadi Chamoun,  BMO Capital Markets Equity Research - MD and Analyst   [6]
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 Okay. And 1 last quick one. So what are -- like, are there any safeguards that are built into this agreement in the event that the going gets tough in the next few years that Airbus remains committed to this program?

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [7]
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 I think the best safeguard that we have is the put and call option in the end. I mean, we're not doing that to -- with the objective of not making it work, but like any good M&A deal, I mean, there is -- you always plan for exit mechanisms should you need that. So we have one in this deal as well. But let me be very clear, I mean, that's not the intention. The intention is to make this a huge commercial success by combining an amazing platform and the capability that we do have at Bombardier aerospace with Airbus, which is a world-class manufacturer of commercial aircraft. So I think that this is the intention here, is to work together and unleash the full value of the program. So we're very excited about that. I think that will be good for our customers. The feedback that we're getting is very positive, and they are excited as much as we are.

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Operator   [8]
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 The next question is from Konark Gupta of Macquarie Capital Markets.

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 Konark Gupta,  Macquarie Research - Analyst   [9]
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 Can you hear me now?

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Operator   [10]
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 Yes, we can, sir. Please go ahead.

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 Konark Gupta,  Macquarie Research - Analyst   [11]
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 Okay. I have a couple of questions. First of all, John, I know you said, $2 billion cash burn over 5 years initially on the C Series program to 2020. And -- but this deal and the cost savings you might get out of this Airbus supply chain and procurement, why don't you expect a significant or even a modest change to that guidance of $2 billion cash burn? Like, will you not achieve those savings within the 5-year time frame? Or do you expect them to happen over time?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [12]
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 No, we definitely expect that we're going to have accelerated improvement synergies in the total plan. I think just to take a couple of things into consideration: number one, there is a closing of regulatory period that will take us to the back end of 2018, which means that 2019 will likely be the first year of the actual partnership under operation. And for us, I think, as you know, there's also the element of establishing the -- as the JV establishes the facility in Mobile, Alabama, for the U.S. production, there's some cost that will go through that. So overall, we see very powerful cash flow generation as you probably get out of that 2020 plan into '21, '22, and thereon. But certainly, we give ourselves now a lot of confidence with what will happen through 2020 on our 5-year plan, establishing that breakeven point and then from there, certainly cash acceleration from an enhanced and an improved program.

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 Konark Gupta,  Macquarie Research - Analyst   [13]
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 Okay. That's great. What portion of the 120 aircraft per-year production will be migrated to Alabama?

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [14]
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 Well, we don't know yet. It will be based on, obviously, U.S. volume because that's, I mean, how we're approaching this thing. So we'll see where it goes. And it also depends, how many new orders will get to the U.S. system. So in time, we will modulate this thing and make sure that there is sufficient volume in Alabama to make it a very good operation.

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Operator   [15]
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 The next question is from Walter Spracklin of RBC Capital Markets.

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 Walter Noel Spracklin,  RBC Capital Markets, LLC, Research Division - Analyst   [16]
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 So my question is really, I guess, John, you mentioned and in the press release you talked about the doubling of the value of the program and certainly that's what a 50% stake would imply. But is there anything you can give us in terms of quantification? Obviously, you've put a tremendous amount of capital into this program. The Québec government has followed in with $1 billion and now a 50% stake comes in, no cash injection coming with Airbus. So it's all kind of -- I understand the cost savings, the marketing arm that they're going to bring to the table. But is there any way of valuing that? How did you look at the buckets of value in each of those components to come up with the 50% stake that, that represented?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [17]
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 Yes. I probably won't get into the details of the actual M&A process and then how we looked at it. But I'll -- may be a couple of things that can provide some color here. One is that -- and I think you alluded to it that when we originally established a transaction with the Québec government a couple of years back, we saw a total value of the program of about $2 billion, including their $1 billion injection. We're talking about over doubling the value of the program, which implies something that is north of $4 billion, and we think possibly -- quite possibly above that as well. And it comes from the fact that, when you're looking at a market of 6,000 aircraft, there is, we believe, the best product out there. And surely with Airbus by our side now, full access to that global market, really a complementary fit to their overall portfolio. So an opportunity to really gain great access to that market. The cost savings when you're looking at whatever multiple of volume that you use, we believe that the due diligence that we've done with Airbus show that overall supply chain opportunities are significant to us. And going from your math on what you think the volumes of the C Series might be, by savings as well, will kind of give you well in excess of $2 billion of value creation. And don't forget that behind all of this also we had a cost reduction plan of our own. This and in terms of our volume plan, the transaction with Airbus also significantly derisks all of the assumptions on the program. So through due diligence that occurred couple of years back -- due diligence that was completed over the last several months, we are very confident that both the market access, the size of the market confirmed by Airbus as well as the opportunity in the supply chain, has, I will say, several billion dollars worth of value available to the JV, to which the shareholders will all participate.

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 Walter Noel Spracklin,  RBC Capital Markets, LLC, Research Division - Analyst   [18]
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 Okay. And just my second last question here is for you, Alain. Can you describe to us the endgame for Bombardier here? I know there is a 7.5-year kind of call and reciprocal put, but based on one of your -- your answer to other question, that was, kind of, this is at a worst-case, kind of, contingency thing that's there if you need it. Can you describe what Bombardier and the C Series program will look like to you in 7.5 years? And what you will be playing -- what role Bombardier will be playing in that in partnership with Airbus, if at all?

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [19]
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 Yes. I think that, as I've said like multiple times, is we were looking for strategic options on the aerospace side, largely on the Commercial Aircraft business and more specifically on the C Series. And for the reason that John just mentioned because -- I mean, when you team up with a company like Airbus, it brings so much scale and you gain so much leverage that you unleash the value of the investment that was done on the -- that has been done on the C Series. So I see that as being very critical. And for the rest, we like our Business Aircraft franchise. We believe it's a great franchise. And we are -- we will continue to explore opportunities on the train side. But in a nutshell, I think that we have now achieved what we wanted to do on the Commercial Aircraft side of the house. And hopefully, this partnership is going to be one for life. So we have no intention to exit that segment of the market. I mean, we are committing still significant investment into this program because we want to stay there. So it's part of our global Bombardier aerospace business, and we like it. And believe now that we can unleash huge value for all key stakeholders.

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Operator   [20]
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 The next question is from Robert Spingarn of Crédit Suisse.

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 Robert Michael Spingarn,  Crédit Suisse AG, Research Division - Aerospace and Defense Analyst   [21]
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 Couple of things. First of all, this was out there as a discussion. Alain, you just talked about you're looking at strategic options for aerospace a couple of years ago. There was -- it was confirmed that you were in talks with Airbus at that time. So what's changed between then and now other than this trade issue that we've all been looking at for the past couple of months?

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [22]
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 I think that's a -- it's a good question. It's not related to the trade issue, by the way. I mean, it's really a strategic move, it's a strategic decision. And as you know, well, I mean, you don't control the timing of M&As. I mean, you do them and know when the time is right, when the stars align. And that's exactly, I mean, what happened here. I think that what has changed the most is in 2015, there was a lot more risk on the program. The program was not certified. Today, we have a program that has been certified by Transport Canada, FAA, EASA. The aircraft is in service. People didn't know what the performance of the aircraft would be. Now, we know that the aircraft performance is amazing. It's actually better than expected with room to grow further. We have a backlog with like good airlines in there like, you've got Delta, you've got Air Canada on top of Korean, Swiss and Air Baltic. So when you look at the overall risk of the program, I think that it was easier for Airbus in order to see how we could come into the program and unleash significant value while minimizing risk. So I think that's kind of the main reason why we could converge at this stage versus 2015.

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 Robert Michael Spingarn,  Crédit Suisse AG, Research Division - Aerospace and Defense Analyst   [23]
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 So just moving along. Even though this doesn't conclude or transact for another year, roughly a year, is it possible that you have some sales campaigns out there now that might have been contingent on such a strategic deal like this? In other words, might we start to see an acceleration in order activity now -- in the near future?

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [24]
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 Well, we certainly hope that just the fact that Airbus will be coming in, in whatever time, 12 months from now, that the people will see that there is a strong endorsement to the program. And we have, like, Fred and the team are already working with a good number of potential customers, and we see that as a significant accelerator. So we are confident that this will help. Now time will tell. Team -- Fred and the team are hard at work, but we see that as being positive.

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 Robert Michael Spingarn,  Crédit Suisse AG, Research Division - Aerospace and Defense Analyst   [25]
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 Okay. And then just quickly clarification, John. The $350 million per year that you've agreed to fund, I guess, over these next few years, if in any single year, the shortfalls are greater than that, how is that addressed? Who splits that and how?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [26]
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 So maybe just a point of clarification is, $350 million in the first 12 months post close and then it's $350 million max over the following, I guess, months 13 to 36, so the following 2 years. That's the way the investment commitment is structured. And with respect to any funding that will be required in any of those 2 brackets above the $350 million, there would be a proportional investment in the standard common stock of the company by both the Airbus and the Bombardier.

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 Robert Michael Spingarn,  Crédit Suisse AG, Research Division - Aerospace and Defense Analyst   [27]
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 And how about Québec?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [28]
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 Unlikely at this point in time as has been up to now. Québec had major initial investment and then we've been diluting them since. That would continue to occur as necessary. Again, not my expectation that we would have a need to surpass the $350 million. But if it were the case, likely split between ourselves and Airbus in a proportional ownership of...

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 Robert Michael Spingarn,  Crédit Suisse AG, Research Division - Aerospace and Defense Analyst   [29]
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 Okay. And that's an annual task? In other words, if you go over the $350 million in the first period, you don't have to fully fund up to the next $700 million. It's in that particular year they would -- you would share the funding requirement?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [30]
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 So just to be clear. First 12 months after close, $350 million cap. So if it was $360 necessary, that additional $10 million would be split. And then months 13 to 36 would be an additional $350 million in aggregate. So it could be all in the first year or it could be split over 2 years. It's just $350 million over those 2 years.

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Operator   [31]
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 The next question is from Ronald Epstein of Bank of America.

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 Ronald Jay Epstein,  BofA Merrill Lynch, Research Division - Industry Analyst   [32]
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 So a couple of questions for me. Maybe just a quick technical one for John. When we think about this reciprocal put/call option structure, can you just walk through it in a little more detail? I wasn't exactly clear on how that thing works?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [33]
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 So essentially, I think it's going to become pretty simple. What it means is that, after 7.5 years post close, Airbus will have the right to call our ownership shares and that would be done at fair value. So that means that, that is basically an assessment test of fair value at that time of the program. And we have the right to put the shares to Airbus to buy us out. So those are reciprocal. And in both cases, there is a fair value assessment that's completed, and that would dictate value.

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 Ronald Jay Epstein,  BofA Merrill Lynch, Research Division - Industry Analyst   [34]
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 Got you. And then maybe one for Alain. When I think back on Boeing's acquisition of McDonnell Douglas, they acquired the 717 program and there was some thinking that might breathe some new life into it, and then ultimately it didn't. I mean, what's the assurance that Airbus is going to actively market this airplane as if it was one of their own children?

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [35]
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 I think that Airbus recognizes value of the aircraft to start with. So -- I mean, that's a good start. They understand that this aircraft is really creating huge value in the 100- to 150-seat class segment. And as we've said and Fred had said that multiple times, I mean, this is a segment of the market that has been underserved. So I mean, there is pent-up demand if you had the right product. And this is what the C Series is and Airbus recognizes it. So that's the reason why we're talking about 6,000 aircraft over 20 years. So Airbus' huge potential and they see -- they are -- they realize that they can unleash tremendous value. And they like the aircraft and what it does and what they can do with this. So it feels right and it feels that they are really committed to this. And I'm very confident that we have the right partner here. So I don't want to think of the past, of the Boeing and McDonnell. I think that we have the right partner. They are very good with international partners as well. I mean, they've done many. If you look at, they have operation in the U.S., operation in China. So I mean, I believe that we will together be able to unleash a lot of value. So we believe, we have the right partner, the right aircraft and the right time.

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 Ronald Jay Epstein,  BofA Merrill Lynch, Research Division - Industry Analyst   [36]
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 And then maybe just one more technical detail for either of you guys. When we think about the facility being set up in Mobile and essentially doing the final assembly of the C Series in the U.S. Is there any worry about an import tariff on components that would get shipped in? And I guess, I'm not as close to that as you guys. Is that a risk? Or from what you see, that's not a risk?

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [37]
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 I mean, I think that it's fair to say that first of all is, we fully disagree with that Boeing petition. We believe it's totally unfair, unjustified, and we will continue fighting this. So I want to start with this because we weren't even competing at Delta. So -- I mean, I don't know if you're going to prove damage here and all with the ITC. So the second thing is, there is more than 50% U.S. content on this aircraft already today. And then if you look at an assembly line on top of this in the U.S. where it become -- when it become a domestic product, then there is no import duty on domestic products. So I think this is it. I think that -- I mean, we're going to be fighting it on multiple fronts, and we're developing like A, B and C and D plans to make sure that we protect access to the U.S. market.

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 Patrick Ghoche,  Bombardier Inc. - VP of IR   [38]
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 Thanks, Ron. So I guess given the late hour, we'll take maybe last final question, please.

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Operator   [39]
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 So the last question is from Yilma Abebe of JPMorgan.

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 Yilma Abebe,  JP Morgan Chase & Co, Research Division - Executive Director and Senior High Yield Analyst   [40]
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 Couple of questions from me. The first one is, I want to understand sort of the $700 million max cap a little bit better. So you mentioned sort of a $2 billion number that you needed to breakeven in the C Series, I guess, from 2015. And presumably, you probably have -- correct me, if I'm wrong, but you probably have about $1.1 billion-ish left in that number. The way to think about this $700 million cap, is that on top of the, call it, $1 billion you still have left to spend?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [41]
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 Well, the answer to that is no. The -- I just want to be clear here. This -- the transaction and the potential of the program gives us more confidence in our original plan to breakeven by 2020 and to do so with $2 billion or less of investments from that time. So this transaction supports that objective. It will generate cash flow faster in the out-years past 2020. And it allows us to derisk the cash flow needs over the following couple of years ahead of us. And we get -- for those investments, we get Class B nonvoting shares. So we look at this as positive from our overall cash flow situation.

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 Yilma Abebe,  JP Morgan Chase & Co, Research Division - Executive Director and Senior High Yield Analyst   [42]
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 So John, to be clear though. When this transaction closes sometime in the next year, these max caps are after this $2 billion? I'm just not clear what is it against sort of that you're comparing the sort of max commitments?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [43]
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 It simply represents some comfort really to Airbus. I mean, we're in control of the program, we've been in control of the program for many, many years. They are going to be taking that program over. And as a result, we've agreed to these 2 caps of $350 million over that 3-year period. And essentially, this provides some comfort that we will be transitioning a program effectively, that we will be able to deliver the breakeven path to cash flow breakeven in 2020. And the original plan that we have continues. Now we will be looking at some potentially additional investment to start up the U.S. facility. But in there also we have synergies coming from this transaction that will impact '19 and '20 cash flows. So as far as Bombardier looked to this, we have a path to breakeven that we've established some 3 years ago. We're on that path. We have clarity and confidence as to how we get it there by 2020. And in return for any investment we may make, we will get Class B shares.

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 Yilma Abebe,  JP Morgan Chase & Co, Research Division - Executive Director and Senior High Yield Analyst   [44]
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 Okay. At closing, how much of this $2 billion number do you expect to have spent? Is that something that you can share with us?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [45]
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 Well, so let me do a bit of a math for you. So in 2016, we did about $1 billion. We've said for 2017, kind of, $300 million, $400 million of cash spend. And then we expect that basically through next, I guess, a couple of years, you'll have the residual of those values. So if you get up to about $1.4 billion or so, then you can look at '18, '19 and '20 and kind of do your own math on that.

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 Yilma Abebe,  JP Morgan Chase & Co, Research Division - Executive Director and Senior High Yield Analyst   [46]
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 Okay, perfect. I think that answers my question. And then one final one. Why sort of the 1-year sort of tail in closing this deal? Why not close it in 1 quarter or 2?

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [47]
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 It's regulatory, I mean.

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 Alain M. Bellemare,  Bombardier Inc. - CEO, President and Director   [48]
------------------------------
 Yes, it's just the normal regulatory approval process. So if we can close faster, we will. I mean, we see no overlap. And I mean, the teams on both side are working on it. So obviously the faster the better, but typically deals like that can range between 9 and 12 months.

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 John Di Bert,  Bombardier Inc. - CFO and SVP   [49]
------------------------------
 And then maybe just a comment. That is also one of the elements of the -- of that capping of the $350 million is that, if it closes sooner, the cash flows that are in '18 will be part of that cap, right. So we -- it doesn't pertain to a calendar year. It pertains to, to 12 months following the close. So accelerated close, we'll put more cash in that first year.

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 Patrick Ghoche,  Bombardier Inc. - VP of IR   [50]
------------------------------
 Thanks, everyone, for joining. That concludes our call. Thank you.

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Operator   [51]
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 Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.




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