Q: Bombardier has had quite a bit of negative press over the last year, with the various layoffs the company has made. What do you see as the positives?
A: It is clear that 2015 was a very important year for Bombardier Business Aircraft. We took a number of steps that have positioned us for long-term success. In May 2015 we announced a significant rate adjustment on the production of our Global aircraft product line-up. In this we led the industry. We were the first manufacturer to recognise and take the necessary action to respond to a definite slowing of demand, especially in emerging markets which had been driving demand growth.
So it was very important to adjust our Global aircraft production rates to the right level, thereby protecting both the value of the brand and the residual values of the pre-owned Global business jet fleet. Taking this decisive action was important and most of our competitors have since followed suit. All the industry indicators have since confirmed the softening of the market that has taken place since May 2015. So we were ahead of the market in anticipating the downturn, and we have benefited from this.
If you look at pre-owned inventories, particularly all long-range models except for Bombardier Global aircraft, the number of pre-owned aircraft for sale is up significantly. There is a very recent report from UBS, which showed that pre-owned inventories for G650s and Falcon 7Xs is up quite sharply, while there is a slight decrease in the Global aircraft pre-owned inventory. This in itself is proof that we were right in realigning production numbers.
This of course led to us having to lay off employees, which was a hard decision to make. But when you look at how important this business is for us, we needed to get the match between production rates and market demand right to protect our business for the long term.
Q: How do you view the cancellation of the Lear 85 programme now?
A: The decision to cancel the Learjet 85 aircraft programme was a difficult one to make but the market slowdown, which has been particularly sharp in that category, has proved that it was the
right decision to make. When we announced the Learjet 85 aircraft programme in 2007, before the global financial crash, the industry sold over 200 jets in that segment in 2007. In 2015, in that US$15 million to $20 million model [price-point] category, the industry only managed to deliver 41 aircraft across all OEMs. So what we are seeing is a complete collapse in that segment.
What happened when we cancelled the Learjet 85 aircraft project was that it freed up a number of skilled employees to move across to our other development programmes.
Last year, we also announced that we would be delaying the Global 7000/Global 8000 aircraft programme. We are now very focused on bringing the Global 7000 aircraft to market. We have a huge backlog of orders for the Global 7000 business jet, and we are determined to have the flagship aircraft in the industry in that segment.
The Global 8000 aircraft is actually a shorter version of the Global 7000 business jet, but with increased range. The Global 8000 continues to be part of our development programme. As a derivative of the Global 7000, many of the features and technology of the Global 7000 aircraft will carry over to the Global 8000 aircraft. As such, Bombardier’s plan always focused on the Global 7000 aircraft entering into service first. Right now we are focusing on first flight. We’ll communicate further updates on the Global 8000 once the Global 7000 is in flight testing.
Q: What kind of reaction are you getting to the Global 7000?
A: The Global 7000 aircraft is going to redefine the long-range market. It has four living zones, and it can land at London City airport. The Global 7000 aircraft will also feature a maximum operating speed of M 0.925. It has state-of-the-art aerodynamics, making it the most efficient jet in its class. Last year, when we reset the schedule, we acknowledged there had been some challenges. We said then that we expected to bring the Global 7000 business jet to market in the second half of 2018, and we are on track to meet this revised schedule. We now have Flight Test [vehicle] 1 all assembled, with Flight Test [vehicle] 2 just behind it, and work is starting on [FTVs] 3 and 4. Developing new aircraft is hard and challenging, but the programme is going well. This aircraft will be the future of business aviation for a long time to come.
Q: You have also made changes in your distribution channel, taking more in-house. What is the objective there?
A: In January we told the market that we were embarking on a transformation of our business model to improve profitability. Through the boom years leading up to 2007, we developed a global network of agents, representatives and distributors to extend our sales reach globally. However, in January [2016] we announced that for 21 countries around the world we would be taking sales back into our own hands and have our own sales teams selling direct to end users again in these places.
Once you do this, and move back to a direct-selling approach, you find that you are really changing the game from a profitability perspective. Getting active in these regions lets us do a great deal more.
Q: The C Series regional jet is not your area of responsibility, but it has been a difficult road for Bombardier. You must be delighted that the programme nowhas the backing of a major order fromAir Canada.
A: My perspective on the C Series, looking across from Bombardier Business Aircraft, is that it is yet another instance where Bombardier has successfully challenged the status quo and led a major industry advance. We challenged the status quo when we launched the Global series, taking on Gulfstream, when no one thought we could do so successfully. The Challenger 300 series aircraft programme was another first in the marketplace, and has become incredibly successful – last year we delivered twice as many Challenger 350 aircraft as our nearest competitor’s sales in that segment.
The C Series is better than anything Boeing or Airbus can offer right now. We are here to be successful in this market with the best product in the category. For those who doubted Bombardier’s liquidity position it is now obvious that we have taken all the right steps. We have key financial institutions participating with us and we have backing from the Quebec government. We have liquidity and now we have some market momentum building up, so the future looks very exciting