Despite posting a modest gain in first-quarter deliveries year over year, Bombardier Inc. is cutting 1,750 jobs and blaming soft demand for its current offerings. The Montreal firm announced the layoffs May 14, calling it an attempt to better match Global 5000 and 6000 production with demand. CEO Alain Bellemare said recently that waning demand in China, Russia, and Latin America was the source of the trouble.
The latest job cuts—to be achieved by a combination of layoffs and retirements—follow the January announcement that 1,000 would be sent packing as the Learjet 85 program was put on hold. The company wrote off $1.4 billion spent to date on development of the new Learjet. The former CEO, who insisted the Learjet 85 interruption was only a “pause,” has since been replaced. Analysts speculated then that the long-delayed CSeries narrow-body jetliner is eating so much cash it is forcing the company to cannibalize business jets.
“I think that these are related but separate decisions,” Rolland Vincent of Rolland Vincent Associates said in an email exchange with AOPA following the May 14 layoffs. “They actually need the Global margins to help them finance their own development programs, so it is the last place they wanted to have to make production cuts.”
Vincent said the Global 5000 and 6000 models are the company’s most profitable business jets, and those profits will be sorely needed. The Global 7000/8000 jets are still years away, and will require “heavy investment” to bring them to market.
“The whipsaw to their own production and completion processes, to their people, and to the Global 5000/6000 supply chain, is the real story here,” Vincent wrote. “It looks now like the 50-55 per year rate that they had from 2007-2012 was probably about right—this is where we think they are heading in 2016/2017. How they make up the lost margins that they were expecting to have from these shipments is not at all clear.”
The latest data from the General Aviation Manufacturers Association shows Bombardier delivered 45 Learjet, Challenger, and Global aircraft altogether, with $1.66 billion in estimated revenue, up from 43 aircraft and $1.57 billion aircraft in the same period of 2014. Global models accounted for 17 of those deliveries, unchanged in 2015, though Vincent said the backlog has declined sharply, down to just 17 months of production from the 44 months of orders on the books at the end of 2012. Global series sales were pumped up by large orders from NetJets and Vista Jet.
“It is also possible that both NetJets and Vista Jet may have re-scheduled their deliveries, pushing them into the out years given some of the slowdown in emerging/developing economies,” Vincent wrote.