Notes for an allocution. Alain Bellemare. President and CEO. Bombardier Inc. The Wings Club. New York City. May 19, 2016

Transcription

1 Notes for an allocution Alain Bellemare President and CEO Bombardier Inc. The Wings Club New York City May 19, 2016 Check against delivery All amounts in this allocution are in U.S. dollars unless otherwise stated.

2 Thank you Mary Ellen. It s really great to be here today and to see so many good friends, customers and partners. First, I d like to start by recognizing and thanking the officers and members of The Wings Club for more than seven decades of supporting the aerospace industry. I also applaud the work done by The Wings Club to encourage young people to pursue careers in aviation, making sure we have a strong pipeline of new talent and future leaders. I know there s a table of students from Vaughn College here today. A special welcome to you, and congratulations for having the wisdom to pursue careers in aerospace. I also have a son studying in engineering. So like many parents in this room, we can relate to you. Again, my thanks to The Wings Club for supporting and providing opportunities for the next generation of aviation professionals. You can continue to count on our support. My plan this afternoon is to: give a brief overview of Bombardier; talk about our turnaround plan; share my thoughts on the long-term outlook for the commercial aerospace market; update you on the C Series; and we will take a few questions. A quick overview of Bombardier: With revenues of $18 billion, we are a leading manufacturer of planes and trains. We operate in 28 countries around the world. We employ over 65,000 people, including more than 11,000 engineers. The company operates under four business segments: Business Aircraft, Commercial Aircraft, Aerostructures and Engineering Services and Transportation. I ll talk briefly about these segments in a few minutes. But first, some perspective on the company as a whole Many of you know, I joined Bombardier a little over a year ago. At the time, the company was facing some major challenges. 2

3 The company took on too many development projects and spread itself too thin to fulfill its ambitious goals. It was clear some tough actions would be required. At the same time, the company had tremendous potential. Bombardier was investing and developing game-changing aircraft, the C Series and Global But, to unleash the full potential of these aircraft, Bombardier had to address its near-term challenges. And, that is what we re doing. Shortly after joining Bombardier, I launched a five year turn-around plan with key specific goals: return the company to profitable growth; leverage investment in new products to deliver superior value to customers and shareholders; and ensure our long-term competitive position. Our turn-around plan has three phases: 1. de-risking the business; 2. re-building earnings power and free cash flow performance; and 3. de-leveraging our balance sheet. Last year, our focus was on de-risking and stabilizing the business, and we made great progress. We secured $5.6 billion in additional liquidity, the right level to execute our turnaround plan and move forward with the C Series and Global 7000 programs. We also de-risked our major programs; for example we reset the new Global 7000 development schedule and adjusted production rates for business aircraft to align with market demand. We took proactive actions and focused the organization on critical tasks. Most importantly, over the last year, we assembled a world-class leadership team, a team with deep industry knowledge, turnaround experience and a track record of delivering value to customers. Today we have a very strong leadership team, including Fred Cromer and Colin Bole, who are here today. We work well together, complement each other nicely and are all focused on executing programs, driving operational efficiency, reducing cost, and delighting customers. And while there is still a lot of work to do, I m very pleased with the progress we ve made so far. Looking ahead, our five-year goal is to grow revenues to more than $25 billion, while expanding margins is a year of transition and so far we are tracking on plan. Let me now give you a quick look at our business segments. Starting with Bombardier Transportation, our rail business, since we re just a few hundred yards from Grand Central Station. 3

4 While most of you know Bombardier as a leading commercial and business aircraft manufacturer, we re also a global leader in rail technology, with over 100,000 rail cars and locomotives in service worldwide. With revenues of $9 billion, we are the market leader, with the broadest portfolio of products and services in the industry. Our portfolio includes light rail systems, metros, commuters, locomotives and high-speed trains. Our products can be found across the New York metro region, including 1,800 subway cars right here in Manhattan and another thousand units on the Long Island and Metro- North rail lines. We also provide Amtrak s Acela trains and the AirTrain systems at JFK and Newark Airports. Similar to our aero businesses, the long-term growth potential for the rail business is very strong, driven by many of the same mega-trends: urbanization, a growing global middle class, and the need for more efficient ways to connect people. The New York City area is also an important region for Bombardier Business Aircraft. Over the past years, Teterboro has led the country for departures and arrivals for charter, fractional and general aviation flights. In the near-term, the business jet market continues to look challenging, especially in emerging markets, which is why we took our production rates down last year. Longer-term, we see strong growth potential, and our ten-year delivery forecast predicts roughly 9,000 business aircraft valued at almost $300 billion dollars. Of course, the biggest drivers for growth in this business are strong GDP and corporate earnings growth. At Bombardier, we have the best Business Aircraft franchise in the world. We see strong growth ahead with our new products and we target revenues of $10 billion by The Global and Challenger are best in class products and the new Global 7000, which will make its first flight later this year, will be the best ultra-long range business aircraft in the world. We call the Global 7000 the complete solution as it combines Mach cruising speeds with the largest cabin, unmatched passenger experience, latest engine technology and the best low speed and steep approach capabilities. Like the C Series, we expect the Global 7000 to be a game-changer. Now, turning to commercial aerospace. Overall, I m very optimistic about the outlook for the industry. 4

5 While the global economy looks challenging in the short-term especially in emerging markets long-term, the growth opportunities look very strong, and I expect revenue passenger mile (RPM) rates will continue to grow at a faster rate than worldwide GDP. Bombardier s commercial aircraft portfolio includes the Q400, the CRJ Series family and of course, the all new C Series. A couple words on each of these aircraft: The Q400 turboprop is a very good aircraft, the best performing aircraft in its class. There s a real opportunity with the Q400. An opportunity to improve our cost structure and to gain market share. We are working on it. Turning to regional jets prior to the C Series, the best example of Bombardier being at the forefront of aerospace innovation was the creation of the regional jet market with the CRJ back in the 1990 s. This program has been a huge success. To date, we ve delivered more than 1,800 regional jets. When you think about the regional jet market it s important to remember how the market has evolved and grown since the mid 1990 s. Starting as a 50-seat class segment, growing to 70 seats, and then to a 90-seat platform. This up-gauging reflected the strong RPM growth we ve seen over the past 20 years, as well as, airlines migrating more routes to regional jets. With the CRJ program, Bombardier saw these trends. Bombardier recognized that the regional jet market would continue to evolve and up-gauge, creating a strong market for a seat aircraft. A space that wasn t being addressed by anyone until the C Series... We project that the market size for aircraft in the 100- to 150-seat class is 7,000 aircraft over the next 20 years. And again, the C Series has been specifically developed for this market. So where are we with this game changing aircraft? 1. First of all, the program is on schedule. The C Series will enter commercial service on July 15th with Swiss Air from Zurich to Paris and the flight is completely sold out. And, we are laser focused on ensuring a flawless EIS. 2. Second, we re very confident the C Series will exceed all of its performance and reliability targets. We are committed to deliver a great experience to our customers. 5

6 We have the right plan, the right team and the right resources in place. 3. Third, with certification behind us and EIS approaching, we re seeing very good momentum and strong campaign activity. Fred, Colin and the team are very busy right now! 4. And finally, winning the Delta order really changed the game! It validated the value that the C Series provides to customers: the lowest operating costs, greatest cabin comfort and the most environmentally-friendly aircraft in its class. Bottom line: the C Series is a superb aircraft. The best performing in the 100- to 150- seat class. We now have a marquee customer list SWISS-Lufthansa, Air Canada, Korean Air and Delta, we have strong momentum. I d like to close my remarks with a few words about something that is at the core of Bombardier and our industry. Something that is fundamental to our ability to create longterm value. That is our commitment to innovation. Some of you may not know that Bombardier was founded in a small repair shop in Québec by Joseph Armand Bombardier. His invention, the snowmobile, was born out of necessity. It created faster transportation so that life-saving medical care could be provided despite the snow-blocked roads of rural Québec. Since then, a commitment to innovation, a drive for progress, and a willingness to make bold moves have allowed the company to become a global leader in aerospace and rail transportation. I joined Bombardier 15 months ago because I believed in its future. And I believed in its commitment to innovation. The type of innovation we do as an industry involves large, complex engineering projects; it happens over long periods of time. It requires courage, discipline and passion. Because the required investments in our industry are large, innovation is not without risk, and does not happen without bold vision and leadership. I think everyone here would agree with me that innovation has been a key driver of growth in our industry since its inception and that future opportunities for innovation in our industry are truly limitless. This is obvious when you look at the advancements that have happened since The Wings Club was founded back in the early 1940 s: advancements like retractable landing gear, air-cooled radial engines, gas turbine engines, cabin pressurization, aluminum alloys, composites, fly-by-wire and winglets, just to name a few. 6

7 And while our industry does a great job at recognizing achievement in aerospace with trophies, awards and banquets we re not very good at vocally supporting companies while they are taking the risks necessary to drive innovation. It is the great paradox of our industry. We all recognize that innovation does not come without risk. We all know that our industry would never advance beyond its current state if we were not willing to take risks. Of course, when risks are taken, setbacks happen. To us. To everyone in the industry. Yet, these setbacks are rarely characterized as evidence of a company pushing the envelope to provide the maximum possible improvement, the maximum value. Look at the GTF engine. When Pratt launched the GTF there were many skeptics. People worried about the gearbox. Would it be reliable, too heavy? But, Pratt saw the potential. They believed in the technology. And, they had the courage to develop it. Today we are all glad they did. The engine plays a big role in the C Series best-in-class noise, fuel burn and emissions performance. Skepticism about the feasibility of the CRJ was widespread when we launched the program. In the end, the CRJ became a huge success and has allowed airlines to better serve their customers. As an industry, we should be more vocal in applauding companies that are willing to take risks to push the industry forward. History has shown us that, in most cases, when aircraft or engine manufacturers push the technology envelope, everyone, passengers, airlines, the environment, all see tremendous benefits. And, that is the case with the C Series. I m confident that when the history on the C Series is written, our past issues will be largely forgotten. People will recognize it as a bold investment and as a game-changing aircraft. 7

8 People will remember that: We correctly predicted the strong market demand for a seat aircraft. We correctly decided that the market would be best served by a new, clean sheet aircraft. That our approach resulted in a superior product a real step change. And finally, as the benefits of the C Series became clear, the industry needed to respond with its own upgraded products which have driven the entire industry forward resulting in more options for airlines, a better experience for passengers and a much lower impact on the environment. As you can see, I m very confident in the outlook for the C Series. In conclusion, Bombardier is a great company. A global leader in trains and planes with superb products and technology. We have been through a rough patch but we have turned the corner. We have a welldefined 5-year turn-around plan and a great team to execute it. We will soon unleash the full value of our past investments as our new products, the C Series and the Global 7000, will enter into service. I am very proud of what we have done over the past 12 months and I know that will still have some work to do. I am confident in our ability to create value for customers and shareholders and am very optimistic about our future. Thank you. Bombardier, C Series, Challenger, CRJ, CRJ Series, Global, Global 7000, Q400 and The Evolution of Mobility are trademarks of Bombardier Inc. or its subsidiaries. 8