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Bombardier has reported strong financial results for the first quarter of 2022. Last June 2, Skies discussed Bombardier’s outlook as a pure play corporate jet manufacturer. We believed that demand for new aircraft, enhanced production efficiencies, and a focused debt reduction program would result in improved earnings, stronger cash flow, and a healthier balance sheet. The quarterly results achieved during 2021 confirmed our belief, and now the Q1/22 numbers show that the positive trends driving the company’s financial turnaround remain in place.
During 2022’s first quarter, Bombardier’s total revenues declined seven percent year-over-year to US$1.25 billion from US$1.34 billion. Revenues related to aircraft sales decreased by about 17 percent as a result of the mix of aircraft delivered and due to the transition in the production of Challenger 350 aircraft to the new Challenger 3500 model. During Q1/22, Bombardier delivered 21 aircraft, a 19 percent decline from the 26 delivered in the year-earlier period. Of the 21, a dozen were Globals and nine of those were flagship Global 7500s.
Services revenues during the quarter increased by 34 percent from US$269 to US$361 million year-over-year. They represented 29 percent of Q1/22’s total revenues versus 20 percent the year before. This is important, as it represents a key part of the company’s growth strategy.
The company’s gross profit increased by 30 percent from US$184 million to US$239 million and its operating income (defined as Earnings Before Interest and Taxes) increased by almost 350 percent from US$19 million to US$85 million.
This enhanced earnings performance enabled free cash flow of US$173 million, a US$578 million improvement from Q1/21. Cash and cash equivalents were at US$1.4 billion at March 31, 2022.
The outlook for Bombardier remains encouraging. Thanks to a very strong book-to-bill ratio of 2.5x during Q1/22, the order backlog at March 31, 2022, stood at US$13.5 billion. That was up from US$12.2 billion at Dec. 31, 2021; US$11.2 billion at Sept. 30, 2021; US$10.7 billion at June 30, 2021; and US$10.4 billion at March 31, 2021.
Despite the conflict in Eastern Europe, business aviation industry trends remain positive. Corporate jet activity has rebounded meaningfully. U.S. bizjet flights during February 2022 were up 26 percent year-over-year and were seven percent above the flights during pre-pandemic February 2019. European bizjet activity has also experienced an impressive comeback, as the number of flights during March 2022 was up approximately 50 percent from the year-earlier level and almost equal to the level of activity in March 2019.
As a result of the pandemic-driven demand for corporate jets, the number of aircraft available in the secondary market has declined significantly. According to the Barclays Business Jet Survey of March 22, 2022, the number of pre-owned bizjets for sale (as a percentage of the active fleet worldwide) had dropped to three percent — the lowest level in two decades. The typical availability ratio is around 10 percent.
Given the level of demand for new corporate jets, it could be expected that Bombardier will be boosting its production rates. Bombardier’s CEO, Eric Martel, has said that the company will act in a prudent manner. It is monitoring its backlog levels, competitive pricing, and supply chain challenges. With respect to the latter issue, Bombardier has personnel dedicated to overseeing the availability of materials and their costs. At this time, the company does not anticipate any problems that would interfere with its near-term production schedule.
While Bombardier’s financial performance during the next six months will likely be driven more by continued cost savings than by revenue growth, the fourth quarter is expected to be impressive. With a record order backlog, continuing strong demand for its products, enhanced cash flow, and the continuing deleveraging of its balance sheet, Bombardier’s financial turnaround continues to be an exciting story.
