AThe Bombardier plant in Belfast, Northern Ireland. Picture: REUTERS/CLODAGH KILCOYNE
AThe Bombardier plant in Belfast, Northern Ireland. Picture: REUTERS/CLODAGH KILCOYNE

Montreal  — Bombardier said on Thursday that it would meet a key 2019 target and announced a deal worth more than $1bn with Spirit AeroSystems, sending shares up nearly 7% despite reporting it burnt more cash than expected.

Montreal-based Bombardier is in the middle of a restructuring, shedding underperforming commercial aircraft programmes to focus on more profitable business jet and rail units.

The company spent more cash than expected during the third quarter while bringing its flagship corporate jet to market and amid project delivery delays in its key rail business, the company’s largest division by revenue. Yet Bombardier said its free cash flow usage for the year would remain at about $500m  and reiterated its 2020 outlook for positive earnings growth and cash generation.

Rail projects

Bombardier CFO John Di Bert said he expects stronger revenues and better margins for Bombardier Transportation in 2020 as delayed rail projects are completed. “We believe we have seen the low point on Bombardier Transportation margins in 2019,” Di Bert told analysts.

The company said it will sell two facilities, including one in Belfast, Northern Ireland, and a smaller US repair plant, to Spirit for $500m in cash and $700m in assumed liabilities. The Belfast plant, which produces wings for Airbus’s A220 jet, is considered politically sensitive as it is the largest hi-tech manufacturer in Northern Ireland with a workforce of 3,500.

The plant “is absolutely integral to Northern Ireland”,  Belfast East MP Gavin Robinson said in a statement welcoming the move.

On Thursday, British business minister Nadhim Zahawi called the deal great news for workers and a welcome investment in the UK.

Airbus, which had been monitoring the sale, said in a statement the company is confident “Spirit’s acquisition of Bombardier’s aerostructures assets will support the strong and sustainable future for the A220 programme”.

Earlier in the day, Bombardier said free cash flow usage for the third quarter rose 84% from a year earlier to $682m. Analysts, on average, were expecting a free cash outflow of $332.98m, according to IBES data from Refinitiv.

CEO Alain Bellemare told analysts that demand for new, large-cabin business jets such as its flagship Global 7500 is driving growth, while demand for medium-sized business jets remains stable.

Bombardier will need to deliver 10 to 15 Global 7500 jets, which list for $73m each, during the last three months of 2019 to meet its target of 15 to 20 deliveries in 2019. The company has delivered five Global 7500 jets to date.