Bombardier on the hunt for military contracts

Bombardier has a new sector in its sights to sell its private jets: defense. Eventually, this industry could allow the aircraft manufacturer to generate additional revenues of 1 billion US per year, which could represent up to 10% of its annual turnover.

Julien Arsenault
The Press

How does the company plan to achieve this? By trying to convince the armed forces around the world to abandon the large carriers currently used for surveillance and reconnaissance missions in favor of its business jets which can be converted.

“The telecommunications equipment that we install in planes has become smaller and smaller,” said Bombardier President and CEO Éric Martel on Tuesday on the sidelines of an event organized by Aéro Montréal.

He participated in the 2022 International Aerospace Innovation Forum to talk about, among other things, the Ecojet, a wing-integrated fuselage aircraft research project. It was during a discussion on stage that Mr. Martel spoke about his ambitions – never revealed before – with regard to the military sector.

Bombardier does not disclose its current sales of aircraft that are subsequently converted for military use. They represent only a “fraction” of the company’s income, according to his boss.

“Oh yes, definitely,” Mr. Martel said when asked if defense could one day represent 10% of company revenue. We deliver three, four, five, six planes a year. We can see that growth getting much bigger and reaching, I don’t know, 1 billion [de dollars] and maybe even more. »

Bombardier expects to earn $7.5 billion in revenue from more sales of luxury private jets and from the contribution of its aftermarket services division. It will likely take some time to see a significant contribution from the military sector.

A shift started

The multinational is already placing its pawns.

Last April, it created the Bombardier Defense division, based in Wichita, Kansas, where the assembly of the Learjet was once carried out. This is where the changes in vocation for the Global and Challenger will be carried out. Its Global 6000 – which can travel more than 11,000 kilometers in its original configuration – has been selected by Saab as part of the GlobalEye program, an airborne remote surveillance system. Last week, a plane from the same family was delivered to the United States Air Force under a contract announced last year.

“Of course, the current geopolitical tensions have accelerated things,” says Mr. Martel. People want to work with us. We don’t just provide the aircraft, but also the engineering. There’s a consulting segment that comes with that and we’re extremely well positioned to do that. »

The armed conflict between Russia and Ukraine has already prompted several countries, including Canada, to increase their military spending. The military expenditure of the 30 member countries of NATO should amount to 1051 billion US this year, estimates the organization. This trend is set to accelerate in the coming years.

Since the conversion of business jets takes place south of the border, it is difficult, for the moment, to quantify the impact of possible spinoffs for Quebec from a breakthrough by Bombardier in defence.

Richard Aboulafia, general manager of the firm AeroDynamic Advisory, believes that this growing interest in the military industry should have manifested itself several years ago at Bombardier. The American analyst wonders, however, whether revenues will still be stable.

“The billion-dollar plateau can be reached with the sale of a dozen wide-cabin jets,” he says. But it is an irregular market. Some years it could be several billions in revenue, while others it could be hundreds of millions. »

Need for immigrants

Taking care not to fuel the debate on immigration thresholds while the election campaign is in full swing in Quebec, Mr. Martel was invited to comment on the contribution of newcomers to the aerospace sector.

With more than 500 positions available in Quebec and few recruits in training schools, the contribution of immigrants is crucial, pleads the leader of the aircraft manufacturer.

“Perhaps we should attract more young people to come to aeronautics, but I think that we are also seeing signs that immigration is going to be important,” he believes.

On the Toronto Stock Exchange on Tuesday, Bombardier shares closed at $30.80, down 5 cents, or 0.16%.