Bombardier | Profits, employee recalls and a worrying tax

The time for reminders has come at Bombardier, which will build more of its business jets since demand does not dry up. The picture could however darken if Ottawa goes ahead with its new tax on certain “luxury” products – such as private planes –, estimates the Quebec aircraft manufacturer.

Julien Arsenault
The Press

“There are four or five transactions that could have been concluded in the fourth quarter or at the beginning of the year, but which are on ice,” explained the president and CEO of the multinational, Éric Martel, on Thursday. of a conference call.

On the sidelines of the release of the fourth quarter results, where Bombardier exceeded expectations in addition to generating profits, the latter did not say whether or not he agreed with this new tax. Like associations, companies and unions, Mr. Martel preferred to focus on the possible negative repercussions for the company he leads.

In its 2021 budget, Ottawa had proposed a “tax on certain luxury goods” for cars and aircraft that sell for more than $100,000 and yachts that cost more than $250,000. The rate would vary between 10 and 20%.

According to government estimates, the measure should make it possible to collect 604 million over five years. It is not yet in force, but Ottawa expects to collect 35 million this year. Mr. Martel said he understood the objective of the Trudeau government – ​​to target the wealthy – which did not prevent him from inviting him to reflect.

“About 5% of our planes are sold in Canada, underlined the boss of Bombardier. I’m sure the government will do the right thing, but it has to weigh the pros and cons. There are not only advantages and I think the job could be one [des désavantages]. »

A 10% tax on a Challenger 3500, which has a list price of US$26.7 million, would be at least US$2.7 million. It would reach 7.5 million US for Bombardier’s spearhead, the Global 7500, sold for 75 million US.

In recent weeks, the Trudeau government has been challenged by boat builders, unions and various associations. Unifor believes Ottawa should find other ways to compel the haves to contribute.

In a brief released in the fall, the Canadian Business Aviation Association stated that its sector generates annual spinoffs of $900 million, which is well above the sum that the Trudeau government wishes to collect with its tax. . She invited Ottawa to change its tune.

“The implementation of this measure is a priority and a draft law, including details on the entry into force, will be tabled soon,” said Adrienne Vaupshas, ​​spokesperson for Federal Finance Minister Chrystia Freeland. in an email.

Recalls and hires

With an order book of US$12.2 billion, up 14% year-on-year, Bombardier will hand over just over 120 aircraft to customers, slightly more than in 2021. These are essentially family deliveries Challenger that will rise. However, in 2023, production is expected to grow by 15-20%. The aircraft manufacturer will need more workers.

“There are about 1,000 people to be recruited in our centers and factories [dans le monde], said Mr. Martel. In Quebec, approximately 300 people need to be recruited. People are being called back to increase the rate on certain products. »

There are less than 1,000 people on Bombardier’s recall list in Quebec.

Unsurprisingly, the company’s announcements were well received by the International Association of Machinists and Aerospace Workers (IAMAW).

“Is this good news? Certainly, said his representative Éric Rancourt. The faster the planes leave the factory, the more people they need. There’s still a recall list, so that’s good news. »

Since the start of the pandemic, the ultra-rich and the affluent have turned to private transportation to get around. Result: last year, a 7% increase in flights made by business jets was recorded compared to 2019, according to data from the analysis firm WingX.

Some of Bombardier’s competitors, such as Gulfstream and Textron, have already announced production ramp-ups. Analyst Benoit Poirier of Desjardins Securities estimates that Bombardier should deliver between 138 and 144 private jets in 2023.

Demand is still strong in North America, Martel said, adding that the environment is improving in markets like Europe and Russia.

“The increase in activity and the low level of stocks in the second-hand market [environ seulement 4 % de la flotte mondiale de jets d’affaires] stimulate new orders,” said analyst Cameron Doerksen of National Bank Financial.

On the Toronto Stock Exchange on Thursday, Bombardier shares fell 4 cents, or 2.2%, to close at $1.76.