Bombardier cancels investor day amid fresh doubt about CSeries
Shareholders who have stuck it out through the 44 per cent decline in Bombardier Inc’s stock price this year may not be rewarded with the chance to question management at an investor day. The company has cancelled the meeting planned for next week and may not hold one at all, news that comes amid the loss of another potential CSeries customer and an analyst warning of a possible “significant writedown” on the program.
Shirley Chénier, Bombardier’s senior director of investor relations, said on Wednesday the company “decided to postpone” the investor day that was scheduled for March 11 because its new CEO needs time to get up to speed. Alain Bellemare moved into the Csuite on Feb. 13, replacing Pierre Beaudoin — who is now executive chairman.
A new date has not been set and Chénier said Bombardier “could just skip this year completely.”
Bombardier is the second-worst performing stock on the S&P/TSX Composite Index this year after the company slashed its financial outlook, halted development of the Learjet 85, suspended its dividend, replaced its CEO and announced plans to raise billions in debt and equity.
In a rare bright spot last week, the larger version of the CSeries jetliner successfully completed its maiden flight. However, the pace of orders remains slow and there are concerns that the company won’t be able to meet its target of securing 300 firm orders by the time the first planes are delivered to customers.
That concern was exacerbated Wednesday when a major Middle Eastern airline said it is no longer interested in ordering any CSeries planes.
Qatar Airways has run hot and cold on the CSeries since initiating talks with Bombardier in 2008. Those talks broke off in 2009 over a disagreement on terms, but CEO Akbar Al Baker reiterated in 2012 that the aircraft was of “great interest” to him and he hoped to get a deal done soon.
On Wednesday, Al Baker said the delays to the program extinguished any remaining interest he had in the plane, according to a Reuters report.
“We have completely forgotten about it because you cannot wait indefinitely,” he was quoted as saying.
Chris Murray, an analyst at AltaCorp Capital, said an order from Qatar Airways was never assured.
“I always believed there was a very low probability of that sale ever happening,” Murray said, adding that he thinks Al Baker likes to see his name in the news.
Bombardier spokeswoman Marianella de la Barrera said the Qatar Airways decision has “no impact” on the company’s sales strategy.
“We continue to have a healthy pipeline of potential orders from operators all over the world,” she said.
“Given our recent success with the flight test program, we are seeing that interest is certainly increasing.”
However, analysts at Scotiabank said there is a “very real possibility” that Bombardier will have to take a “significant writedown” on the CSeries program.
“Not only is the development cost too high, Bombardier has also set up the production plan based on what we think are optimistic forecasts,” analyst Turan Quettawala wrote in a note to clients.
“As such, taking a writedown on the program and rebating expectations to a lower level could result in improved future profitability as well as help Bombardier’s ability to compete with Airbus and Boeing.”
Quettawala said Bombardier should also consider “aggressive discounting” to boost orders or even selling the CSeries program altogether.
De la Barrera said the company doesn’t comment on speculation.
When contacted Wednesday, Bombardier customers Odyssey Airlines, Republic Airways and Lease Corporation International — together accounting for 70 CSeries orders — expressed their ongoing support for the CSeries.
“Odyssey maintains full confidence in Bombardier’s ability to deliver our aircraft on order,” CEO Adam Scott said in an email.