Product diversity, recovering business aircraft market mitigate impact on level of employment.
Bombardier Aerospace announced today that it is aligning the production rates of its Bombardier CRJ Series aircraft with current and forecast market demand. This will result in a total workforce reduction of approximately 2,000 employees at its Montréal-area facilities and at its Belfast site over a nine-month period starting November 2004.
Severance costs associated with these layoffs will total approximately $26 million US and will be expensed through the normal course of operations over the current fiscal year 2004/05 (year ending January 31, 2005). As a consequence, Bombardier Aerospace cannot maintain its previous guidance of break-even at the earnings before income taxes (EBT) level for the current fiscal year.
Total Bombardier Aerospace aircraft deliveries for the current fiscal year 2004/05 will not be affected by the adjustments to the production rates and will remain as previously announced, approximately the same number as was delivered in the last fiscal year 2003/04 (year ending January 31, 2004).
The production rates will be adjusted as follows:
* For the 50-passenger Bombardier CRJ200, a reduction to a rate of one aircraft produced every four days from a rate of one aircraft produced every three days, or a total of 68 CRJ200 deliveries in the next fiscal year 2005/06.
* The 70-passenger Bombardier CRJ700 and 86-passenger CRJ900 production level will remain at the rate of one aircraft produced every three days, or 77 CRJ700/CRJ900 aircraft deliveries in the next fiscal year 2005/06. This rate was established at the beginning of this current fiscal year 2004/05 and will not be increased as planned. However, in Belfast, due to the necessity of a long production lead-time within the aircraft manufacturing cycle, the production rate for the CRJ700/900 programs had already increased and will now revert to the original rate.
"Given the context of the airline industry and the financial difficulties facing a number of our customers, we must continue to be prudent and proactively manage our production rates and delivery schedule to reduce our exposure to the cancellation or deferral of orders," said Pierre Beaudoin, President and Chief Operating Officer, Bombardier Aerospace. "By making these difficult but necessary decisions, we will remain competitive and ensure our success in the long term," he added.
Impact on the employment level by site
|Site||Workforce Reduction||Employees to leave|
|560||In two groups:
In January 2005
In July 2005
|460||In two groups:
In May 2005
In July 2005
|410||In two groups:
In November 2004
In January 2005
|260||In two groups:
In November 2004
In May 2005
|310||From November 2004
* Refers to office employees at Bombardier Aerospace sites in Canada
In addition, Delta, a major CRJ customer, is facing unprecedented financial challenges. Should Delta be unable to take delivery of CRJ aircraft, a further cut in the Bombardier CRJ Series production rate would be implemented with an additional workforce reduction of approximately 1,200 employees.
Regional jet operations, however, remain profitable for the airlines. Regional jet city-pairs serviced by Bombardier CRJ aircraft have grown 48 per cent in the last 18 months while Bombardier CRJ departures have increased by 54 per cent. In addition, industry forecasts for aircraft in the 70- to 120-seat range predict production of over 3,700 regional aircraft from 2004 to 2013 representing a value of over $84 billion US.
Firm orders for the CRJ family of regional jets - the most successful regional aircraft program in history - as of August 31, 2004 stood at 1,380 aircraft. Conditional orders and options could increase the program by a further 1,140 Bombardier CRJ Series aircraft. As of August 31, 2004, 1,142 CRJ Series aircraft had been delivered.
While the airline industry is facing challenges, the business aircraft industry is recovering steadily with several consecutive quarters of measurable growth. Orders and deliveries of Bombardier business aircraft have increased dramatically in the first half of this current fiscal year 2004/05 with 60 orders compared with 24 for the same period last year, and 26 deliveries in the second quarter of this current fiscal year 2004/05 compared with 14 for the same period last year. This strong increase in order intake will have a positive impact on the production levels of a number of Bombardier business aircraft.
Furthermore, there is increased interest in Bombardier Q Series turboprops, particularly in the new generation, high-speed Bombardier Q400 aircraft. The Q400's profitability and strong passenger appeal has been demonstrated with operators placing follow-on orders. This current fiscal year 2004/05, both ANA (All Nippon Airways Co. Ltd.) and Japan Air Commuter placed additional orders for the aircraft.
A strong order intake in the last 18 months has resulted in an increase in the Q400 production rate. There is also keen interest in the 50-passenger Bombardier Q300 turboprop as demonstrated by Qantas Airways' order of seven Q300 in the last 10 months and a number of solid prospects for the future. As of August 31, 2004, the Bombardier Q400 firm order book stood at 114 aircraft, of which 85 had been delivered to 11 operators around the world.
Bombardier regional aircraft deliveries
(1) From February 1, 2004 to January 31, 2005.
(2) From February 1, 2005 to January 31, 2006.
A world-leading manufacturer of innovative transportation solutions, from regional aircraft and business jets to rail transportation equipment, Bombardier Inc. is a global corporation headquartered in Canada. Its revenues for the fiscal year ended Jan. 31, 2004 were $15.5 billion US and its shares are traded on the Toronto, Brussels and Frankfurt stock exchanges (BBD, BOM and BBDd.F). News and information are available at www.bombardier.com.
Bombardier, CRJ, CRJ Series, CRJ200, CRJ700, CRJ900, Q Series, Q400, Challenger 300, Challenger 604, Global Express, Global Express XRS, Global 5000 are trademarks of Bombardier Inc and its subsidiaries.
John Paul Macdonald