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War in Ukraine | The Russian market is becoming tricky for Bombardier

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Bombardier could see the doors of the Russian market close with the escalation of sanctions imposed on Russia in the wake of its invasion of Ukraine, an element which would be added to the list of pitfalls likely to slow its recovery.

On average, the company makes between 5% and 6% of its annual sales — which were $6.1 billion last year — from Russian customers. Bombardier is the business jet manufacturer with the most exposure to Russia and members of the Commonwealth of Independent States with a market share of around 30% according to Dubai-based broker ArcosJet.

The Ukrainian crisis was invited to the investor day organized by Bombardier on Thursday, which reiterated the targets of its plan which should culminate in 2025. For the moment, the company exclusively refocused on business jets does not have any customer subject to Canadian sanctions. These concern in particular the Russian elites, who have the means to afford private planes.

“You know, sanctions change from day to day,” said Bombardier President and CEO Eric Martel.

It is clear that if we have (customers) affected by sanctions, we will not deliver (devices) to these people.

Bombardier President and CEO Eric Martel.

For Bombardier, this geopolitical uncertainty comes on top of supply chain disruptions, the imposition of a potential tax in Canada on luxury goods like private jets — which Bombardier says would already be a drag on sales — and the arrival next on the market new jets built by competitors like Gulfstream and Dassault.

Although the multinational has no control over these elements, Mr. Martel believes that his team’s plan is unforeseen. Despite a strong market in business aviation, Bombardier did not raise its targets for 2025.

“Our order book is well stocked and our position allows us (to cash in) upheavals if there are any,” said Mr. Martel, during a videoconference.


Bombardier does not operate any service centers in Russia or Ukraine. Its former rail division, now owned by Alstom, exported rolling stock to the Russian market.

“It’s not an insignificant figure, underlines Brian Foley, of the firm Brian Foley Associates, about the revenues generated by Bombardier in Russia. Time will tell if the current situation will last. It’s something to follow on the radar. »

With a ratio of new orders to shipments of 1.5 in 2021, the analyst believes that in the short term, a drop in business volume in Russia will be offset by strong demand in North America. and in Europe.

According to WingX, Russia and Ukraine account for almost 10% of all flights by European business jet operators. The current crisis could thus have “serious economic consequences”, which will dampen demand, the data firm estimates in a recent note.

Increased flexibility

With an improving financial situation, Bombardier expects to be able to devote US600 million per year by 2025 to finance new “strategic” projects or continue to reduce its debt.

This is a significant increase while Mr. Martel repeated that the envelope was approximately 250 million US. This does not mean that the aircraft manufacturer is preparing to develop a new aircraft, he warned.

“We say we will have the flexibility to be able to move forward with a new program,” explained Mr. Martel. We shouldn’t see that we won’t do anything before 2025. I’m not saying either that we’re going to do something before 2025.”

Competition is expected to be fiercer over the next few years with the arrival of new jets built by competitors, but Bombardier’s senior management has time ahead of them.

Cameron Doerksen of National Bank Financial agrees, with one caveat.

“We believe that the company will potentially have to invest […] to replace its Challenger 650,” the analyst said in a report.

Several analysts believe that this platform from the late 1970s will need a facelift or that it will have to be replaced by a new aircraft. Mr. Martel sees things differently. In his opinion, the Challenger 650 is an aircraft “that people like to doubt”, with the exception of “customers” of Bombardier.

Even if the aircraft manufacturer did not reserve any unpleasant surprises for investors, its stock fell four cents, or 2.6%, on the Toronto Stock Exchange, to trade at $1.51 on Thursday afternoon. The trend was down on the stock exchanges due to Russia’s invasion of Ukraine.

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    Bombardier currently has some 5,000 aircraft in service worldwide

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