Bombardier Inc. Class A · TSX:BBD.A
Bombardier Inc. Class A — Farnborough International Airshow 2006
55 slides from Bombardier Inc. Class A's conference presentation, Jul 17, 2006
Slide 1: Sustaining our Leadership
Sustaining our Leadership Bombardier Aerospace Farnborough Presentation Aerospace Senior Management Team Bombardier Aerospace July 17, 2006
Slide 2: Forward-looking statements
Forward-looking statements This presentation includes forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “plan”, “foresee”, “believe” or “continue” or the ne
Slide 3: Agenda
Agenda Aerospace Overview (P. Beaudoin) Business Aircraft Overview (J. Hoblyn) Regional Aircraft Overview (S. Ridolfi) Aircraft Services Overview (G. Scott) Conclusion (P. Beaudoin) 3
Slide 4: Agenda
Agenda Aerospace Overview (P. Beaudoin) Business Aircraft Overview (J. Hoblyn) Regional Aircraft Overview (S. Ridolfi) Aircraft Services Overview (G. Scott) Conclusion (P. Beaudoin) 4
Slide 5: Bombardier Aerospace: A Balanced Portfolio
Bombardier Aerospace: A Balanced Portfolio Aerospace Revenue Breakdown by Business – F06 Other 10.6% Aircraft Services Business A/C 14.9% 38.7% Regional A/C 35.8% Total revenues = $8.1B 5 * As of January 31, 2006
Slide 6: Product diversity ensures sustained revenues over the long term
Bombardier Aerospace’s strength in product diversity ensures sustained revenues over the long term FISCAL YEAR AIRCRAFT DELIVERIES # of Aircraft, FY2003-2006 400 350 329 337 324 298 300 Amphibious 250 Business Aircraft 200 Regional Aircraft 150 100 50 0 FY2003 FY2004 FY2005 FY2006 Note: Fiscal Year
Slide 7: Aerospace segmented information
Aerospace segmented information (In millions of U.S. dollars) Q1 Q1 F2006 F2006-07 F2005-06 Revenues 8,087 1,940 1,936 EBITDA from continuing 672 8.3% 158 8.1% 156 8.1% operations before special items EBIT from continuing 266 3.3% 55 2.8% 52 2.7% operations before special items Free cash flow 900 (2
Slide 8: Aerospace key issues
Aerospace key issues Aerospace: Improving profit margin Business Aircraft: Meeting contractual commitments Regional Aircraft: Addressing temporary market difficulties Aircraft Services: Developing the market CSeries: Business planning continues with core team 8
Slide 9: Confident in our ability to continue improving performance
We are confident in our ability to continue improving our performance Potential Opportunity Impact Comments/Examples Pricing 1 – 2% • Business A/C still strengthening • Regional at bottom of cycle Amortization 2 – 3% • As platforms/programs mature, key thresholds will be crossed Improvement 3 – 5% •
Slide 10: Amortization effect will continue to trend favourably
Amortization effect will continue to trend favourably as Programs mature 2 1.86 1.82 EOAPC & Program Tooling (US$B) 1.59 – $230M EOAPC Program Tooling 1 0.84 0.64 0.55 – $90M 0 F2004 F2005 F2006 F2004 F2005 F2006 Business Aircraft Regional Aircraft 10
Slide 11: Improvement initiatives: Lean Manufacturing
There are a number of improvement initiatives currently underway Lean Manufacturing Initiative • Lear 40/45 fuselage assembly line in Belfast is currently used as a pilot line for a lean transformation approach to be deployed throughout the site • CRJ700/900 final assembly line in Mirabel is in the
Slide 12: Improvement initiatives: New Plant in Mexico
There are a number of improvement initiatives currently underway New Plant in Mexico • Structural and electrical activities ongoing since May 2006 • Activities ongoing in the temporary building in Querétaro • Permanent facilities planned for FY2007 • Wire Harnesses: 16 harnesses (8 ship-sets - CRJ70
Slide 13: Strategic Sourcing: Supplier Deep Dives
There are a number of improvement initiatives currently underway Strategic Sourcing Initiatives 1. Suppliers-Bombardier Deep Dives • Identifying and implementing, in collaboration with our key suppliers, cost optimization & waste elimination initiatives across programs to achieve total life cycle co
Slide 14: Strategic Sourcing: Commodity Sourcing
There are a number of improvement initiatives currently underway Strategic Sourcing Initiatives 2. Commodity Sourcing • Organized in commodity teams focused on developing optimal strategies • Thorough total acquisition cost structure analysis • Leveraging full Bombardier Aerospace spend and focus on
Slide 15: Strategic Sourcing: Low-Cost Country, Raw Material
There are a number of improvement initiatives currently underway Strategic Sourcing Initiatives 3. Low-Cost Country Sourcing • Based on assessment of cost attractiveness and feasibility, low cost country sourcing efforts to initially focus on major structures & established technology • Targeting sig
Slide 16: Absorbed significant cost increase from high Canadian dollar
The organization has already absorbed a significant cost-increase from the high Canadian dollar Sensitivity Analysis, C$/US$ F/X Rates 2 ~ $280 M 1.75 Aerospace C$ 1.63 1.64 Cost Base(1) 1.54 (US$B) 1.5 1.36 1 0.5 EBIT $255 $419 $203 $266 % 3.5% 5.1% 2.5% 3.3% 0 F2003 F2004 F2005 F2006 F2007 C$/US$
Slide 17: Agenda
Agenda Aerospace Overview (P. Beaudoin) Business Aircraft Overview (J. Hoblyn) Regional Aircraft Overview (S. Ridolfi) Aircraft Services Overview (G. Scott) Conclusion (P. Beaudoin) 17
Slide 18: Overview
Overview Business aircraft market drivers remain strong • Steady economic growth worldwide • Pre-owned aircraft in strong recovery • Fractional market growth returning Bombardier well positioned • Broadest and strongest product offering • Only full service aviation company • Strong position in F
Slide 19: Total business aircraft market expected at US$73.8B over 5 years
The total business aircraft market is expected to total US$73.8B over the next 5 years BASELINE SCENARIO – TOTAL MARKET REVENUE FORECAST Demand model, Constant 2006 US$ Million (calendar years 2001-2010) 18,000 2001-2005 Actuals 2006-2010 Forecast 5-Year 5-Year Revenue Average = $10.6B/yr Revenue Av
Slide 20: Strong U.S. economy with steady real GDP growth
Strong U.S. economy with steady real GDP growth and increasing corporate profits U.S. REAL GDP GROWTH(1) U.S. CORPORATE PROFITS(2) %, Quarterly $ Bn, Quarterly 8% 1,800 7% Forecast 1,600 1,400 6% 1,200 5% 1,000 Q2 2006 4% N/A 800 3% 600 2% 400 1% 200 0% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 21: International markets a key driver of growth
International markets a key driver of growth EUROPE-25 REAL GDP GROWTH EUROPE-25 STOCK MARKET CAPITALIZATION %, Quarterly € Bn, Monthly 3.0% 10 9 2.5% Forecast 8 2.0% 7 6 1.5% 5 4 1.0% 3 0.5% 2 1 0.0% 0 F F 2 3 4 1 2 3 4 1 2 3 4 06 07 Q Q Q Q Q Q Q Q Q Q Q m05 m06 m07 m08 m09 m10 m11 m12 m01 m02 m03
Slide 22: Reduced pre-owned aircraft levels benefit residual values
Reduced levels of pre-owned aircraft benefit residual values PRE-OWNED INVENTORY VS. FLEET(1) RESIDUAL VALUE LEVELS(2) Total Inventory as a % of Fleet 5-Year Value as a % of Original BCA (Industry Average) 83% 85% 80% 82% 80% 14.5% 14.0% 13.3% 12.9% 12.4% 12.5% 11.9% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4
Slide 23: Bombardier has the strongest product line
Bombardier has the strongest product line Segment Micro / Super Super Super Ultra Long Converted Light Midsize Large Very Light Light Midsize Large Range Airliner * OEM L40 L45 CL-850 Bombardier L60XR CL-300 CL-604 G5000 GEX XRS CL-870 L40XR L45 XR CL-890 CJ1 CJ1+ CJ3 Excel Cessna CJ2 CJ2+ Encore So
Slide 24: The only full service aviation company
….and is the only full service aviation company Ownership options Business Business Jet Jet Fractional Fractional Full Full Charter Charter Ownership Ownership Ownership Ownership Skyjet Flexjet Learjet Challenger Global Services Service Pilot Corporate Aircraft Mgmt ‘Smart’ Services Centers T
Slide 25: Loyalty rates are very high for Bombardier
As a result, loyalty rates are very high for Bombardier Widebody Market Narrowbody Market 87.80% 78.30% 79.70% 73.70% 73.70% 61.90% 61.90% 25% Dassault Gulfstream Bombardier n lt a am r ie sn u eo sa rd tre es th ba as ay fs C D om ul R G B Source: Honeywell Buyers intention survey 2005 25
Slide 26: 2004/5 delivery revenue market share highest in industry
2004/5 delivery revenue market share was highest in industry BUSINESS AIRCRAFT DELIVERY REVENUE MARKET SHARE Others Total Market, Delivery Revenues, Calendar Year, $US, Millions Bombardier $10,447 $8,742 $10,326 $13,163 73% 70% 81% 82% 27% 30% 19% 18% 2002 2003 2004 2005 Source: Total market include
Slide 27: Strong order intake increasing backlogs
Strong order intake increasing backlogs Global Express XRS 20 Target range (18-24 months) Global 5000 21 Challenger 605 7 Target range (12-15 months) Models Challenger 300 11 Learjet 60 8 Learjet 45 11 Target range (6-9 months) Learjet 40 7 Months 27
Slide 28: Business Aircraft strategy going forward
Bombardier Business Aircraft strategy going forward Overview Increase Customer Loyalty: • Continue to invest in after- market support initiatives • Capitalize on investments in • Business Aircraft market drivers new platforms to introduce remain strong regular (low-cost) product enhancements • Bom
Slide 29: Agenda
Agenda Aerospace Overview (P. Beaudoin) Business Aircraft Overview (J. Hoblyn) Regional Aircraft Overview (S. Ridolfi) Aircraft Services Overview (G. Scott) Conclusion (P. Beaudoin) 29
Slide 30: Comprehensive common families of turboprops and regional jets
Only Bombardier offers comprehensive common families of turboprops and regional jets Q200 37-39 seats CRJ200 40-50 seats Q300 50-56 seats CRJ700 66-78 seats Q400 68-78 seats CRJ900 75-90 seats Q200, Q300, Q400, CRJ200, CRJ700 and CRJ900 are trademarks of Bombardier Inc. or its subsidiaries. 30
Slide 31: Bombardier has led the market over five years
Bombardier has led the market over five years Gross Orders in the 20-99 Seat Regional Market Total Units 344 111 283 325 290 85 28% 42% 40% 41% 49% 50% 72% 58% 60% 59% 51% 50% 2001 2002 2003 2004 2005 2006 Ytd Bombardier Others Note: Data includes order conversions between programs. Does not include
Slide 32: Bombardier has led the market over the past 18 months
Bombardier has led the market over the past 18 months Gross Orders in the 20-99 Seat Regional Market Embraer 16% Q Series 59 Units 23% 85 Units Bombardier 53% ATR 31% CRJ Series 120 Units 30% 111 Units Total Regional Aircraft Market = 375 Units Note: Data includes order conversions between programs.
Slide 33: Market leadership even including 100 seat aircraft
Bombardier still maintains market leadership even including 100 seat aircraft Gross Orders 737-600 2% 9 Units A318 6% 33 Units CRJ Series 21% Bombardier 111 Units 37% Embraer 32% Q Series 175 Units 16% 85 Units ATR 23% 120 Units Total Aircraft Market = 533 Units Note: Data includes order conversions
Slide 34: Regional passenger traffic: strong growth continues
Regional passenger traffic – strong growth continues 450 400 Worldwide Regional Traffic Growth Since 350 1978 = 11% per annum Passengers (Millions) 300 250 200 150 100 Deregulation 50 11% per annum 0 70 75 80 85 90 95 00 05 19 19 19 19 19 19 20 20 34 Source: RAA and ERA
Slide 35: Continued growth for U.S. Regionals
Continued growth for U.S. Regionals Passengers 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Operations Passengers 57.2 61.9 66.3 71.1 78.1 84.6 82.8 98.4 113.2 134.5 153.0 Enplaned +19% +15% +19% +13% (millions) RPM’s 12.75 14.22 15.30 17.42 20.81 25.27 25.74 32.77 43.35 56.18 69.06 (billi
Slide 36: Regional airlines link small communities to the world
Regional airlines link small communities to the world Airport Count by Type of Aircraft Service 1400 1,307 1200 1,097 970 1000 42% 63% Served Served exclusively exclusively 55% Airports 800 by regional Served by regional aircraft Regional only Served aircraft exclusively by regional Mainline only 60
Slide 37: Regional airlines and low cost carriers share market dynamic
Regional airlines and low cost carriers are part of the same market dynamic Historical Distribution of U.S. Domestic Passenger Enplanements 3% 7% 5% 10% 14% 16% 18% 20% 7% 9% 21% 22% 11% 13% 16% 19% 20% 21% 91% 83% 84% 76% 71% 66% 61% 59% 57% 1980 1985 1990 1995 2000 2002 2003 2004 2005 Network Regi
Slide 38: Major carriers outsource routes to regional partners
As major carriers drop their small narrowbodies, they outsource the routes to regional partners Aircraft Unit Cost Comparison (500 nm Sector) 16¢ Network Carriers Regional Outsourced 110 Seaters Carriers Routes Cost per seat-mile (US¢) 14¢ 50 Seaters 130 Seaters 2005 U SD omesti c Yield Curve 12¢ 15
Slide 39: Industry instability continues until segmentation equilibrium
Industry instability will continue until segmentation share equilibrium is reached Networks will match their operating costs to the premium Where Will It End Up ? the passenger is willing to pay: Low Cost Carriers Restructure 22% Low Cost Carriers 33% - labor Regional Airlines - productivity 21% -
Slide 40: Capacity growth and outsourcing trends evident in reported figures
The capacity growth and outsourcing trends are evident in reported figures Mainline Aircraft Market Share and Regional Aircraft Market Share and Average Seat Capacity Average Seat Capacity 174.8 38.0 174.1 37.5 173.2 173.0 36.8 36.4 172.0 35.9 35.3 170.9 83.8% 83.2% 81.9% 80.4% 80.0% 77.6% 16.2% 16.
Slide 41: Large RJs compete with narrowbodies on cost per seat
Large RJs compete effectively with narrowbodies on a cost per seat basis 500 nm Sector Operating Cost per Seat-Mile Comparison Regional Carriers Major Carriers 15.0¢ 13.6¢ 13.7¢ 12.1¢ 11.3¢ 10.5¢ 9.7¢ 8.9¢ 9.1¢ TOC 8.1¢ 8.2¢ 7.8¢ 7.1¢ 7.2¢ 6.6¢ 6.5¢ DOC CRJ200 CRJ700 CRJ900 CRJ900X 100-Seat 130-Seat
Slide 42: Larger regional jets are a new weapon in the arsenal
Larger regional jets are a new weapon in the arsenal 500 NM Sector CRJ200 CRJ200 50 seats Base Cost per Seat (CASM) CRJ700 CRJ700 70 Seats -11 % CRJ900 CRJ900 - 21% 86 Seats Trip Costs 42
Slide 43: The CRJ900 continues to gain momentum
The CRJ900 continues to gain momentum 75 firm orders in the past 24 months 43
Slide 44: Larger turboprops are the next breakthrough
Larger turboprops are the next breakthrough 200 NM Sector Q200 Q200 37 seats Base Cost per Seat Q300 Q300 50 Seats -24 % Q400 Q400 78 Seats - 42 % Trip Costs 44
Slide 45: The Q400 continues to gain ground around the world
The Q400 continues to gain ground around the world LUX AIR 79 firm orders in the past 24 months … including our latest Customer 45
Slide 46: Order dynamics have shifted towards turboprops
Order dynamics have shifted towards turboprops Gross Orders in the 20-99 Seat Regional Market Total Units 325 290 85 100% 90% 15% 80% 52% 70% 64% 60% 50% 40% 85% 30% 48% 20% 36% 10% 0% 2004 2005 2006 Ytd Regional Jets Turboprops 46
Slide 47: Bombardier is well positioned for the future
Bombardier is well positioned for the future Q200 37-39 seats CRJ200 40-50 seats Q300 50-56 seats CRJ700 66-78 seats Q400 68-78 seats CRJ900 75-90 seats UNDER STUDY Q400X 90 seats CRJ900X 98 seats 47 Q200, Q300, Q400, CRJ200, CRJ700 and CRJ900 are trademarks of Bombardier Inc. or its subsidiaries.
Slide 48: Regional Aircraft strategy going forward
Regional Aircraft strategy going forward Maximize overall regional aircraft profitability • Capitalize on surging turboprop volume and forecasted “next wave” of large CRJ orders to strengthen our backlog • Aggressively pursue cost reduction initiatives including lean manufacturing, supply base rat
Slide 49: Agenda
Agenda Aerospace Overview (P. Beaudoin) Business Aircraft Overview (J. Hoblyn) Regional Aircraft Overview (S. Ridolfi) Aircraft Services Overview (G. Scott) Conclusion (P. Beaudoin) 49
Slide 50: Expanded Aircraft Services to capture aftermarket opportunities
Expanded Aircraft Services to focus on capturing untapped aftermarket opportunities and synergies Fulfill growing operating fleet services demands through a more Original Equipment Manufacturer (OEM) centric model: • Operators desire lower total life cycle costs • Greater outsourcing from airlines
Slide 51: Increasing opportunities for Specialized Aircraft Solutions
There are increasing opportunities for Specialized Aircraft Solutions Growing demand for Surveillance, Intelligence and Reconnaissance platform derived from commercial products Multiple solutions from various Bombardier platforms offering value through performance capability (speed, range, paylo
Slide 52: Amphibious Aircraft most attractive firefighting aircraft
Bombardier Amphibious Aircraft remains the most attractive firefighting aircraft Rebounding demand justifying production restart with rate of 4 aircraft a year Re-launched the CL-215T conversion kit with first delivery by end of this year 15 aircraft upgrade kits signed with Italy 52
Slide 53: Agenda
Agenda Aerospace Overview (P. Beaudoin) Business Aircraft Overview (J. Hoblyn) Regional Aircraft Overview (S. Ridolfi) Aircraft Services Overview (G. Scott) Conclusion (P. Beaudoin) 53
Slide 54: Conclusion
Conclusion Business jet market remains strong • Bombardier is market leader (on revenue basis) and has the widest product offering Regional airlines are part of the solution to airlines’ restructuring efforts worldwide • The trend toward larger regional aircraft will continue • Bombardier’s broa
Slide 55: Sustaining our Leadership
Sustaining our Leadership Bombardier Aerospace Farnborough Presentation Aerospace Senior Management Team Bombardier Aerospace July 17, 2006