| NEW YORK
NEW YORK Dec 15 Bombardier Inc
investors will be looking for more information on the cost of
value guarantees for older jets and forecasts for the Canadian
plane and train maker's business jet unit at an investor day in
New York on Thursday.
The event comes two days after U.S. airline Skywest Inc
said it had agreed to terminate a residual value
guarantee with Bombardier covering 76 CRJ200 planes. SkyWest
said Bombardier had agreed to pay it $90 million by January
Residual value guarantees cover some of plane buyers' losses
if the value of their aircraft drops below a certain threshold,
a potential liability and a drag on cash flow for Bombardier as
older planes like the CRJ200 go out of service.
"We expect management to provide additional details with
respect to the termination agreement," AltaCorp analyst Chris
Murray said in a note to clients.
Bombardier disclosed early this year that its maximum
potential exposure from residual value guarantees was $991
million over four years starting Dec. 31, but it is not clear
how much that potential liability could affect cash flow.
"RVG payments are embedded in the 2016 guidance and will be
in future guidance," said Bombardier spokesman Mike Nadolski.
One factor that could improve cash flow is increased demand
for the company's business jets, and analysts and investors will
be looking for new guidance on sales on Thursday. The new
ultra-long-range Global 7000 jet, said by the company to have a
strong order book, is expected to play a key part in
Bombardier's five-year turnaround plan.
Bombardier, which considered bankruptcy protection at one
point last year, now aims to break even on free cash flow in
2018 and on its new CSeries program of narrow-body commercial
jets in 2020.
On Wednesday, Bombardier said it expects its full-year 2017
consolidated revenue to grow in the low single digits
year-over-year, and reaffirmed its guidance for 2016.
Production of the company's largest business jets, which
slowed this year to match weaker market demand for corporate
planes, is expected to pick up slightly in 2017, a source
familiar with the matter said, although a broader industry
rebound is not expected.
Production of Bombardier's Global 5000 and 6000 jets is
expected to rise slightly from one in 10 days to one in seven
days next year, said the source, who spoke on condition of
anonymity because the company does not disclose such figures.
A Bombardier business jets spokesman declined to disclose
global production rates for competitive reasons.
Some aviation and financial analysts expressed skepticism
about the company's ability to meet its 2018 cash flow goal
because of soft industrywide demand for corporate jets, and
initial production costs and discounts for the CSeries.
"I admire the turnaround that's occurring but I think the
break-even part will take place later than expected," said
Rolland Vincent, president of consulting firm Rolland Vincent
(Writing by Allison Martell in Toronto; Editing by Jonathan