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SUMMARY: Oil Prices continue their slow downward slide with no end in sight ($US 30 per barrel in 2016 is possible) as supply exceeds demand and oil inventories at record highs (3 million barrels a day in 2Q/15). While airlines are having a very profitable year with average fuel costs down 34%, the offshore helicopter operators are hurting, as exploration is pretty much halted and production slowly being reduced. The top 4 offshore operators (Bristow, CHC, ERA and PHI) are reporting decreasing revenues and falling stock prices as they struggle to cope with new market realities after many years of high growth. The OEM’s are starting to feel the pain, Sikorsky (sold by UTC to Lockheed Martin), AugustaWestland and Airbus Helicopters will have deteriorating orders and deliveries as the heavy and medium helicopter segment starts to stagnate. CHC Group sees its stock become a penny stock only 20 months after its IPO at $10.00, now NYSE:HELI at $0.40, yes 96% loss in value, as its “creative” accounting creates a loss of $794 million (- 46.5% net profit margin YE 2015), $1.016 billion loss in 4 years (inc. $985 million in Goodwill and Asset Impairement write-downs) ? stock now 4 months away from being de-listed from NYSE ($US 1.00), IPO investors litigating and yet private equity power house Clayton, Dubilier & Rice buys 600 million CHC Group convertible preferred shares at $1.00 (with conversion price of $US 7.50 per share) ? when all other investors are bailing out from HELI shares ? The next 2-3 years will be very difficult for the offshore helicopter market, operators and OEM’s and it won’t be very pretty for some, as a major shakeout is coming.

As oil prices continue their slow path below $40 a barrel to a possible $25 to $30 a barrel in 2016, not everyone in aviation is happy about this. The DOW dropped 531 by 531 points on Friday, China’s stock market drops 8.5% today and the TSX down on Friday by 263 on news of … Continue reading

UPDATE: Bombardier stock (TSX:BBD.B) hit a low of $1.19 on Wednesday (today it “rallied” and closed at $1.29) as it continues its spiral towards becoming a penny stock, if it was listed on the NYSE (New York Stock Exchange), it would mean possible de-listing of the stock, as Vancouver’s CHC Group (global helicopter company) is now facing for its NYSE:HELI stock that is now hovering at around $0.30 a share (-90% YTD). After my many warnings about the many questionable and poor quality of airline orders for its CSeries, investors and aviation experts are now finally starting to take notice that after 7 years of sales the current minuscule 243 CS100/300 ‘firm’ orders are in fact a whole lot smaller, with many questionable airline orders possibly as low as 130 ‘real’ orders (53% of what is on the books today). Bombardier desperately needs a NEW CS100/300 brand name airline order in the next 30-45 days to prevent the slide of its stock below $C 1.00, as that is the only way in the short term it can gain some investor confidence to stop the stock’s downward spiral. The CS100 is going to be certified in the next 3-5 months, but by then the stock will be a penny stock if no quality new order or some new un-predicted good news is forthcoming soon from Bombardier. The planned IPO of Transportation division in 4th Quarter will raise up to $US 2.5 billion for a 49% sale, but it will most likely impact BBD.B stock negatively, as the trains are 50% of Bombardier’s business, these are desperate times at Bombardier and most Canadians want to see a bright future for this promising company. With 54% of the special voting shares in the hands of the Beaudoin family, new investors are reluctant to be subordinated and a possible hostile takeover is not yet possible. But with the company at a historic crossroad, the possibility of “Combardier” (China’s Comac buying Bombardier), is a real possibility in the next 18-24 months, as this is the only major aircraft OEM the Chinese can possibly buy today, to help them achieve their global aerospace ambitions of being #3 behind Airbus and Boeing, and they are surely watching events in Montreal with great interest.

A week ago (August 14, 2015) I wrote my last blog on Bombardier when its stock price (TSX:BBD.B) was at $C1.46, since then it has dropped to $1.19 on August 19th, followed by a jump to $1.27 in a flurry of 8.17 million trades, as investors were thinking it has reached its bottom, yet without … Continue reading

SUMMARY: Bombardier’s stock (TSE:BBD.B) hit a new 22 year low again today at $C 1.46 a share, a 62% drop from a year ago, market capitalization is now $C 3.25 billion (less than CAE and just above WestJet Airlines) for a $US 20 billion a year company, that is just unacceptable for any public company. The company just announced a 2 year delay in its new $US 75 million per unit Global 7000 business jet program (already behind by 2 years), right after it announced a 30% production reduction from 80 to 55 units per year of its “cash cow” Global 5000/6000 business jet brand due to a ‘softening’ market globally but also very much due to competition from the #1 OEM in the ultra-long range segment (+/- 48% market share), Gulfstream Aerospace, which is having a very strong sales year (book to bill ratio is 1.0+) with its new G500/600’s and existing G650/G650ER’s , and # 3 OEM (+/- 15% market share), Dassault, with its new Falcon 8X and 5X. Bombardier’s CEO Alain Bellemare is doing a great job keeping the “Titanic” afloat, but 1st half results are worrying, both Commercial and Business Aircraft did have slightly better revenues than last year, BUT most worrying are the Book to Bill ratios (orders/deliveries), Commercial had 0.67 (CRJ line only 0.26) while Business Aircraft had 0.29, in short, both Commercial and Business Jet divisions are seeing very few new firm orders, yet Embraer posted book to bill ratio of 2.64 for its E-Jets (124 firm orders, 47 deliveries) in the first half of this year, the 124 E-Jet orders vs 7 CRJ orders (7 x CRJ-900’s for Mesa) so far this year, says novels about the two products attractiveness, their marketing, promotion and sales, a very serious downward trend indeed for the CRJ brand. Now Bombardier will see deteriorating revenue and cash flow numbers from Commercial and Business aircraft divisions at a time it needs lots and lots of cash, as it “Burned” over $US 1.553 billion in free cash-flow (FCF) in the first 6 months of this year on the CSeries and G7000/8000 programs, and is on target to “Burn” another $US 1.5 billion by year’s end, which wipes away all the new equity and debt it raised in February of this year. An IPO (initial public offering) of Transportation division (trains) is set for the 4th quarter this year which will raise lots of cash (up to $US 5.0 billion for 100%, but only a minority will be sold, most likely to Siemens), so around $US 2.0+ billion is possible as debt is very high at almost $US 10 billion, so where is Bombardier heading ? Many analyst and investors believe there is NO clear path to recovery in sight, while Macquarie Financial lowers BBD.B target stock price to $C 1.00 and yet its own subsidiary, AirFinance (commercial aircraft lessor) has 40 CS300’s on order worth $US 3.14 billion ?? On the bright side, the CSeries is 3+/- months away from certification, and new orders will start coming in after that and the stock will rebound on any positive news. More liquidity is badly needed by 2017, but the Beaudoin family’s control 54% of Bombardier through special class shares, a situation many investors find unacceptable, and many of them may not be lining up next year when Bombardier will need to raise more equity and debt once again, and NOW is the best time for ex-CEO Pierre Beaudoin who created the current mess, and who is now Bombardier’s Executive Chairman of the Board, to go ! It is what is best for the future of the company, as many tough times are still ahead, and there should only be one ‘master’ at the helm at this time as the company’s future is at a crossroad.

Well I am back to writing about Bombardier, my last article was on July 16, 2015 when Bombardier’s stock (TSE:BBD.B) was at a 22 year low of $C 1.84 a share, and I thought it had hit rock bottom, having laid off up to 6,950 employees since January 2014 in 4 rounds and a 5th … Continue reading