Report on Business Magazine presents: CEO Speaker Series – Building a Global Company from Canada

Good morning, everybody.

Yeah, but I found out it was Labor Day, as you may remember. So I was with my family, spending the whole day with them, and then suddenly, you know, my head of communication called me and says, 'Have you seen the Truth Social post?' And I said, 'No, I haven't.' So she told me what was going on. But I think, you know, my team was also already prepared somehow. We had already talked about those scenarios because that was the second time this year, as you will remember. So we actually reacted fairly quickly. I think that same evening we posted a statement, and I think it was actually to try to bring the facts together by saying, 'Here's what we contribute to the US economy,' which is very significant. And it's true, we're actually creating tens of thousands of jobs in the United States, probably as many as in Canada. You know, of course, we are assembling, and we're very proud of being Canadian, having our head office here, assembling the aircraft between Toronto and Montreal. So we did explain that, hey, we have close to 4,000 people in the US. We have 2,500 suppliers in 47 states. So we're buying engines from companies like GE, Honeywell, or a lot of other systems. You know, we're manufacturing ourselves, you know, the wing of the famous Global 8000, which is assembled here in Toronto. And I think, you know, for me, it was just important to make that statement. And I think the great news is there's people that, you know, you've seen, you've heard the senators of some of the states, you know, coming up and saying, 'Hey, Bombardier is important in my own state.' So I think that message was done, and there's a lot of people that we reached out to behind the scenes that were also reaching out to the president's environment to make sure that it's understood.

So I think at the end of the day, I'm taking this, you know, seriously, but at the same time, you know, it's part of a bigger conversation that's happening right now between the two countries. And, you know, we know what happened with the negotiation, like maybe a week or two before that event. So it's a negotiation, right? You know, it's a card that could have been played that day and that they decided to play, which may come back at some point depending on how the negotiations are going.

Yeah, I was actually in Florida that day with the entire sales team of Bombardier worldwide. We were sitting in Orlando, you know, getting prepared to reward our salespeople of the year. And I was going to that event, and then suddenly, you know, that news came out. And then, you know, again, my head of communication says, 'Hey, you know, have you seen this?' And I said, 'No.' I thought they were joking at the beginning. I said, 'Yeah, that can't be true.' But it was. So anyway, we actually — I missed the dinner. We ended up — we were in a hotel. We kind of created a bit of a crisis room to manage it. But I think for me, what was important is, again, we had a lot of people. We talked to the FAA that night. We said, 'What is this all about? You know, is there a process?' And they said, 'No, there's no way you can decertify an airplane. We don't know how to do it.' [laughter] But anyway, and there was a lot of noise for 24 hours. And the next day, of course, our stock reacted to that. But I think if you look into it, what happened two weeks ago, you know, our stock was losing 7.5% at the beginning of the day. We ended up at the end of the day losing 2.5% roughly. So, you know, I think people are more used to that kind of behavior these days. So that day it was important because we needed to react, and, you know, there was a threat of decertifying all the Canadian-certified planes, which there's probably five or six thousand of them flying in the US. So the whole system would have been paralyzed, probably completely. So anyway, I think, and, you know, again, we just got stuck, Bombardier, in the middle of that because we had no issue there. It was, you know, I would call it a misunderstanding between our competitor and maybe Transport Canada, which got sorted out, you know, in a few weeks.

I think, you know, we clearly have — we are competing very hard, you know, with Gulfstream. We respect, you know, them as a competitor. I guess it's the same on their side. We're very often nose to nose, and so, you know, we're in their backyard all the time. Also, you know, we're competing internationally. As you know, Bombardier, we have 5,300 airplanes flying all around the world. Gulfstream and us represent together about 75% of the dollars spent in business aviation worldwide. So that's quite significant, and we're nose to nose. One year they're ahead of us, the year after we're ahead of them. So it's been — and they're a challenging competitor. And we are competing in the US. You know, the US remains the most significant market for all of us worldwide, and we're competing, of course, internationally. So I guess even in his surroundings, there's a lot of people flying our planes. Okay. So I guess he hears about our planes all the time, and so we're top of mind. And I think we're probably, you know, one of the Canadian companies that probably has the largest worldwide presence, you know, because we're an exporter. If you look at it, we are 1% of the exports of the country.

So, you know, we've looked at those scenarios, and, you know, we've always prepared for — you know, we look at what are the risks, the probability. And, you know, a year and a half ago when this threat came out for the first time, you know, it was more global. As you remember, I think we go back to November 2024, actually. So we were looking at scenarios: what's going to happen? And then, you know, is the tariff going to be at 10%, 25%? Because it will vary. So we decided — we made some bullish decisions at the time to just carry on, continue to sell airplanes in the US. But if this would happen, it depends on the level. We will have to assess, you know, how long this may happen. You know, is there negotiation to try to avoid it? Is it going to be — if it lasts three days, a week, or one month? It's a scenario that it's not going to really move the needle for us. But if it's starting to last six months and more, then we're going to have to adjust. Okay. And then again, we've explained very often, because of what I was explaining earlier, that we have a very significant presence in the US, that probably the impact on us — let's say we produce fewer airplanes because we don't have access to that market or a portion of that market — yes, we will reduce our rate. You know, there will be fewer people in our facility, but the impact on the United States will probably be as big, if not bigger. Unfortunately, people will lose their jobs. And I think, you know, we've been explaining it. You know, we're spending quite a bit of time. I was myself in Washington again last Thursday to make sure that there's people that understand that and carry that message if ever they're facing that decision.

Yeah, but some of those conversations that we're having, most of the time privately, you know, I think people understand [snorts] and a lot of the time we're getting their support. They're saying, 'We understand that you guys have a very, very significant footprint. You're creating jobs. You're part of our economy.' And I think, you know, most of the people are saying, you know, 'We'll make sure that it's understood.' And when I say most of the people, it's like 99% of the people are supportive of what we do and what we're saying. So I think, you know, it's happening right now. As I said, there's a negotiation, there's a bigger picture, and we're just part of that, you know, and sometimes just being used for that.

Yeah. So we've already diversified ourselves. You know, it's not like, you know, we have a very niche clientele of customers and we're going after — already today, every single one of them. So we're proud because we have already like 40-plus percent, 45%-ish of our sales being done outside of the United States. And it's actually a very significant presence we have worldwide. I always say very proudly, I've never — and it's true — I've never landed on an airport that didn't have at least one Bombardier plane sitting somewhere or taking off or around, even in crazy places in the middle of nowhere, in the middle of Africa or Asia, somewhere in some places where not many people go. So we have a very large presence. We're serving our customers worldwide. We will continue to do that. And I would say today it's a stimulus also for us. You know, people are looking at us also maybe differently, and we're proud Canadians of what we're doing, with a strong presence in Europe, in the US [snorts] and everywhere.

It's helping very much. You know, I'll say it very candidly. I think we have a captain on the boat right now. He has a very strong global presence. You know, for us, it's important to have good relationships as a country with other people. You remember that a few years ago we had tension with Saudi Arabia, tension with India, tension with — you know. So I think it's important to preserve that, and I think the government is doing a great job right now. The prime minister clearly knows a lot of people. We just saw what happened with the investment summit last week. I was there myself. A lot of people showed up, very high-profile people, American, you know, European, people from everywhere, from Singapore. So I think he's clearly taking the lead in helping and shaping, I would say, the Canadian brand right now very well. And, you know, we've been doing that, and I can tell you, having support right now, I feel pretty good about it because we've done this, Bombardier, we do this all the time. But I have to tell you, I felt being alone very often with my team doing that. Now we feel that there is support coming.

Yeah, but it's an interesting thought, and I think, you know, clearly, you know, we share values that are very similar. So there's a natural, I would say, way of working together that we don't have to force. And I think, you know, when you look at the economy of Europe, the GDP of Europe, if you put, you know, the UK and Canada into this, we have pretty much the same size as the United States, and, you know, all together when you add up all the GDP of every country. So I think it gives us weight. I think there's ways, and I think we got to be careful in terms of how close we want this to be. But I think if we have a, you know, an open trade partnership, you know, easy to deal with, and we remove barriers, I think this is going to be great for everybody, for the Europeans and for us. So I think it's — all the devil's in the detail. We have to define it properly, but I think it can open a lot of doors for us.

A lot more right now. [laughter] I feel I do a bit of politics right now, most — some of my time. So actually a lot more. And geopolitics for Bombardier has always been important. You know, I just said earlier, when there's tension, you know, with countries like Saudi Arabia or India, it's impacting our business. I was giving the example the other day: when that tension came up with Saudi Arabia, we did not sell one plane in Saudi Arabia for four years, okay? And which we were always having a very strong presence. You know, you may have seen we just announced a fleet operator being created in Saudi Arabia and Flynas, which is going to buy up to 60 planes. So we're, you know, having clearly — we value, you know, the good relationship with countries. I think we have to be mindful that sometimes they are different, you know. But, you know, I see this country evolving at a very fast pace, and I think that's what we have to keep in mind. You know, we can sit here together and say, 'Hey, they should do this, they should do that,' but I think it's evolving much faster probably than even as a country we have evolved in the last 100 years in terms of recognizing human rights and other things. So is it perfect? No. But I think we have to be careful of just teaching people what they should, and we have to respect what they are. So I think we are more mindful of that. I would say today we are working with them, and I think I've seen, as I said, you know, going to this country for 20-odd years and more, quite a bit of evolution in a lot of cases.

We have beefed up actually over the last couple of years, and we're discussing right now to have a stronger — we have a much stronger presence in Washington than we have today compared to what we had before. First, there's the defense business, we'll talk about that later, that we're growing. But at the same time, you know, because of what's happening, it's important that we do, you know, make sure that our message is out there, that people understand that we have those relationships, that we need them. So we've been building it up over the last three years quite a bit, I would say, over the last two years. And in Europe it's going to be important. Europe is a huge opportunity, as we just talked about. So we are going to grow. We've already started our presence, you know, of our government affairs presence. You know, we're very present also in the Middle East because that's a very significant market. We've been in Singapore for a long time, and there's interesting movement happening. You know, like we talk a lot about China today because, you know, the president is in the US visiting, but China has always been a very difficult market to understand, not just for Bombardier but for my competitors and everybody. I remember in 2014 there was 400 business jets in China, and people thought that in 2020 there's going to be 5,000 — 2,000, sorry — because there's a lot of billionaires. You know, what happened in 2020? There was 250. That market went down, okay? But then you need to understand the dynamic of it. A lot of Chinese billionaires have moved out of China. They put their money in Singapore or some in the US or in Canada. So they're still buying jets, okay? But from another angle, if I may say it this way. So it's an interesting shift of all kinds of things. And, you know, I have people that are experts. We're debating this: what's the trend? Where are they going? How can we make sure that we secure that they're going to purchase their next airplane with us? So it's been an interesting geopolitical, I would say, in the last even 10 years, you know, with everything going on. You know, with the presence of a new president in China since '14, you know, COVID happened, Ukraine-Russia happened, we have a different leadership style, I would say, in the White House. So all this to say — yeah. [laughter] You notice that, yeah. So it's very interesting what's happening, but it keeps us on our toes all the time. There's a lot of moving parts, and we still have to — the good news is our business is growing still at a very rapid pace, but we have to understand this dynamic.

Yeah, so my first day on the job was very interesting. I show up at the office April 6th, 2020. My CFO tells me we have 49 manufacturing facilities because we still had the train division at the time. He said, 'Nobody's producing anything. We don't produce planes, we don't produce trains, everything is shut down.' So it's not a good place to be as a manufacturing company. And, you know, Bombardier was already in a very challenging time, you know, with our balance sheet issues we had at the time. But, you know what, I took this and I said, you know, let's try to build from a good crisis something we can build on. I was very convinced that the business jet market was going to grow. I was convinced also that we were doing the right move. You know, we needed to clean up our balance sheet at that time. So we moved, you know, we sold our train division. We sold the commercial aircraft business to Mitsubishi. We sold one of our facilities in Northern Ireland. So the first nine months were challenging, not easy. The world was shut down. We needed to get through this. We had no money to get through this. We figured it out, and then, you know, sometimes you get lucky. At the same time, I could have started observing at the summer of 2020 that business jets were flying more and more because remember, commercial aircraft were grounded. People were uncomfortable to fly with 300 people on an airplane that they don't know, and, you know, with the virus threat still being present and for a while after that. So people that have — they don't have to be a billionaire or rich, you know, people that have a little bit of money, they said, you know, instead of flying on a first-class seat, I will go and start flying on a business jet. They don't have to buy their own business jet; they can buy a few hours left and right. So I remember a discussion with one of the CEOs of the fleet operators who told me at the end of July — he said, you know what happened? He said, 'I just got record sales.' That same guy three months before that was saying, 'I have like less than 1% of my airplanes flying.' He was very concerned, and he was saying, you know, 'Éric, I may not take my delivery this year.' And, you know, this is when relationship matters. I knew the guy for 20 years. I said, 'You and I have no clue what's going to happen.' I said, 'Let's say sometimes the best strategy is not to do anything.' And I said, 'Let's wait and see what's going to happen.' And then at the end of July, he said, 'I had record sales.' He called me at the end of August. He said, 'We just did better than what we did in July.' And you know what? In November, which was like five, six months later, he said, 'I need more planes.' And then it's been a story since then, the business aircraft. So I knew that the private jet business was going to grow, but COVID was an accelerator. It just ended up going faster for us. And then we've seen, you know, we see right now the wealth creation is present. You know, there's six, seven percent more people every year that have, you know, $30 million US and more. So these people are, you know, looking at flying private more and more for security reasons, for health reasons, for all kinds of reasons. But the main one is for efficiency reasons, right? So it makes you very much more efficient if you're a CEO or an executive in a company that you need to move around very quickly. It's going to — I was giving the example of someone the other day, couldn't believe it. I said, 'I left Montreal on a Monday morning about two months ago. I went to Sweden. I was there all day on Tuesday. I left, you know, that night for dinner with a customer in Italy. The next morning I went to Berlin for meetings. The next morning I left for dinner again in the UK, in London. I was back Thursday night having dinner with my wife in Montreal.' So commercially, it would have taken me two weeks to do the same trip.

Yeah. So I think, you know, the train business was a challenging business for us and for everybody. It's a business with a lot of risk, with low margin. And I always like to say there's like a lot of countries in the world. You can have competition from pretty much every country that can build trains. Airplanes — it's very unique, and we're lucky to have that capability in Canada because, you know, there's just a few countries — you can count them with my fingers here — that have the ability to design, to build, to certify also a plane in this country. The Americans can do it, the Brazilians, the French, and that's pretty much it. Other people are trying hard, but they wouldn't be able to certify their plane with the safety requirements we have either in North America or Europe. So we're very proud of that, and that was a little bit how we thought about that. We said, today, you know, we have five competitors, you know, between Gulfstream, Textron, and all the other guys, and there's the likelihood of having the same five competitors 20 years from now is probably real. So before other countries may get into the aerospace business — and I think some of them, like China, are working very hard. Eventually they'll figure out how to certify a plane, but they'll be focused on the commercial side. They won't get into the business jets right away. So the landscape is clear. I like that. And I know that, you know, I would be surprised if there'll be another 10 countries that can build and design a plane in the next 20 years even, right?

It was actually interesting, just an anecdote. The day that I was announced, I think it was March 13 or 14, 2020, and in Quebec it was big news because I was going back to Bombardier. It was Hydro-Québec and Bombardier, two iconic companies. And I remember, so in the morning that news was spinning. It was like a big deal. But then the premier of Quebec came out at lunchtime, at 1:00, I think, to be more precise, and said, 'I'm shutting down all the schools.' You know, and then I was saying, 'Okay, what's going on?' I knew it was already a complicated mission, but I was very, very convinced that I could do it. And I had the advantage at the time to walk in and I knew that business inside out. Actually, I started at the train division at Bombardier for three years. I was running the rail operation in North America, and then I moved back to aerospace because I had an aerospace background. I worked there for a while. Then I left. I was president of the business aircraft division. So my biggest advantage probably coming back was what — I knew the customer. I knew the operation. I knew the people at Bombardier. My suppliers knew me too. So it took me a couple of days just to figure out where things were at. And so my learning curve was very fast. Okay. But it was challenging because the environment was very unstable and, you know, uncertain, I should say. But I can tell you, I have never doubted — I never doubted that we were going to make it. Even though there were some tough moments in the first nine months, but I always told the team, you know, as much as I see a light at the end of the tunnel, we're going for it. And we did. And there were people debating, you know, what should we do? Should we carry on? Should we look at other options? But we've always pushed it. And, you know, today I think we went from a company — our market cap was less than a billion dollars in that year. You know, even we went down as much as I think 600, 700 million. And today, you know, we're very healthy. We have a nice balance sheet. We're a $30 billion company market cap, you know, in Canada. The employees are happy. I think it was also a matter of bringing the culture back. You know, so our culture — we have a culture, a very special culture at Bombardier. Despite our size, we are still very entrepreneurial. We get things moving fairly quickly. Our employees feel like they're part of a family. We have a lot of respect for each other. We work together, teamwork. It's not about, 'Hey, I'm successful,' you know, and there's no competition within the company, right? I always tell my competitors outside, not within these walls. So it's very deep, okay? And we've leveraged that over the few years. Our engagement level went very — the engagement level of our employees that we survey every year went from a crazy number like 40% to the 80s in a few years, which was remarkable. The other thing also is the focus on customer. I always tell the people we need to be focused on our employees and our customers all the time. We need to be obsessed about our customers. How do we make their journey better? I don't know if you follow that, but there's a few specialized magazines that are publishing, you know, how we are perceived, you know, to support and service on the customer support we're providing. We were last in 2020. We've been number one for the last three years. So we completely turned it around. You know, so customer focus, employee focus, and of course our balance sheet and our financials needed some improvement.

So it's interesting because there was a lot of confusion, I would say, in terms of who are we now, what's our culture. But I knew the culture. I knew that this could come back. It was just a question of — and it's not just about saying this and putting a poster on the wall. It's about making sure that on a day-to-day basis they can live that culture. And you need also to have the right management team, you know, because if you say, you know, I'm expecting the leaders to be in a certain way and you got half of your team not behaving properly, then it's not going to work. So we had to make some changes, make sure that the people fit with the culture of Bombardier. So we made some changes, you know, at all the levels. I think people saw the change fairly quickly. And culture for me was very important. I remember my first week on the job, the week of April 6. Of course, the financial situation was on everybody's mind. But I remember I had a call with the entire management, and we still had the train division. It was like 2,000 people on the call. I was just coming back. I did that on the Friday of the first week, and people from all around the world. And I spent half of the time to talk about our short-term game plan, and I said, 'I don't know exactly what the game plan will be, right? But here is what we're going to do in the next nine months, and then we'll work it out together to see what's the — where's going to be the strategy moving forward.' But I spent also 30 minutes on that call talking about the culture I'm expecting, right? The behavior of the leaders. It was very, very important, and this was one of our strengths. After that, I think the people recognized themselves. I was talking about our engagement, you know, came out. People felt that we knew what we were doing. We knew where we were going. And then after, it's a question of celebrating the small victories. You know, you don't wait to win the Stanley Cup all the time. You know, you win and you say, 'We've won this today,' you know, let's —

Celebrate that, and let's go step by step. And then, you know, the market was very concerned, rightly so. But you know, we delivered quarter by quarter, and it's been, right, six years and a half now I've been back, and we've always delivered. Actually, we've overachieved in terms of what we said, because when we came out, also it gives confidence to our people. We, after the whole restructuring, so February 2021 now, we sold the train division, everything is done, and now we're a business, private jet focused business.

And we said, here's the game plan, you know, we're going to grow services. We're going to do this, we're going to do that. So, we had a very clear plan. Defense was also part of that.

And I remember there was a lot of skeptical people in the room. They said, you know, hey, they've been disappointing. But then we came out about two years later and we said, you know what, the target we had for '25, we're going to beat them. We're going to do better. So, but it was a question of growing this very slowly. So, quarter after quarter, we're going out talking to the street and say, hey, here's what we've done. We've achieved it. And then people start to believe you at some point. And I think they did, and we had support. We have people that have reinvested in our company quite significantly.

So here we are today. We have a very solid company, you know, with a very strong balance sheet, generating cash flow, being able to predict what's going to happen in the next five years. And I feel a little bit lucky also right now because the three businesses we have, which is the private jet, defense, and services, we're firing on all cylinders right now at the same time, which is rare.

But you know, my background was at Bombardier in 2011, '12, '13. I was the president of services, so I knew that division fairly well before being president of business aircraft, and I knew that this was an untapped opportunity. So in 2020, it was a billion dollars of revenue. Last year, we achieved 2.4, almost a billion. So we grew it quite a bit, and we had a very simple strategy. You know, I'm always careful of too complex strategy. This one was simple. It was basically to be present where our customer needs us. So we grew our presence in Asia, we grew our presence in Europe, we grew our presence in the United States so that people can come to us easily. It's like, I don't know if you're in Toronto and you own a BMW, but the BMW dealer to do your maintenance is in Montreal, right?

Then you're going to find another solution. You're going to go to another person that can do the maintenance without being the OEM. And that was our problem. We were just not where people wanted us to do their maintenance. So they had, you don't want to fly your plane from Africa to Singapore or Tucson in Arizona where we are today. So we just made ourselves present. We worked on our efficiency also, the service center, so our parts business, everything has grown quite a bit. So this is a very lucrative business for us. It's actually a business that doesn't require much capital investment. So it's not capital intensive compared to, you have to be mindful that the airplane business is, because when you invest into a program, that's a lot of capital you need to spend. So you need to balance this out also. So today we have a much better distribution of our revenue. Okay. We're not just focused on the business. Maintenance has a lot of weight today in our total revenue portfolio. It's less capital intensive than the other business, right, which is a nice mix for us. So services was for me again an untapped opportunity which we kind of accelerated, and the good news is despite we grew it from a billion to 2.4 in less than five years, the potential to continue to grow it is enormous. So we're going to continue to do it, and we are.

So what's interesting is we've been in that business for a long time, but it was a bit, you know, not something we were focused on. People were knocking at the door and saying, hey, could you take a Global or a Challenger and modify it and do this? And basically what we do today is we build our Global here in Toronto or a Challenger in Montreal, we bring this airplane in our Wichita facility in Kansas, and we will make modifications on the structure, you know, we'll install radar, we'll install cameras, very sophisticated communications systems on board. And our airplanes today are, you know, on the front line, you know, either in Ukraine or in the Middle East or everywhere to do surveillance, you know, their communication node, their different type of application. So it's interesting, and our airplanes are renowned, you know, for their reliability, their performance, you know, they can fly at 51,000 feet, they can do a lot of things, they can go fast. So the military likes what we do. So we've been doing it for a long time, but we decided it was about $200 million in revenue. You know, last year we achieved a billion dollars in revenue. So we've accelerated the growth, and it's a lucrative business also, and we are renowned also for our creativity, innovation, come up with solutions, you know, rapidly. And so the military likes us, you know, they're saying you guys are fresh air in that industry because you're competing against other people that are slow to move or the first answer is always no. So we're not that type of, and it's again, it's a bit of our entrepreneurship DNA that I think is helping here. So the defense business is a significant opportunity, and especially right now we've been, I think, positioning ourselves very nicely. Think what we call the airborne early warning airplane. You know, we have an airplane we work with Saab called the GlobalEye, and we have another solution also that we do with L3Harris. So today we have two products, two competing products because we're providing to these two guys the Global platform built here in Toronto, and we're competing with Boeing, as an example, with the E-7. Our plane in our mind is much less expensive than our competitors. So let's say it's interesting to have also a European solution in the current geopolitical world and an American solution.

Like think about South Korea, we were competing the three usual suspects, you know, in South Korea. We got down selected at the end, it was between L3Harris and GlobalEye. We knew we were going to win because we're on both. So they selected L3Harris and the American solution. But in Europe right now with the current geopolitical landscape, the GlobalEye is winning on most of the campaigns. So we're in France, we're in Sweden, you know, NATO just picked us up, Canada selected it. So it's actually growing, and of course a few things are happening at the same time. We are offering an American and a non-American solution, and at the same time, you know, Trump was right, you know, when he said, you know, you guys are not spending enough money, you don't do your share, he was right. We can discuss how he did it, but he was right, and everybody is increasing their spending right now, the whole NATO world, you know, Canada also leading the pack with a few other countries. So we're increasing our spending, so the opportunity is enormous right now, and I would say we're extremely well positioned being Canadian right now to capture that market.