I have some time on my hands today, and I want to address Richard Aboulafia's article if you care to read it.
https://www.richardaboulafia.com/shownote.asp?id=677 -The reason why I want to address it is, that I don't agree with his conclusions. That Bombardier's survival as a stand alone BA company is going to be hard.
-I think that his conclusion, that the Family will have to sell BA at some point to GD, or any other competitor group is unfounded. On the contrary I think he is totaly wrong IMHO.
This is where I'm coming from.
Any company's survival, or success depends on it's Management, and Managements decisions, in which direction they want to take the company. In the case of this company, management was in the wrong hands, in Pierre Beaudoin. I don't want to rehash everything, because a lot of you will have your own opinions about the Bellemare and PB relationship. but I have mine. Now that we have seen that duo management played out, you're all going to say that that is Hind Sight. I don't want to go there. Because I've been saying this all along when the CSeries CSeries decisions were made at the time, and I considered the AB/PB team combined as incompetent management.
I was saying since 2016, that they needed to sell a lot of the assets to get the CSeries Debt down. They went about it, slowly or as quickly as they could, so interest on the debt killed them. They finally made the gravest error IMHO when they decided to sell the CSeries to Airbus. Richard Aboulafia made note of the fact that they didn't only sell it for nothing, but they kept giving presents to Airbus to take it, in the form of cash calls. I said that, and kept saying that throughout the the sale, and still feel the same today that, that was their mistake. You can't give away 51% of a $6B program for free, and then give control of that program to Airbus a stronger competitor, and then finance the growth of that program with your JV partner and then give them the option to buy it from you. It's just not a smart management decision. I said then, and I still say it today, that they should have just built the orders they had, and then PAUSE the program. We saw the conclusion of that management decision to give control to Airbus. Finished no more on the CSeries BLUNDER.
Now the new management of EM of this once strong company going forward.
WE have a strong BA. The leader in Bus., Jets. If Martel is left alone to take control, and they get rid of PB's salary? Then we have a chance. How? I think BA is in good hands with EM and BD.
This is MO alone, and I think it's doable. They have a year runway right now to manage BA well. They have to save, save, save. Debt is paid off till 2023. So from now 2021 till 2023 they should save $500M conbined, from operations and keep their $1.8B in reserves intact. This will give them leaway to tackle the 2024 debt. That's when the other debt's start to come in. Stay the course in NO spending for new programs, only spending minimal on them, and spend minimal on PP&E. Spend nothing on R&D. Get rid of all excess personel, and over capacity, and get whatever you can out of the assets. Then renegotiate every recurring debt 2024 and on, by puting in a small 35% amount on each renewal, because by them they should be able to make $350M of positive FCF IMHO.
All the above will work assuming that PB hasn't paid off all of BT's, and CSeries, debt's yet, and is throwing them on the BA Statements going forward. We'll know the answer to that soon, Quarter by Quarter, or at the very leasy by the end of Q4/2021.
Now if things get out of hand, and things don't work out as planned. Then EM can find an equity partner, and sell up to 49% of BA and get in the range of $4B equity for 50% of BA and go forward. By then I would be open to a 10 to 1 reverse split, because we'll be in positive FCF territory anyway, of at least $350M/yearly.
So Aboulafia's conclusion is totally wrong. The V-raptor was, or could even still be in the Bunny Farm, but this time unlike the CSeries he's not running lose to eat all the rabbits. He is in his cage, and we may need him for a pet later. If Bombardier had kept the CSeries mothballed/paused? They would have sold it to someone like Boeing, or even the MHI, in MHO 2-3 years later.
This plan is very doable, and it's in EM's hands to deliver. Good management is the key from now on. We have no more freebee cash coming from any other sources. Time to tighten our belt.