RE:RE:RE:RE:RE:Another tough day?The problem with inflation for BBD is not on the demand side (although with higher jet fuel prices, lower equity markets, and a slower economy – demand could get hit) but the big problem is that BBD has pre-sold the next 2+ years of planes in one cost environment, but will be building the planes in a vastly different cost environment.
Unless they have already purchased all the raw materials and commodities required to build those planes, they are going to get hit pretty hard as their inputs costs are up 15% to 40% or more (depending on the commodity).
So by pre-selliing the planes, they have locked in their future revenues, but their costs are floating (and floating higher), so they may have sold all the 2023 planes at significantly lower profit margin, or even at a loss, as input costs continue to skyrocket. Thus forcing investors to re-evaluate the profitability potential of BBD.
Additionally, their future debt will be re-financed at significantly higher rates (read: higher interest costs) so that will also hit profitability.
So inflation is hitting them multiple ways on the cost side.