Bombardier Inc. T.BBD.A

RBC

[retiredcf]

October 23, 2024

Bombardier Inc.
Wheels Up adding Challenger aircraft to its fleet - a positive for Services and CPO

TSX: BBD.B | CAD 107.00 | Outperform | Price Target CAD 133.00

Sentiment: Positive

Our view: We view the announcement from Wheels Up that it is transitioning its super mid offering to Challenger 300 Series aircraft to improve operational performance, operational efficiency and enhance customer experience as a positive for Bombardier. We note that Challengers continue to lead the super-midsize category and are a top choice for fleet operators, with this news further cementing that fact, in our view. We see the adoption by Wheels Up as a tailwind for services growth post-2025, given the higher utilization rates of fleet operators. Wheels Up currently has 40 Citation Xs in its fleet, which the company plans to transition according to the release over the next three years, which could also benefit CPO, in our view. BBD remains our top idea under coverage, and we see continued adoption of its aircraft as supporting our long-term estimates surrounding revenue growth and margin improvement, which, when combined, translate to low-teen FCF CAGR out to 2030.

What happened? Last night, Wheels Up announced its plans to acquire a fleet of pre-owned Challenger 300 and 350 aircraft via the secondary market. The Bombardier Challenger 300 Series aircraft are expected to be introduced into Wheels Up's fleet beginning next year, with availability on both an as-requested charter basis and on specified routes for members. A complete introduction into Wheels Up's programmatic offering across guaranteed service areas is expected by the end of 2025. Wheels Up expects to complete the transition to the Challenger platform within approximately three years.