B8 OTHEGLOBEANDMAIL | SATURDAY, FEBRUARY 22, 2020
Sales of large-cabin, long-range jets that can cross
oceans have held up better. During the 2008-09 re-
cession, sales of the priciest big-cabin jets kept grow-
ing, fuelled largely by buyers in up-and-coming
countries like China, while the cheaper products de-
clined sharply. By beefing up its offerings in the high-
er end of the market, Bombardier is betting it can in-
sulate itself from any future downturn.
That means much of Bombardier’s business jet
future is pinned on its all-new marquee Global 7500
aircraft, the biggest, fastest and most expensive pri-
vate jet the multinational has ever built. The 19-pas-
senger plane, which Bombardier spent billions de-
veloping, can fly non-stop from New York to Hong
Kong, and has four living spaces, a full-sized bed and
kitchen, and dedicated quarters for the crew.
The plane is sold out through 2022.
Bombardier shared some internal data with The
Globe in 2018 that bolsters its confidence in the
health of the high end of the market. The company’s
research shows the number of high-net-worth indi-
viduals (those with a minimum of US$100-million
in assets) climbed by 10 per cent from 2015 to 2017,
outpacing economic growth. More specifically, the
number of billionaires worldwide increased by
about 15 per cent, to 2,754, in 2017, according to re-
search firm Wealth-X. Bombardier already sells jet to
many of these individuals and is trying to woo more
of them. Its own research shows 18 per cent of billio-
naires and 28 per cent of the biggest public compa-
nies use a private jet or own one outright. That sug-
gests big untapped interest.
There’s a potential complication for Bombardier,
though: it’s about to become the industry’s only ma-
jor pure-play luxury jet manufacturer. Gulfstream,
which competes with Bombardier on big-cabin jets,
is owned by General Dynamics, a major defence con-
tractor that makes submarines and the M1 Abrams
tank. Cessna’s parent, Textron, owns Bell Helicopter,
which builds military choppers. France’s Dassault
Aviation and Brazil’s Embraer also build military air-
craft. That means everyone but Bombardier has oth-
er businesses to help offset corporate jet operations
and feed research and development. That could
leave Bombardier exposed when the economy
slows and it needs to make the next multibillion-
dollar investments to keep buyers interested.
But Mr. Bellemare says Bombardier has proven it
can successfully compete without that military-re-
lated element. In the next breath, however, he says
it’s simply “a reality”that governments around the
world support their aerospace industries with well-
articulated strategies and investment. “I wish that in
time people would realize why this is,” says Mr. Belle-
mare. “It creates tremendous value for a country.”
That value is less obvious when it comes to Bom-
bardier, especially as it has shrunk for reasons both
self-inflicted and imposed. So are both Ottawa and
taxpayers ready to continue as silent partners in a
company that has failed to live up to its end of the
bargain?Seventeen years ago, then Bombardier CEO Paul Tel-
lier went on the offensive to try to shoot down the
company’s reputation as “a poster child of corporate
welfare,” as he put it. Speaking to a Bay Street audi-
ence that had applauded his turnaround of Cana-
dian National Railway, he said “it’s getting under my
skin” that critics are “always ... coming out with
some nasty remarks [implying] we are at the public
trough.”
The speech did little to sway public attitudes in
Bombardier’s favour. For decades,governments
have played a critical role in helping Bombardier
build itself into a global player.
Bombardier built the foundation of its aerospace
business by buying manufacturing operations in
Ontario, Quebec and NorthernIreland withgovern-
ment assistance. It has received heavy research and
development support and tax breaks from Ottawa
and Quebec, and export financing help from Export
Development Canada. It secured more than US$1-
billion from the two governments to get the C Series
airliner to market.
Its perception as a favoured industrial child of Ot-
tawa also rankled Canadians outside Quebec – its
success in securing a maintenance contract for CF-18
fighter jets in 1986 so infuriated Western Canadians,
it inspired the birth of the Reform Party.
“Bombardier presents a public perception prob-
lem as a company that is continually requiring gov-
ernment support, and that plays to regional tensions
between Quebec and the rest of Canada,” says one
senior federalgovernment official who is not autho-
rized to speak publicly.
In many ways, that’s not fair.
Bombardier operates in one of the most heavily
subsidized industries in the world. Boeing, Embraer,
Airbus and Canadian flight simulator maker CAE
have also benefited from financial aid or military
contracts from theirhome governments.
And in some respects, Bombardier’s track record
is better than others – it repaid in full the $141.8-mil-
lion it received through the federalgovernment’s
Technology Partnerships Canada program in the
1990s, and provided an additional $44.6-million, ac-
cording togovernment records.
Like it or not, the growth of Canada’s aerospace
sector has come with support fromgovernment.“None of this happened by accident, and it can be
lost if we ignore it,” said a 2019 report authored by
former Quebec Premier Jean Charest for the Aero-
space Industries Association of Canada (AIAC).
Regardless of Bombardier’s path forward, there
will be implications for Ottawa. If the company re-
mains a pure-play business jet maker, Bombardier
will no doubt continue tap both Ottawa and its
home province for R&D funding and export financ-
ing.
Allowing the company to be sold – industry ob-
servers say foreign defence giants Northrop Grum-
man Corp. and Lockheed Martin Corp. are natural
buyers – could weaken a sector whose contribution
to Canada’s gross domestic product has already
shrunk by 4 per cent since 2012, according to the
AIAC.
Whether Bombardier’s founding family would
want to sell is another question. If it doesn’t, Bom-
bardier might have to bulk up its own technological
capabilities to survive. “We’re going into this very
crazy world in the future where defence is on the in-
crease, and not to participate in that segment – you
miss out,” says Mr. Vincent, the former Bombardier
executive.
He believes Bombardier will move in that direc-
tion, making strategic acquisitions of its own. If it
can find a financial backer, it could even turn the ta-
bles on Textron and attempt to take it over.
It’s not such a far-fetched idea. The world is awash
in an estimated US$2-trillion of private equity mon-
ey waiting to be put to work, and private capital pro-
viders are cobbling together industry leaders in
many sectors almost overnight. In the past year
alone, the Caisse has funded acquisitions of much
larger rivals by emerging tech giants in its home
province, including payments provider Nuvei Corp.
and pipeline testing firm Eddyfi NDT Inc.
But several observers worry that if there’s renew-
ed ambition to rebuild Bombardier and reinvigorate
aerospace, it won’t be matched by support from Ot-
tawa.
During the Liberalgovernments of Jean Chrétien
and Paul Martin, Ottawa poured an average of $300-
million a year into aerospace through the Technol-
ogy Partnerships Canada program. Under the Har-
per government’s Strategic Aerospace and Defence
Initiative (SADI), that shrunk to less than $150-mil-
lion.
The Trudeaugovernment replaced SADI with a
catch-all Strategic Innovation Fund that also sup-
ports Canada’s automotive and tech sectors. That
rankled the aerospace industry, thoughgovernment
insiders argue the latest program has committed
more money to the sector in its first two years – an
average of about $220-million annually – than SADI
did. But aerospace clearly has less profile in Ottawa
these days. It got a single mention in innovation, sci-
ence and industry minister Navdeep Bains’s most re-
cent mandate letter, and an application for aero-
space to be part of thefederal government’s $950-
million supercluster program was rejected by an in-
dependent selection committee because it wasn’t
deemed “transformational” enough.
Robert Brown, a former CEO of both Bombardier
and CAE, worries that without a comprehensive pro-
gram of support for the domestic aerospace sector,
Canada will increasingly lose its standing in the glob-
al market.
“In G7 countries, industrial-military capability is
an important element of their national security pol-
icy. They support national companies through R&D
and program development in the aerospace and
space divisions, which flows through to commercial
products,” says Mr. Brown, who was once an associ-
ate deputy minister in what is now the Department
of Innovation, Science and Industry.
“Currently in Canada there is nogovernment pro-
gram to compensate for the support that foreign
competitors receive through defence funding,” he
adds. “Given the major change in the landscape of
the Canadian aerospace industry, it’s important that
government and the industry sit down and deter-
mine a way they can approach how they are going to
support Canadian companies so they can compete
globally.”
One way that could happen is for Ottawa to loosen
up procurement practices so more Canadian suppli-
ers can get in on giant defence contracts. But that has
been a long-standing point of tension between elect-
ed officials and public servants, says one former se-
nior government insider: “The way we handle de-
fence procurement in this country is Boy Scoutish.”
“Procurement ministers of all political stripes
have attempted to modernize procurement in the
hopes of advancing Canadian economic interests,”
the source adds. “However, the rigid interpretation
of trade rules by public servants results in a greater
emphasis on the fairness of the process versus desir-
ed economic outcomes.”
But would taxpayers stomach more public mon-
ey being used to fuel a bold new strategy for Bombar-
dier? They’ve seen that movie before, and here we
are. They watched as Bombardier let poor manage-
ment, badgovernance and slack execution fester un-
til the only choice left was extreme dismember-
ment.
And so, if Canada is going to support Bombardier
2.0, it could come down to this: demanding the
Bombardier-Beaudoin family relinquish the power
it holds over the company through super-voting
shares and commit to finding the best executives it
can to turn the company into something great.
That’s something Mr. Tellier pushed for unsuc-
cessfully years ago and that has arguably hindered
the company’s ability to win back investors. With the
third generation of the founding family now in
charge of Bombardier’s fate – and of their declining
wealth – it’s bound to become a key conversation
around both the board table and the dinner table.WORLDDEFENCESPENDING:TOPCOUNTRIES/REGIONS(THEN-YEAR$BILLIONS)$8 006004002000U.S.
W.EUROPE
CHINA
MIDEAST
RUSSIA
FRANCE
U.K.
INDIA20062007
2008
2009
2
0
10
2
011
2
0
12
2
0
13
2
0
14
2
0
15
2
0
16
2
0
17
2
0
18
2
0
19
2020
2
0
21
2022
2023
2024BUSINESSAIRCRAFTMARKETBYCLASS
ASHIFTTOWARDLARGERAIRCRAFT(2 0 19 $BILLIONS)
$3 02520151050TURBOPROPS
JETLINERS+RJsULTRAVERY LARGELARGESUPER-MID-SIZEDMID-SIZED
ENTRY-LEVEL
VERY LIGHT2
008
2
009
2
0
10
2011
2
012
2
013
2
014
2
015
2
016
2
017
2
018
2
019
2
0
20
2
021
2
0
22
2
0
23
2
0
24
2
0
25
2
0
2
6
2
0
27
2
0
28COVERSTORY
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