Bombardier Inc.

Shirley Chenier – IR Pierre Beaudoin – President & CEO Pierre Alary – SVP & CFO

Joe Nadol – JPMorgan Walter Spracklin – RBC Noah Poponak – Goldman Sachs Fadi Chamoun – BMO Capital Markets Turan Quettawala – Scotiabank Cameron Doerksen – National Bank Financial Robert Spingarn – Credit Suisse Benoit Poirier – Desjardins Capital Markets Darryl Genovesi – UBS Securities David Newman – Cormark Securities Ron Epstein – BofA Merrill Lynch Konark Gupta – Macquarie Capital David Tyerman – Canaccord Genuity Deepak Kaushal – GMP Securities Anthony Scilipoti – Veritas Investment Research Steven Trent – Citi Peter Arment – Sterne Agee Paul Vieira – Wall Street Journal Francois Pouliot – Journal Les Affaires Ross Marowits – The Canadian Press Daniel Bordeleau – Info Aero Quebec Molly McMillan – Wichita Eagle Julie Arseneau – The Canadian Press Vanessa Lu – Toronto Star Frederic Tomesco – Bloomberg News

Thank you, operator. (Foreign Language).

Good morning, and… (Interpreted) Hello, everyone. Call intended for investors and financial analysts.

(Interpreted) I also welcome media representatives in attendance today. You'll be able to ask questions a little later in the conference call during the question-and-answer period portion set aside for you.

President and Chief Executive Officer, and Mr. Pierre Alary, Senior Vice President and Chief Financial Officer, will discuss Bombardier's financial results for the third quarter ended September 30th, 2014.

(Interpreted) This conference call is broadcast live on the Internet and is translated into French and English. Access the broadcast on our Website at www.bombardier.com.

And the Webcast archive of the integral version of this call will be available later today. Slides for this presentation in English and French are equally available on our Website.

All dollar values expressed during this conference call are in US dollars unless stated otherwise. I also wish to remind you that, during the course of this conference call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the Corporation.

Several assumptions were made by Bombardier in preparing these statements, and we wish to emphasize that there are risks that actual events or results may differ materially from these statements. For additional information on such assumptions, please refer to the MD&A released today.

Please also note that I am making this cautionary statement on behalf of each speaker whose remarks today will contain forward-looking statements. Pierre Beaudoin will now begin the presentation.

(Interpreted) Welcome to this conference call. We had good results in the quarter with both group increasing their EBIT margins as well as revenues.

For the Company as a whole, revenues increased by 20%, excluding foreign exchange. The major restructuring plan announced in July was deployed in aerospace, while transportation continued to execute on its OneBT plan.

We remain on track to meet our overall guidance for the full year. The CSeries flight test program resumed in September.

And good progress has been made since. In the quarter, we also secured a firm order for 40 CS300s from Macquarie Air Finance plus 10 options, bringing the total commitment for the program to 563 CSeries aircraft, including 243 firm orders.

During the quarter, transportation had a good level of activity with many small and medium orders, one in various regions, bringing the total order level to $10.8 billion, or book to bill of 1.6 for the year. In both groups, a new lighter structure will result in a more nimble organization, which brings reduced cost and contributes to increased profitability.

And now, I'd like to let Pierre Alary walk you through the results for the quarter.

Thank you, Pierre. Good morning to all.

Starting with the aerospace, aerospace revenue for the quarter totaled $2.6 billion compared to $2 billion last year as a result of higher level of deliveries of regional jets and large business aircraft, partly offset by the sale of Flexjet. EBIT before special items totaled $137 million or 5.3% of revenues compared to $86 million or 4.3% last year.

The improvement in margin is mainly due to the higher absorption of lower SG&A expenses and higher margins from commercial aircraft, partly offset by the mix of commercial versus business aircraft delivery. For transportation, revenues totaled $2.3 billion compared to $2.1 billion last year.

And excluding a positive currency impact of $33 million, revenue increased by 12%. EBIT margin before special items is at 6.6% compared to 6% last year, mainly due to higher margin and rolling stock and higher absorption of lower SG&A, partially offset by a lower margin in systems and signaling and services and a lower share of income in joint venture and [associated].

On a consolidated basis, revenues totaled $4.9 billion, which represent an increase of 20%, while EBIT before special items was at $291 million compared to an EBIT of $210 million last year. Net financing expense were $51 million compared to $36 million last year, mainly as a result of the net loss on certain financial instruments compared to a net gain last year.

And with an adjusted effective income tax rate of 21%, the adjusted net income totaled $222 million or $0.12 per share compared to $165 million or $0.09 per share last year. Now, looking at the free cash flow, aerospace cash flow from operations totaled $235 million, while our investment in our programs totaled $415 million.

Transportation used $81 million of cash in the third quarter compared to last year usage of $5 million. And the consolidated free cash flow usage amounted to $368 million compared to usage of $522 million last year.

As at the end of Q3, our short-term capital resources totaled $3.3 billion, including cash and cash equivalents of $1.9 billion.

Thank you, Pierre. We will now start the question period for analysts and investors.

In order to keep the duration of this call at a reasonable length, I would ask you to limit yourself to one question to give everyone a chance to participate, and that includes subquestions. If you have any remaining questions at the end, and if time permits, you can get back in queue.

And if not, you can contact me or Jan after this conference call. We can now start with the first question.

Operator?

Okay. Thank you.

Good morning. I was wondering, Pierre, if you could comment on the business jet demand environment.

Been hearing from some others that things are picking up a little bit, particularly in the US. Noted your book to bill is – was below one.

And I guess I'd be particularly interested in demand at the high end for Globals and maybe geographically as well. Thank you.

Thank you, Joe, for your question. Demand seems to be picking up in the US.

Definitely the NBA was a very strong show for us. We had lots of interest on – across our platform.

Our Global platform continues to be very strong. And we have, as you know, a great backlog there.

So – and we saw our competitor launch new products. But, if you look at the spec of the new products, you can see that the Global remained the airplane of choice based on its performance, cabin size, and speed.

So, overall, we're very well positioned. In terms of geography, it's definitely the US picking up.

And as you know, that's the biggest market by far in the industry. China has been slow this year.

And of course, we saw some orders in Russia. But, it's also been more difficult than previous years.

Okay.

Yes.

Thank you.

Thank you.

Thank you very much. Good morning, everyone.

So, I wanted I guess start with the first question on BA margins and the evolution that you've been seeing. And looking at your guidance for the year at around 5% I believe is where we last had the update, you're clearly above that in the first three quarters of this year.

If we were to look at 5%, we would essentially be building in a fairly significant downturn in your margins in the fourth quarter. And I'm just wondering.

Is there something in the fourth quarter that we should be aware of that might negatively impact margins that would bring the overall margin back down to your guided 5%?

Well, if we look at the margin coming up in the fourth quarter, in terms of volume, it's typically a high-volume quarter. On the other end, what might impact the fourth quarter is the mix of the delivery, if we have a higher level, for example, of Lear versus – as opposed to Global.

And also, on the contingent liability with respect to the SLB GRVG that we do review in the fourth quarter all of our assumption. And we'll review the detail of it.

So, there always can be some changes there. And there could be significant varies a lot.

So, there's different things. So, we're comfortable with our 5% guidance for the full year.

Thank you.

Thank you.

Hi, good morning.

Morning, Noah.

I wondered if you might be able to talk about the plan, as we're getting close to the end of 2014 and closer to 2015, the plan for CRJ and Q400 production rates, given the backlog coverage of current annual rates is fairly low. And this year, especially on the CRJ, you're producing so much higher than you were in the past few years.

If you can help us out at all with where you plan to go next, that'd be helpful.

Well, specific guidance we give in Q4. And we intend to – Q4 results, if you want.

We intend to leave it this way. So, when it comes down for the results next year, we'll give you the guidance.

Overall, we feel there's good opportunities for CRJs and Q400s that we're working on right now. So, we don't see a reason to change.

Okay. Thank you.

Thank you, Noah.

Good morning. I just have a quick question about the Global 7000 and 8000.

Just in the context of sort of the longer-term stake in with the CSeries and the Learjet 85, I'm wondering if you can give us an idea about the status of the resources that you have in place to potentially – it looks like you may have to be running three or four flight test program at the same time at some point in the next 12, 18 months. And also, do you feel that these programs remain on track for the entry into service that you've outlined?

Well, like you said, Fadi, we have to manage many program at once. They were not planned that way.

So, we have to give our flight test department some priorities. And the first two would be the CSeries and Global 7000 and 8000.

The other programs are what we measure is market demand plus how we can support them in flight tests. So, that's how we're going to balance this out.

The Global 7000 and 8000s are making good progress. We've started to receive the parts for the assembly of the first flight test vehicle.

So, we feel the program is on track to certify in 2015.

Okay. That's helpful.

Thanks.

Thank you.

Yes, good morning. I guess, just going back to the business jets again, Pierre, you mentioned that there's some improvement here for sure on the demand side.

And we're hearing that from a lot of other guys as well. Obviously, you guys have a great product line.

I just wanted to understand how much room there might be on your skyline to maybe benefit from this improvement in pricing. And also, could your sense of urgency maybe on the Lear 85 flight test program change as a result of this market improvement?

Well, there's – I think everybody's saying there's good signs of market improvement at this point, like inventory level of used aircraft. But, as far as we're concerned, we have – and we've seen a very strong NBA, maybe not in terms of amounts of people, but in terms of buyers being at the show.

So, we're – and good actions in terms of real orders that we got at the show and letters of intent. But, I can't say yet that, in the small category, it's a very robust market.

It's starting to show signs of picking up. But, I don't think we're yet in a position to say that means more volume.

And as far as the Lear 85, we want this aircraft on the market as soon as possible. But, we have to manage priorities within our flight test program because, unfortunately, they're all at the same time.

Like I said before, the CSeries and the Global 7000, 8000 are unfortunately for the Lear 85 a greater priority, given the market demand and given where we are in the program.

Okay. And if I may, just one more quickly on the restructuring, can you talk a little bit about how that's going and how far ahead you are on it?

And is the organization settling back down again now after the upheaval?

Turan, you'll get in trouble with Shirley.

Yes, going to give you a call right after.

Yes, we've made a lot of progress. Essentially, the layoffs we had announced are done.

It's a very difficult time for the organization when we have layoffs. There may be a few still to go for very specific reasons.

But, overall, as a general rule, the reorganization is in place. And now, with the team, it's really about focusing our objectives going forward, building the motivation with the new organization.

And I'm quite impressed how our employees have supported us in this reorganization and have our focus on the goals that we've set forward. And we're building the momentum right now.

So, I think on this, I take the opportunity to thank our employees for supporting us through this reorganization.

That's great. Thank you very much.

Yes, thanks. Good morning.

My question's on free cash flow, I guess, specifically on Q4. Always, Q4 is a big positive free cash flow quarter for you.

And obviously, if you have higher aircraft deliveries, I can see the aerospace cash flows there. But, my question's really on transportation.

The implied full-year guidance on free cash flow and BT sort of implies that Q4 will have something north of $900 million and positive free cash flow. And I know you had a good Q4 last year in BT.

But, it seems like that may be a pretty high number anyway. So, I'm just wondering if that's kind of overly optimistic.

And why would it be such a nice increase year over year if that is the case?

Yes, well, first of all, in BT, we're seeing it – the free cash flow is generally in line with profitability. Obviously, as you know and as you point out, it's not quarter by quarter.

It's over a number of quarters. So, is it specifically within the year or within five quarters?

And also, planning big new orders, that comes with a lot of cash at signature. Whether it's mid-December or early January can make a difference, as you know.

So, there's some variability. But, free cash flow in the fourth quarter is always strong in BT.

And we do anticipate a strong quarter and to be generally in line with profitability.

Okay. Thank you.

Good morning. Just on the transportation margin, you did quite well this quarter.

Maybe there was a little bit less R&D. And I know the plan is to raise R&D.

But, clearly, that and SG&A have improved. And you've got your overall restructuring program.

But, when we look at the sequential numbers, this is a very significant lift in EBIT. How should we think about the full year with regard to the fact that you're well ahead in this third quarter?

How should margins trend because I would imagine they decline in Q4?

Our guidance is for 6% for the full year. For three quarters, we're at around 5.5% on a similar basis.

So, what we see in the third quarter, it would be – would need to be a similar level to get to 6% for the overall year in a sense. But, again, that's approximately 6%.

And from quarter to quarter, it depends on the adjustment that we do on our various contracts. As you know, we review our contracts on a regular basis, basically every quarter.

So, if there's some adjustment on the contract, a negative adjustment, there's a catchup adjustment. So, that what could explain on a sequential basis what happened.

The other thing on the fourth quarter, it's typically a strong quarter in terms of volume. So, that's a – it's a higher quarter, which helps in the percentage as the level of SG&A period costs is pretty stable.

As you noted, the period costs are effectively lower year over year. That's due to the various initiative that has been taken in transportation to reduce the SG&A and the overhead.

So, Pierre, essentially, the guidance would imply like $170 million in EBIT in Q4, which would be like a 7% type number. And you're essentially saying you think you can get there.

Well, we said approximately 6%. Approximately 6%, does that mean 5.6%?

Does that mean 5.8%, 6.2%?

Okay. But, the point being that Q4 will look a lot more like Q3 than Q1 or Q2.

That's what we can imply through our guidance.

Okay. Thank you.

Thank you.

Yes, good morning. Just to come back on the previous transportation margin question, just wondering if you could provide more color about the share of income coming from the JV.

Basically, you were able to report 6.6% margins despite the fact that the income came down from $24 million last year to $14 million. And I know the JV contribution is expected to improve in the second half.

So, is the strong margin expected for Q4 will come from the fact that the income from JV is expected to improve from the $14 million currently?

We expect that – yes, that the share of income in JVs would contribute to the margin in Q4 at a higher level, yes.

Okay. So, that's my one…

When we look at the share of income in the JV, within the JV, there's maybe two or three contracts. We've got over 500 to 1,000 contracts going on at any point in time.

So, I see that the share in the JV the same way I see all the other contracts. In some cases, the contract – some contract varies downwards, upwards.

But, on the average, that's how we look at it. So, we do report specifically the JVs because that's the accounting rules.

But, to me, I see it as part of the margin, as part of the overall margin and the overall contract portfolio.

Okay.

Thank you, Benoit.

Hi, good morning. Just wanted to ask you a little bit about your residual value guarantees.

It looks like you've burned through about $50 million year to date. And I see you've also reversed a little bit of it, too.

But, the $400 million that is in your current provision is still well below what you disclosed as your total exposure at $1.8 billion. And just wondering what exactly – if you could just give us some of the underlying assumptions behind that $400 million number in terms of what – at what age you sort of expect the rest of the 50-seat regional jets in the fleet to come out, and then also, if that's entirely based on current scope clauses or maybe the potential for further scope revision with this next round of pilot contracts that the US airlines are about to go through in 2015 and 2016.

Thanks.

Yes, so, on these guarantees, we've got residual value guarantees, and we've got first loss deficiency guarantees or credit-related guarantees. So, the credit is at any point in time, the risk during the financing or the lease that...

Right, I'm really just asking about the residual value side.

Well, we have to look at both because we look at the – we have a very detailed model that looks specifically, each contract, when are they due? The residual value guarantee are at a very specific point in time for each of the contracts, for each of the airlines, for each of the deliveries.

So, we have to plot that in time. And that's how we look at it.

We look at the residual value guarantee. We are seeing evaluation from third parties, five or six different third parties.

So, we determine the residual value in time. And then we apply probability.

And as you can imagine, if a customer has both credit and a residual value guarantee, the both represent kind of 100%. So, that means that, if there's no credit event, then we get the residual value guarantee.

If there's a credit event, we don't get the residual value guarantee because the customer won't be there at the end to claim it. So, it's – we cannot look at it in isolation.

It has to be looked at globally. We apply probability.

We use a very sophisticated model. We use the – what are the expected level of loss through what rating agency are publishing.

And that's how we come up with the – our provision. And when you look at the provision, if you put it in relation to the net exposure, it has been very stable over time.

And we've been having those for more than 10 years. And we've been through credit events.

We've been through end of lease term, where we had residual value guarantees. And in each cases, our provision has proven to be sufficient to cover those.

So, we never had a hiccup, a sudden impact on one given quarter based on the credit event or, again, the end of a lease term, a claim on the residual value guarantee. So, I'm very comfortable with the level of provisioning we have.

Just your question on scope, scope in our guarantees I don't think are – one would not influence the other because the RVGs have specific windows. So, there may be an RVG at 10 years or at 15 years.

So, even if an airline was to retire an airplane at seven years, that would not trigger an RVG. So, we have to more look and how these are planned and what is the second life of the 50-passenger.

In fact, what we're seeing in the US is we're seeing the 50-passengers, particularly the Bombardier CRJ, being used even if some airlines have made some statement that they would retire X numbers. In the end, they don't seem to retire them.

They seem to find ways to use them in different ways and very often replacing the 145, which is an airplane that's not aging very well.

Okay. So, can you give us any – you said there are specific points in time where these would pay out.

Can you give us any guidance around how many of the aircraft that are still out there in operation, maybe as a percentage of the total 50-seat fleet, are sort of past the point in time where they could be collecting? I would think that that would essentially reduce the total liability, right?

And so, I guess the total liability must be related to those that haven't reached that point in time. But, is there any guidance you can give us around what the timing looks like?

Yes, and as part of the – our note to the financial statement we give, what we present is the maximum exposure. And again, we've never [to be under] the maximum exposure.

But, if you look at the maximum exposure and if you look at our year-end note with our – as part of the Annual Report, we do provide the maximum exposure under the RVG through time. So, we segregate it through time.

So, part – I don't have it in front of me. But, if you go to our Annual Report, you will have the information as part of the same note on contingent and – commitment and contingency.

Okay.

Year by year.

Year by year.

Great. Thank you very much.

Over a five-year period.

Over five years.

Over five-year period. But, you'll have a breakdown.

Great. Thank you.

Okay?

Good morning. Can you hear me?

Morning, David.

Solid results, so very good to see. I guess my question's more of a macro call, just on the BT side.

Obviously, the train makers in China are considering consolidating, or the government's forcing them to. And they just won that recent contract in Boston.

I don't want to really get into that contract in Boston. But, just more of a macro comment or maybe your thoughts on this, what the potential impact on pricing might be overall.

My understanding is they really came in at a pretty low price on the Boston contract – market share, future orders, especially in their own home market now, obviously, going through deceleration. And do you think there would be – a speculation is out there – think there might be some consolidation of the remaining players of the Western-based players, including yourselves?

Well, first of all, as you pointed out, it's speculation because their trading has been interrupted, but there's been no formal announcement of the merger. Of course, I read the paper like you would and the rumors.

But, I don't want to comment on rumors. As far as competing with our Chinese competitor, what we feel we offer to the market is innovation to our customers, so unique features which differentiate us from the others, capabilities to – proven capabilities to deliver products on time and reliably, reliable products to our customers.

For example, our Ile-de-France product, which we've talked quite a bit on these calls, is the most reliable product in the region of Paris today. So, that's what Bombardier brings to the table.

We've faced many types of competitors through the years. And there's always going to be – it's part of the business that one competitor once in a while gets sort of a price that's different than the others or significantly different.

And at that time, what we always do at Bombardier is make the best offer we can to make a return for the Company. So, I think that's the nature of the industry to have an outlier once in a while.

Now, from a competitive perspective, if we take this US order that you mentioned, it's still under – by America. So, that is, in essence, 60% US content.

So, I think Bombardier has proven it can be competitive under those rules. And this new competitor on the market in the US will need to prove it can be competitive under those rules in time.

We – some people point out that, yes, but they will have supplies from China. My response to this is we have very successful joint ventures in China, and we have very good supplier from China.

So, if that's a way to increase our competitiveness, we always – already use these suppliers for many contracts. So, I don't see them as having a significant competitive advantage.

Do you – you mentioned previously that you're thinking about hatching plans to perhaps come up with a lower-cost offering or a lighter cost or maybe a more standardized offering underneath a different brand. Is that something you're still considering, or where does that stand?

Yes, that's a very good question. And we are still looking technically how to do that.

For example, if we make subways for a lot of the systems in Latin America, as an example, that would like a much more basic subway, we're looking how to build a subway that, of course, will be different than the subways we would make for Montreal, Paris, London – .

Right.

And New York. But, it would be a subway that meets their needs.

And yes, our engineering team are studying that because it's important for us to have this product to compete in many different markets. For example, in China, we built the subways that the people call the Category A subway.

But, they also have a Category B subway, which we don't build because it's a much lower-priced subway, a very different product than the Category A. And we're looking at doing that in other areas of the world at this point.

As far as branding, that's also a discussion. At this point, we have not made a decision on that.

All we can point out, we've seen that in other industry but more in consumer products. We're not sure at this point whether it would add to Bombardier Transport to sell the products under another brand.

But, we are studying that. But, most importantly, we're studying the product that we would need to compete in these lower-cost and lower-spec type of products.

And just the last part of that question – sorry, Shirley. I promise I'll get off.

The – just on the M&A side, if you – were you still looking for perhaps other Western partners? I know there's obviously speculation out there on Ansaldo.

But, are you still looking on that front?

On the what – you said…

So, are you still considering other – acquiring or maybe partnering with other train makers? Like, I know you're looking at Ansaldo at one point.

Is that something that you're still considering?

We always look at opportunities. We've added some small business in signaling, for example, through the years that maybe don't come up on this call, but add – one after the other, add value to our signaling business.

As far as Ansaldo, we're not part of the company and aren't looking at it at this point.

Right. Very good.

Thanks, guys. Great results.

Thank you.

Hey, good morning, guys. Yes, thanks for the call.

So, just maybe one quick question for you. When we think about the CSeries program today, I think you mentioned in the press release you're at about 450 flight test hours on the program.

And my operating assumption is – maybe I'm wrong here – it would be about 2,500 hours to complete the flight test program. How do you get there by the middle of next year?

And it just seems – even if everything goes really well – pretty aggressive.

Well, I think we gave you an indication on the amount of hours early in the program to give you an idea how many flight hours we typically do on an airplane to certify. What's important to us is the earned value when we fly.

So, this can vary widely in the 2,500 hours you pointed out. Of course, it's an idea on how many hours.

And the airplane, through the downtime in the summer, has matured a lot. I can say that, since we got back to fly in September, because of various upgrades we also did since September, we really were flying with a plane and a half, if you want.

And we did more than 120 hours. So, as we get the four airplanes back in flight, you can see that the hours per month will increase substantially.

And there's a point in the program that we get through all of the development flying, and then we get into certification flying, which is a very different type of flying, meaning it's more regular with the authorities to make sure that we've done all the checkpoint that we need to do. So, I feel confident that we're in line to certify the airplane, like we said, in the second half of 2015.

Great. Thank you very much.

Thank you, Ron.

Good morning. Can you hear me okay?

Yes.

Hi. Yes, congratulations on a good quarter.

My just one question would be: I'm trying to understand what actually drove the margins in the quarter, especially on the transportation side. Like, I understand, obviously, they were kind of like some sort of mixed benefits from contracts ending or new contracts beginning and all those things.

But, can you also quantify sort of how much did restructuring or job cuts help during the quarter at both aerospace and transportation? Thank you.

Well, on the restructuring, the cost of restructuring is shown as a special item. So, it's not part of the margin before special item, obviously.

And the impact it had on the transportation side, there was some initiative in terms of cost reduction that were done earlier in the year and some more during the quarter. And you could see it just through the year-over-year comparison of the SG&A as a good way to look at it.

There's also some of it, part of the overhead, which eventually going to translate into the margin as we revise the estimated completion of our various projects. But, that would be the transportation side.

On the aerospace, the restructuring happened towards the end of the quarter. So, we don't see yet the benefits of the restructuring.

Okay. So, you mean basically that $200 million saving should come from fourth quarter onwards.

Exactly, yes.

Okay. Thank you.

Mostly in next year, yes.

I see. Thank you.

And then it's – is it going to be all reflected initially in the P&L? Not necessarily because there's a lot of overhead.

A lot of the overhead goes to the inventories first, gets recycled. There's some overhead in the development cost.

So, it's not necessarily all 100% in the P&L to start. But, at some point, yes, it will all be reflected in the P&L.

Okay. Great.

Thanks.

Thank you, Konark.

Yes, good morning. My questions just follow up on that.

So, on the benefits from the layoffs, they're pretty significant, as you pointed out in the release. Would there be any offsets over the long term such that you wouldn't – that we shouldn't be adding $268 million to our estimates of EBIT?

There's no particular offset. But, what you need to be careful in projecting it is at what point in time it's going to be fully reflected in the results.

Okay.

That's why I'm explaining. First of all, a lot of it goes through inventory, goes through development costs because it's the fully burden rate, if you like.

That is a slight to inventory, to development costs. SG&A will see it immediately because it's all to P&L directly.

But, it – some of it's going to cycle through the inventory. Some of it's going to cycle development cost.

So, that means through the amortization over time. So, it's a question of – more a question of timing as to, is there any offset per se?

There's no offset. It's pure saving.

Okay. Very helpful.

Thank you.

Hi, good morning. Thank you for taking my question.

I did want to ask a follow-up question on the CSeries flight test program. Maybe I'll ask it in slightly a different way.

I was just wondering, Pierre, what are the factors that you monitor and you'll monitor through the next year on the flight test program that are outside of your control that might prevent you from actually delivering the first aircraft before the end of next year?

Well, maybe I'll answer it a little bit differently. And your question is, what do we monitor?

Our flight test program gives us the test that they plan for each day and how it earns value towards the certification. So, this – I get a weekly report on the earned value.

And that's a big part of what I monitor. The other aspect is that we have a few systems that the dates are more challenged than others.

So, some fit well within the target. Some have some challenge.

So, then I would monitor these systems with our engineers and our supplier and how we're addressing the issues on these systems to make sure we hold the promised date. So, it's both supplier delivery and ourselves because we're a supplier to the program to aerostructure.

So, supplier monitoring of the ones that would be more critical, on the critical path, and the earned value every day.

Okay. And I guess what I'm also asking is, how much does first operator readiness factor into the timing of first delivery, things like pilot training or maintenance training?

And if you can perhaps give an update on the status of first operator and where the support for the first pilots and the maintenance mechanics is in terms of the timeline.

That's well planned. And I feel that's not on the critical path.

I think our team are doing a great job on this as far as having the simulator ready when we need it, as far as keeping the people that would maintain this airplane aware of what's going on and getting prepared for the entry into service. It's very critical to our success.

But, I don't see that as a – on the critical path. So, this would be something that would be presented part of all – the whole development.

And of course, there's many, many different stakeholders in bringing this airplane to entry to service and many suppliers. So, what I would mainly discuss is the ones that are on the critical path.

But, this one I feel very comfortable with.

Okay. Thank you for that.

Appreciate it.

Thank you, Deepak.

Thanks very much. Pierre, looking at the OCI statement, I noticed the – under the net – there's a net gain – loss on derivative financial instruments, which is pretty significant, big swing from last year.

And I know this is not going through the P&L, but I just – how should we interpret this? What exactly does this relate to?

Well, it relates to our hedging program. As you know, we do have hedges in place and a significant level of hedges in various currency to protect basically or to fix kind of the exchange rate at the inception of the contract in the case of transportation and in the case of aerospace just to protect ourselves, again, a sudden fluctuation.

We have to mark to market those hedges. So, if the rate modifies, it can go up or down significantly.

And the mark to market, on one side, is on the balance sheet. On the other side, it goes through OCI.

So, it doesn't go through P&L. And it gets recycled into the P&L at the same of the hedged item.

So, therefore, when we deliver, for example, and a supplier – when we pay the suppliers in a different currency in transportation, so we have a different exchange rate than at the signature, then that's when the forward contract ends and typically would offset one another. So, that's the mechanic of it.

So, it goes through OCI because it's sudden fluctuation. And as we keep our hedges to the end and it's effective hedges, at the end, there's no impact on P&L.

So, effectively, if you didn't have the hedge, given the swings in the currency, you would've had – you would've made potentially more money.

Or, less.

Potentially more money.

Or, less.

Potentially because that's a variation. So, it depends where you start.

So…

Yes.

We always hedge our margin, meaning that we want to protect the margin when we bid on a contract. It's nice when it's on the positive side.

People say, you could've made more. But, it goes both ways.

You could make substantially less. So, our job is not to speculate on FX.

Our job is to deliver the margin that we bid on, on a contract or sold an aircraft. So, we don't speculate on…

I remember a quarter, like, three or four years ago where the variance was $1 billion on the negative. Imagine if we had $1 billion to face on the negative.

That's why we have those hedges in place.

And we get those question on the Canadian dollar. Now, if we had not had a hedging program, you would've done better.

Yes, but the other way, we would've faced a downside when the Canadian dollar was going up. In the end, our job is to protect our margin and deliver our plan.

I guess what it shows is that our hedging program is very effective.

Yes. Okay.

Thanks very much.

Thank you, Anthony.

Hi, good morning, everybody. And thanks for taking my question.

I'll stick to Shirley's rule here. I'm just asking about the competitive environment on the commercial jet side.

To what extent, when you guys are going out there on RFPs, are you seeing guys like Mitsubishi heavy creeping in on lower end? And is anybody really biting at the smallest re-engines by Boeing and Airbus, or is it just you and Embraer?

Thanks.

Well, on the regional, it's us and Embraer. We may see this Mitsubishi once in a while.

But, frankly, they're not a factor in the market at this point. It's the traditional competition between us and Embraer.

On the CSeries, we really don't compete much with Embraer at all. It's really about the market and the 130-seat potential and 150 seats.

And if we compete with somebody, it's an airline making a choice for a bigger airplane rather than a smaller airplane. And at this point, people look at the delivery schedule for the CSeries and with the booking that we have, and they feel it puts them far in time before the first delivery.

So, that's one of our challenge. But, there, I think we have to be very disciplined.

We have to focus on the entry into service of the CSeries, not to make too much volume at first, but make sure that we deliver a reliable product and build our reputation for the long term.

Okay. Very helpful.

I'll leave it there. Thanks very much.

Thank you, Steve.

Yes, good morning, everyone. My question's on the aerospace, just on the free cash flow guidance.

You've been tracking I guess in line to your expectations on the CapEx, $1.4 billion for nine months. But, you've generated about $320 million on the free cash flow side.

And your guidance implies $1.2 billion to $1.6 billion. I realize deliveries are going to be up.

But, can you just walk us through a little bit of the dynamics of the big cash flow? And it implies obviously a very massive fourth quarter.

Thank you.

Well, the dynamics of the free cash flow, obviously, to have a very high free cash flow, that means that there's a lot of working capital, positive working capital effect in the fourth quarter above the EBITDA. And these are coming from delivery, higher level of deliveries, so reduced of – reduction of the inventory.

Then, typically, the fourth quarter is very strong in terms of new orders. With new orders comes advances from customers, which is a positive.

So, that – these are the main elements in terms of the variations.

Okay?

Thank you.

Thank you.

Thanks. Just wanted to follow up on the CSeries.

Pierre, you've had, obviously, some fits and starts over the summer but are now ramping up on the hours. And you sound pretty confident in terms of the timing of the rest of the flight test program.

When will you make the decision to really start pulling from a production standpoint you?re your suppliers and from your own factories, from your own supplier-type factories on the program?

Sometime next year, I would say more towards midyear next year to make that decision and how much. Some are longer lead time.

But, there, we look at how we can build the parts as late as possible because, as I said a few times, there's always risk in the – in flight test programs. I want to be careful in the inventory buildup.

But, sometime towards the – maybe second half of next year, we're going to have to start bringing in some parts.

Can you characterize…

Or, ordering the parts.

Yes, could you characterize where you are right now because, obviously, you've been building – you've built out the flight test vehicles. And you have to keep the line warm to some degree at the suppliers.

So, are you building at one every couple of months or something along those lines? And where do you intend to take it in the second half next year?

Not really at this point, we're not keeping things warm, if I can use your term, at this point, given the certification of the airplane in the second half of 2015. There's – the suppliers have our production schedule.

But, there's not much going on in terms of building parts for production.

Okay. Thank you.

In fact, the ramp up, we're starting to define the ramp up. So, it's not like keeping the line warm.

It's physically setting up the line.

Right.

But, that's at the stage we are I would say.

Right. Thanks.

Depends where you are in the supply chain.

Yes, thanks very much. Just a follow up on your cash position, Pierre, and the free cash flow trend, particularly on the CapEx side.

When you set the guidance for us earlier this year, I believe it was $1.2 billion to $1.5 billion for 2015 was kind of the trend that you were looking at in your CapEx spend. Now, obviously, since that time, we've had some – a lot of things have happened in that interim.

I know you'll be updating that guidance with the next quarter. But, given the issues that happened with the engine, it's causing a lot of investors to wonder whether that number has changed substantially.

And as a result, is that cash flow or that free cash flow profile that you've given us out over the next years been materially impacted by the events that happened this year with regards to the development of the CSeries? Can you provide us any comments on that?

Well, I can give a couple of comments. I can reaffirm what you said is that we'll provide more specific guidance on next year with the Q4 results.

Our – we've just confirmed that, second half, we said we're very confident the certification in the second half. That's our plan for the CSeries.

So, we are within the guideline. So, obviously, with the engine, it has given us additional months, which is – cannot be counted fully, as we did some work during those months.

And we'll be giving you a more specific update at the end of the fourth quarter.

I guess my question really was, given what you gave us last time and the events that have happened, should we be bracing for a material change to your existing guidance on 2015 when it comes to CapEx, or is it – there might be a variation that you'll update us with, but stay tuned. But, are we – in other words, should we be bracing for a material change, given the events that have happened, on your 2015 CapEx?

We're not changing our guidance at this point in time.

Okay. Okay.

Thank you very much.

Hi. Pierre, I wanted to follow up on your aerospace comment with regard to the margins being dependent on volumes in Q4.

Your guidance for 200 biz jets implies a fairly high number of deliveries in Q4, higher growth than we've seen so far year to date, yet your commercial guidance implies the opposite, in other words, you – that you would – you don't need many aircraft in Q4 to hit 80 commercial jets or commercial aircraft. How should we think about that?

Will you exceed the number? Is there a falloff in commercial deliveries in Q4?

These are approximate numbers that we give a year ahead of time. Again, it varies.

So, we said 200 on business aircraft. As you pointed out, we need to deliver a significant number in the fourth quarter.

Have we done it before in the fourth quarter at that level of deliveries? The answer is yes.

Do we have the backlog, the production levels set up for – yes. But, if the – we would be three or four short or one or two above, that can happen for sure.

And the same thing with the commercial side. I guess we delivered just about 60 on a cumulative basis.

Our guidance is 80. So, could we be above?

Yes, we can be above. But, if we're above, it's going to be one, two, maybe three, but it won't be, like, 90 as opposed to 80.

Okay. That's very helpful.

And then just one other thing. You just talked about advances from healthy orders.

One of the questions out there today is just exactly how robust those advances are when taking orders, particularly in the commercial side. Would you say that deposits over time have become smaller on a per-unit basis, maybe not necessarily for Bombardier, but perhaps the competition is accepting smaller deposits than they have historically, cash deposits?

Well, I can talk about Bombardier. I cannot talk about the others.

It varies from customer to customer. They're specific in each cases.

It depends of the delivery profile, the timing of the delivery. If you sign an order for deliveries in the 12 – in 24 months from now, then the level of advance is going to be – could be lower.

So, it varies a lot. But, on average, we're getting the level of advances that we used to get or we continue to get.

And there's not a big change in pattern. When we refer to advances related to order, it's more the length of backlog that will influence the advance level.

Okay. Very helpful.

Thank you.

Thank you, Rob.

Thanks very much. I just wanted to quickly go over the tax rate.

You didn't mention it in your discussion. But, it has come – it's gone up significantly this quarter.

And I know it's been quite – it's been fluctuating quite a bit over the last quarters. But, maybe you could explain a little bit more detail of what you mean by the nonrecognition of income tax benefits and so on.

Thanks.

Yes, if you look at our notes in the financial statement, the year-end note where we give more detail, you will notice that we've got significant tax attribute in Canada. And they're not fully accounted for.

So, therefore, the restructuring that we've put in place and the charge of restructuring is – for the aerospace is mostly in Canada. So, therefore, I cannot record tax benefit in relation to that expense, so which makes the net expense – tax expense higher as a percentage of EBT after special item.

So, that's what explains the variance. So, if you're adjusting the tax rate based on the adjusted net income, and we do provide the impact of tax on the adjustment to the adjusted net income, then we have a tax rate that is more in the low 20s as opposed to the above 30.

So, that's the main variance.

And why is that that you can't deduct that again in Canada?

Because we've got tax attributes. I've got more tax attribute than what I can account it for on the debit side.

We're limited in terms of what we can record as deferred tax assets. So, I'm capped on the deferred tax assets.

So, if I've got an expense, then I cannot record the benefit.

I understand. Okay.

Thanks very much.

Thank you, Anthony.

Yes, my next question is on foreign exchange for aerospace. It should be benefiting pretty significantly I would think over the next while from foreign exchange, given the weaker Canadian dollar.

With your hedging program, I’m wondering what kind of effect of foreign exchange you would've had on the Canadian dollar versus the US dollar on the production in – or the deliveries in the third quarter.

That's for Pierre Alary to answer.

I'm not sure I can answer that question. Well, I don't have the information just right in front of me.

In the broad sense, Pierre, how much of the big decline in the Canadian dollar would you have realized so far? It would seem to me not a huge amount of that, given that you hedged so heavily and it takes a while for the hedge effects to roll off.

Is that fair?

It takes about 18 months. So, it's very gradual.

And in the results, year over year, if you'd like, the impact is not significant. Otherwise, we would have highlighted it in our variation year over year.

Okay. That's helpful.

Thank you…

18 months ahead of time.

Yes, okay. So, it's ahead of us.

Yes.

Yes.

Thanks, David. Okay.

Operator, I think we'll go to the question period for the media.

Good morning, everyone. I want to – this is a bit of housekeeping.

But, I just want to be clear about the restructuring charge because you give it in two segments. But, the way I look at it, it's – and just a quick glance on the footnotes, it's – am I correct to say that there was total restructuring charges, about $120 million, and it's for both the aerospace and transport, and it relates to – I guess the footnotes now say is a reduction of 2,000 jobs in – as a result of the July announcement.

And I have a supplementary question I'm just going to stick in, and that'll be it from me. Is there any – is there – what is the concern about eating through your cash on hand if there's any further delays in the development and delivery of the CSeries aircraft.

I'm going to leave it at that. Thank you very much.

Okay. On the restructuring, the $120 million is effectively for both groups, both aerospace and transportation.

And the reference to 2,000 employees, that's for the aerospace. For transportation, we're talking about 900 employees.

Okay. So, like 2,900, but is that the result of the two restructuring announcements, or just the single one from July?

It's – when you refer to two, it's both aerospace and transportation in July.

In…

But, I guess the one you referred to when you spoke about 2,000 employees, this is an aerospace announcement strictly. And then we added transportation announcement, part of a program we call OneBT.

In July, we announced 900 reduction. So, you have to add these up.

And the $120 million is for both groups, the charge of $120 million.

Okay. Because maybe – and maybe this – I need to clear this up then because I thought, at the time of the July announcement, there was an estimated job reduction of 1,800.

But, are you suggesting it could be more than 1,800 now, closer to the, as you put – go ahead.

We're not suggesting the – we had given an approximation of 1,800. What we work with management is to right size the organization for the volume that we have.

And in the end, the layoffs that we have done, mostly in indirect, has been around more 2,000.

In Aerospace, yes…

Not an announcement of additional. Most of that is done.

Okay. Okay.

Fair enough. My second question about the cash flow?

About the cash flow is that, typically, our fourth quarter is very strong in terms of cash. So – cash generation.

So, therefore, the cash is being replenished in the fourth quarter. We have $1.9 billion of cash and $1.4 billion of line of credit that are available.

And we're replenishing that $1.9 billion in the fourth quarter. So, we're very comfortable with our level of liquidity.

Okay. Thank you.

Okay?

Yes.

Thank you.

(Interpreted) Question on margin. The eight – $68 million in savings, is that for both restructuring, both on the side of transportation and aeronautics?

(Interpreted) No, in aeronautics, it's $200 million in savings. Transportation $68 million.

(Interpreted) Now, I understand. So, $68 is transportation.

Did you put this in the MD&A because…

(Interpreted) Actually, if you refer to them, you'll see that.

(Interpreted) So, I think I had not picked up the one covering aeronautics. So, the impact on margin, it's not something that we see in the results now, but over the next year, what will be the impact on your income?

(Interpreted) Well, the amount – on the aeronautic side, aerospace, it's $200 million, will not be reflected initially in the margin. But, over time, they will be reflected because those savings – it's nearly exclusively of the indirect type.

When we talk about the direct type, it depends where it is written under or reported under. If it's inventory, that'll be it.

When the inventory will be used, then we will see the results. Then the indirect side, the people working on our development projects, that's under project cost, so can't see it right away.

But, then you've got amortization over time. And then there's also the part of our admin cost.

And that will be seen right away in the results.

(Interpreted) So, you won't see it right now, but over time, spaced out, you will see the effect. Let me try to rephrase that.

The CSeries entry into service, is it about same time, or do you expect it's going to be higher or lower?

(Interpreted) Well, we usually don't project beyond what we said for 2014. You will get our projections at Q4 for 2015.

(Interpreted) Thank you.

Yes, a few things. First of all, I'm wondering, in terms of the assembly of the CSeries, when do you expect to be hiring people?

How many? Can you provide a little bit more details as to that end of things?

I don't got that information with me, but as we plan to certify the second half of 2015, we will start planning and bringing in people for the production of the aircraft sometime in 2015, so probably starting in second quarter. But, I don't have the specific, but it will be very gradual as we get ready for production.

So, assembly people will start coming onboard the second quarter gradually?

Well, I'm saying sometime in 2015. I don't have the information with me, but it will be gradual through the year 2015.

Okay. And in terms of numbers, how many people are we talking about now?

I don't have it with me. So, I don't want to speculate on the numbers.

Okay. And secondly, in terms of the earlier comments about a sort of a cheaper train, a less expensive train option, when would that come to market?

When will you be deciding that option?

Well, on train, it's always related to specific contract opportunities. So, we're looking at the ability to design a train.

And as first of all, I mentioned a subway, which is slightly different than our – in our description of products. And we're looking at opportunities.

The focus has been for us right now in Latin America to see where would be the next opportunity to bid and what kind of product we could put in front that would be a low-cost subway. But, the specific date, it really depends on when the requests for proposal come up in the various cities in Latin America.

So, it's more in terms of bidding. It's not that you're going to announce something as this is what – a new direction.

No, on trains, we don't announce a product per se. They're usually related to a product – to a contract.

And then we can announce the product. So, it's not something we'll announce on its own.

And relating to that, the increased competition from China, do you think that you've contributed to that in some ways by your activities in China that you've sort of armed these companies with new ways of doing things that they're now coming back to compete against you?

We – I would say China's been a very good market for Bombardier. So, we took advantage of a great opportunity to be in a growing market.

And we continue to invest in China and grow in China. It's a great market.

So, I don't – I see the upside of being in China really.

Thank you.

Thank you.

(Interpreted) Good morning. I'd like to come back to the Learjet 85.

I know you said in English it wasn't a priority, but have you really decided that it will be certified and commercialized, or is there a small possibility that you might even abandon that aircraft and…

(Interpreted) – No, I didn't say that it wasn't a priority. I said we had to manage our priorities amongst the different flight tests because there are so many flight testing programs.

The Learjet 85 category and proof is at the NBA in Orlando. We introduced the aircraft there.

We presented it. That was our test vehicle.

We did 160 – no, not – excuse me, 60 flights, sorry, more than 100 hours of flight. So, we're moving ahead.

And that will be quite a success story in the market.

(Interpreted) Yes, but, the problem you have with certification, can you tell us a bit about that?

(Interpreted) We don't really have a problem with its certification. Few years back, we might have said that there was a problem.

We addressed it when it came to producing an aircraft made of composite. But, whatever the problem was at the time, it's been settled.

We know how to make this aircraft, how to manufacture it. We just need time and investments to complete the program.

(Interpreted) And according to a rumor that was going around at the NBA, they said you were perhaps looking at preparing a Lear 80, a smaller one that would be made entirely out of aluminum. Is that the case?

(Interpreted) That's the first time I hear this. No, no intention of doing something like that.

(Interpreted) Fine. Thank you.

Hi, good morning. My question was also related to the Lear 85 and the Learjet side of things.

Do you have any more clarification on when the Lear 85 might – what – be certified then and any projections? And then I was just wondering, on the Learjet side of things, how the market is shaping up for that size of aircraft.

Well, let me start by that. As you saw comments from our competitors also I'm sure, we see some signs of picking up in the light market with the Lear 70/75, we have upgraded these products substantially through the last few years.

And the 70/75s are very competitive on the market. And we feel that we see signs now, particularly when we see the inventory of used aircraft, the pricing of used aircraft.

I can't see that the demand for new is as strong as it was once, and yet, but with the US economy picking up, and we're quite upbeat about that category. As far as the Lear 85, no, we have not announced a date of entry into service right now because we have a lot of things going on in our flight test department.

And I don't want to announce a specific date on the Lear 85 at this point.

Is the main thing just more of a juggling of all the flight testing that you have to do?

Yes, a big part of it is managing priorities in our flight test department.

Okay. Thank you.

Thank you.

(Interpreted) Question. Yes, good morning, Mr.

Beaudoin. We haven't been hearing about Russia all that much in late.

Is there less pressure in terms of sanctions? Can you update us about the project for the Q400 over there in Russia?

(Interpreted) First of all, as concerns Russia, it is still important market for Bombardier. We're there for transportation.

We also have a lot of sales of private jets over there. So, for the Q400 right now, we're not moving ahead because the conditions are not right at this point in time for a joint venture in Russia.

(Interpreted) Do you have a better notion of what the timelines might be? When the agreement was announced for 2014, it's been pushed back at least to 2015.

(Interpreted) Well, given the political situation and the economy in Russia right now, we're setting this project aside for the time being. And we'll see what happens over the next number of months and then decide if we have to go ahead.

(Interpreted) So, it's on the ice right now. It's on the back burner.

It might never happen if the situation doesn't improve?

(Interpreted) Right now, the conditions are not right for us to move ahead with that project.

(Interpreted) A broader question now. The aerospace industry in Quebec – well, Bombardier has a lot of tax credits.

And this is being reviewed, being reduced. I'd like to hear you tell us more about what the impact might be for Bombardier for some of your activities in Quebec.

(Interpreted) Of course, Bombardier invests a lot in R&D in Canada, in Quebec. We have a lot of – well, thousands of engineers working at designing our aircraft.

And where there are changes in terms of tax credits, this bothers us. It might impact not just Bombardier's investments, but also those of our suppliers.

So, we've spoken to government about these issues. We believe that the tax credits for the aerospace industry have tremendously contributed to our economy.

And we've made representations to them saying that they ought to go back to what it was before the changes that were implemented this year.

(Interpreted) One of your spokespersons sort of said that Bombardier might move sort of its – some of its engineering work elsewhere. Might this be the case?

(Interpreted) Well, when you invest in programs and you want to remain competitive on the world market, you have to see what the best place is to do the work.

(Interpreted) Thank you.

Hi, good morning. I'm just wondering if you could just walk me through on the CSeries the flight test vehicles.

My understanding is there's five of the CS100s. How many of them are flying at this point?

And also, if you could explain to me, are you thinking of reducing the number of flight hours needed for certification from the 2,400? I didn't quite understand it.

Well, I'll start with the flight hours. Flight hours is always a guideline.

What's important for us is that we accomplish certain tests to certify the aircraft. So, if we can do it in less flight hours, better it is because it'll cost less money.

So, we gave that as a guideline. But, it can vary substantially because they're tests.

And sometimes, you have to redo a test, or other times, the test goes well right from the start. And right now, the CSeries is performing very well.

We're accomplishing our flight test or our – the specific tests at a good rate. So, we feel confident with the certification of second half 2015.

You asked how many flight test vehicles are flying right now. There's two.

Okay.

There's a third one. The airplane that had the engine incident, that is in the flight test department right now getting ready for flight.

And the fourth aircraft is in Wichita and is going through some major modifications. And we're bringing the airplane closer to a production standard if I can say it this way.

And it will return to flight in the coming weeks.

Okay. And in terms of – there's always a possibility that the number of flight test hours could be reduced substantially, what does that mean?

Like, are we talking 25%, 50%? What does substantially mean?

Well, the guideline's 2,400 hours. So, it means, depending on how fast we can accomplish the test, it can vary.

But, it can vary both ways. So, we gave you guidelines.

And that's the guidelines we're going to stick with.

Okay. Thank you.

Thank you.

(Interpreted) Good morning, Mr. Beaudoin.

First of all, as concerns the quarter in terms of administrative charges, fees, this reduction, is it mostly due to the plan that you came out with for January aerospace, or is this also a reduction in transportation that we've seen with the OneBT plan?

(Interpreted) Well, as concerns OneBT, there were certain changes. Well, both in transportation and aerospace, there were initiatives at the beginning of the year to reduce the SG&A, which impacts our results, of course.

But, as to the restructuring that we carried out, it was done mostly toward the end of the quarter. So, we still haven't seen the benefits of this restructuring in the results for the quarter for aerospace.

There were additional initiatives taken or additional changes in terms of transportation. And those were done toward the end of the third quarter.

So, once again, the benefits will remain to be seen. What we mentioned in the press release, the benefits will be seen later on, not just in terms of administration costs.

There are parts of these costs that go to production. And there's inventory.

And the cost of the planes will go down. There are people who are in development.

And those fees are being capitalized. And we'll see that this will mean lower capitalization.

So, you can't just say that it's admin costs of $200 million and some in aerospace. That's not the case.

(Interpreted) Another question dealing with the business jets. You said that the market was kind of slow in China.

Why is this? Is this an overall economic slowdown, or perhaps there are changes in terms of what people are doing on the Chinese market or the consumers are doing over there.

Is there less appetite for larger business jets, for instance? What's your explanation?

(Interpreted) That's a more difficult market this year. The government put a lot of – really highlighted the expenses in terms of government companies.

And this had an impact also on private companies because there's a lot of pressure in terms of their own expenditures. But, when you look at those companies that have chartered planes, there's been changes in the patterns.

They used the same plane and rent them for – on an hourly basis. But, this is temporary, in my opinion, because Chinese companies are looking at the international market.

And they want to remain competitive internationally. And they need business jets to be there.

(Interpreted) One last question, if I may, coming back to the question that my colleague asked about Russia. So, basically, your talks with Rostec are interrupted?

(Interpreted) Well, the Q400 project for an assembly line in Russia, that's been set aside for the time being. I'm not saying that we're not talking with Rostec.

They do believe in the Q400. And we think that there's quite a market for that in Russia.

And we could look at other ways for us to get into that market than not just the Q400.

(Interpreted) But, this won't move ahead as long as the plant doesn't move ahead?

(Interpreted) As I said, we're looking at other ways to penetrate that market. They need an aircraft such as the Q400.

So, we're still talking about selling that plane to Russia.

(Interpreted) Thank you very much.

Operator, do we have any more questions?

(Foreign Language). Thank you, all, for being with us today.

(Foreign Language).