Bombardier Inc.

Good morning, everyone, and welcome to Bombardier’s fourth quarter and full year 2019 earnings call. I wish to remind you that, during the course of this call, we may make projections or other forward-looking statements regarding future events or the financial performance of the corporation.

There are risks that actual events or results may differ materially from these statements. For additional information on forward-looking statements and underlying assumptions, please refer to the MD&A.

I’m making this cautionary statement on behalf of each speaker on this call. With me today is our President and Chief Executive Officer, Alain Bellemare; and our Chief Financial Officer, John Di Bert, to review our financial results for the fourth quarter and yearend 2019.

I will now like to turn over the discussion to Alain.

Well, thank you, Patrick. Good morning, everyone, and thank you for joining us today.

Let me start by saying that it is a busy time at Bombardier. We continue to make steady progress towards completing our turnaround journey, including finalizing our exit from commercial aerospace, successfully executing the last stages of the ramp-up at Business Aviation and addressing our challenging projects at Transportation, while completing the transformation.

Before I talk about our outlook for 2020, I want to first recap the significant progress made in 2019. While financial performance at Transportation was disappointing, Bombardier ended 2019 in a much stronger position than we started.

Our transformation in aerospace is largely completed. Last night, we announced an agreement with Airbus and Investissement Québec to exit the A220 partnership.

This is the final step to exit commercial aerospace and it is a big deal. You will recall, in 2016, our commercial aerospace business lost approximately $400 million and was consuming over $1 billion in cash.

Addressing this was critical to our turnaround and it is now behind us. Over the past few years, we have successfully dealt with our underperforming assets, selling the Q400 and CRJ program.

We position the C Series, now Airbus 220 to achieve its full potential under Airbus control and we monetize our commercial aerostructure business with the sales to Spirit. With our exit from the A220, we have improved Bombardier’s cash position by roughly $1.3 billion.

And we have completely eliminated any future funding obligations for the A220 program. This transaction, combined with the previously announced aerospace divestitures will generate more than $1.6 billion in cash proceeds and eliminate close to $2 billion in liabilities and future commitments.

Our liquidated position remains strong with pro forma cash on-hand of more than $4 billion and $5.5 billion in liquidity. This gives us the necessary flexibility to complete the turnaround.

A few thoughts as we turn the page on commercial aerospace. First, we are incredibly proud of the many achievements and tremendous impact Bombardier has had on the commercial aerospace industry.

We are equally proud of the responsible manner in which we have exited commercial aerospace, preserving jobs and reinforcing the aerospace cluster in Quebec in Canada. And we are confident that the Airbus 220 program will enjoy a long and successful run under Airbus and Québec’s leadership.

All Bombardier employees will play the key role in designing and bring this incredible aircraft into the market should be very proud. And we thank them for their many contributions and hard work.

For Bombardier, our future in aerospace is with our industry-leading business jet franchise. And we see tremendous opportunities.

As you saw in our Q4 results, Business Aviation performance is tracking right on plan. And 2020 will be another year of significant growth.

In 2019, we completed the consolidation and streamlining of our aerospace assets and capabilities into a single Bombardier aviation business unit. And we successfully ramped our production of our flagship Global 7500.

David and the team have successfully navigated the transition to full-scale production. This included the full integration of the wing operations acquired from Triumph last year.

In 2020, we expect that deliveries will accelerate roughly tripling our 2019 output. We currently have a dozen Global 7500 in service.

The fleet-leader has logged more than 1,000 flight hours and flown almost 0.5 million medical miles. In-service performance and reliability have been outstanding.

The aircraft continues to set records and win awards for performance, fuel efficiency and cabin comfort. In 2019, we also certified and brought into service the Global 5500 and 6500 on time, on budget and with better-than-expected performance.

Bombardier has the best product portfolio in the industry, where our new Globals, Learjet Liberty 75 and the market-leading Challenger family. Our aftermarket growth strategy also remains on track, delivering double-digit organic growth in 2019.

And we are successfully executing on major expansion projects around the world, including new facilities in Singapore, London and Miami to better support our customers worldwide and our large in-service fleet of over 4,800 aircrafts. Bombardier aviation has great momentum and we expect another strong year in 2020 with very solid organic growth.

Turning now to transportation, where we are focused on completing the transformation. While our financial performance in Q4 was disappointing, we continue to make significant progress addressing our legacy projects, we have completed deliveries in New York, Toronto and Crossrail.

We have nearly completed production for the LoTrain project and deliveries have just started. At SBB, we have 31 trains in service, up from 0 a year ago.

This has been a very complex project, and we now have delivered half of the order. The trains are performing very well and we continue to work very closely with the customer.

In the fourth quarter, the team was driving heavy workload to achieve key technical milestones, which resolved outstanding commercial claims and [re-baseline] [ph] our delivery schedule in the UK and Germany. And we run into a number of challenges.

For example, the LoTrain multi-unit software certification came later than expected, facing the schedule reset. As I just said, these trains are now being delivered.

Commercial settlement costs also came in higher than anticipated as we took action to put a number of outstanding claims behind us. As we told you in Q3, there would be some volatility in the near-term as we were to complete our large challenging projects and reposition BT for more stable earnings growth and cash generation.

We are confident in the growth fundamentals at BT and we continue to win in the marketplace. In fact, total order intake in 2019 reached a record $10 billion, almost 70% of these orders came from service contracts, signaling projects, [I-reuse] [ph] platforms or options on existing rolling stock contracts.

These carry higher margin and much lower execution risk. In closing, Danny and his team are executing on our projects with discipline and they’re focused on completing the turnaround at BT.

For 2020 outlook, we expect strong double-digit revenue growth to more than $15 billion. We are driving margin expansion in both businesses and we expect consolidated free cash flow to be positive, excluding RVG.

Let me stop here and turn it over to John to review our Q4 results and walk you through our 2020 outlook.

Thank you, Alain, and good morning, everyone. We had a busy year at Aviation.

We successfully ramped up the Global 7500, certified the Global 5500 and 6500, and continue to grow our backlog and aftermarket business. We also reshape the portfolio by exiting commercial aircraft and monetizing underperforming assets, generating total proceeds of over $2 billion from deals announced over the last 12 to 18 months.

With the focused aviation franchise, we were able to simplify our cost structure and integrate all of our engineering and manufacturing activities, creating synergies and allowing for margin expansion as we grow. At Transportation, although financial performance did not meet our expectations, we stabilize production, achieving important technical milestones, improved customer relationships and result commercial issues on key contracts.

Achieving these goals came with significant volatility and discontinued through the fourth quarter. Our prudent cash and liquidity approach are served as well and navigating this volatility.

And our proactive management of debt maturities continues to offer necessary runway to turn the business to positive free cash flow. And with the announcement on the ACLP, we are further increasing our liquidity by adding close to $600 million of cash on hand, providing us with even more operating flexibility.

The sale of our remaining stake in A220 also preserves approximately $700 million in additional cash over the next 24 months. Eliminate liabilities associated with our existing position as an aerostructure supplier to the JV and cancel the 100 million warrants that were issued to Airbus in 2017.

So while this transaction comes at $1.6 billion accounting write-down, it improves our overall liquidity position by close to $1.3 billion. Let maybe clear, we are in solid liquidity position with over $4 billion of pro forma cash including proceeds from announced transaction and $5.5 billion of available liquidity with no meaningful bond maturities until December 2021.

Let me now turn to a review of our 2 segments and our 2020 outlook. Starting with Aviation, we are again this past year; we continue to drive stronger financial performance.

When looking at the business aircraft activities alone, revenue in 2019 accounted for $5.4 billion of the total $7.5 billion at Aviation. These activities grew 8.5% organically despite some year-end deliveries shifting into 2020.

The remaining $2.1 billion in revenues are mostly non-recurring as we expect to close the transactions with MHI, Spirit and Airbus at various points in 2020. Growth in Aviation at 2019 was driven by business aircraft with Global 7500 deliveries and increasing after-market activities.

These same 2 drivers are expected to significantly grow Aviation’s revenues in 2020 on a comparable basis, meaning, excluding revenues from ongoing divestitures. This assumes 160 or more aircraft deliveries, including a significant acceleration of Global 7500.

Turning to earnings, in the fourth quarter as deliveries of early Global 7500 production aircraft picked up, our adjusted EBIT margin was 5.9%. For the year, the margin was 7.1% in line with guidance and 70 basis points better than 2018, including higher amortization driven by Global 7500 deliveries.

On EBITDA, the 2019 earnings improvement is even more meaningful with Aviation’s margins increasing 200 basis points year-over-year to 10.8%. Looking forward to 2020, we expect the EBITDA margin expansion to continue at a similar pace.

As new global aircraft production continues to intensify, we expect Aviation’s EBIT margin in the first half of 2020 to remain in the mid-single-digit range. By mid-year, as we move beyond the 25th production aircraft, we expect the production learning curve to drive higher margins, supporting and expansion of full year EBIT margins over 2019.

In summary, our Aviation business continues to operate with discipline and it supported by its industry-leading $14.4 billion backlog. In 2020, we are completing the reshaping of the portfolio, fully ramping up production and continuing to streamline the operations in line with our turnaround goals.

Moving to our real business. Our priority in 2020 is to largely complete challenging legacy projects and gradually restore the businesses, earning power and ability to generate cash.

Our backlog today supports the stronger financial performance goal, as we have been winning a healthier mix of higher margin and lower risk projects. In 2019, the achievements and milestones on challenging projects in the UK, Switzerland and Germany required significant investments and additional costs, which had a meaningful impact on revenues and earnings.

These investments and costs ultimately supported project delivery schedules, improved in-service reliability of trend and customer resolutions. They led to charges of more than $500 million in 2019, including $350 million in the fourth quarter significantly diluting adjusted EBIT margins to allow to a low of approximately 1% for the year.

These charges increase to share of projects with neutral or negative margins. In fact, 30% of the $8.2 billion revenue reported in 2019 were significantly dilutive to margins.

And as we move to complete these projects in 2020 and 2021, we expect some gradual margin expansion even as the shared revenue from dilutive projects remains elevated. Looking at 2020 outlook on a consolidated basis, we expect revenues to grow organically at double digit rate to more than $15 billion compared to $13.7 billion realized from our sustaining activities in 2019.

Most of this growth is anticipated from the plan to increase of the Global 7500 deliveries at BA and from projects into backlog at BT. EBITDA margin is forecast, it’s grown from 5.7% to approximately 7%, while EBIT margin expansion is expected to be closer to 50 basis points as a result of the additional amortization charge associated with higher aircraft deliveries.

Our plan is supported by growing margins at BA, the elimination of the A220 equity pickup starting today and a conservative view of BT’s earnings as we complete the turnaround. Before I discuss the free cash flow outlook for 2020, let me give color on the fourth quarter.

We generated $1 billion of positive cash in 3 months leading to December 31, a typical solid fourth quarter. However, with $1.6 billion Q4 target, renew our plan was a significant undertaking.

While we released $1.3 billion in working capital in Q4 by achieving many of our objectives, we did come up short due to timing of milestones and deliveries primarily at BT. 2020 cash flow should benefit from these delayed cash inflows.

But they will also be affected by the cash cost of the Q4 charges at BT. And so, our free cash flow expectations for 2020 remain unchanged versus 3 months ago.

We expect to be marginally positive, excluding close to $200 million of RVG payments due in 2020. We view these payments as exit costs of our CRJ program and they will be funded from the proceeds of its sale.

Our 2020 free cash flow plan assumes stable CapEx year over year and a working capital release of $300 million to $500 million from the delivery of finished train inventory. We also expect free cash flow in 2020 to follow typical quarterly pattern with cash generation concentrated in the fourth quarter.

For the first half of the year, cash usage is expected to be slightly better than last year; although, it will absorb most of the $200 million of RVG payments for the year. Let me now wrap up.

We are committed to a stronger balance sheet and creating long-term sustainable value from the businesses. To achieve this goal, we have clear priorities in 2020.

Continue to grow our business aircraft franchise by increasing delivering and driving the learning curve. Complete the ongoing commercial aircraft divestitures by mid-year, generating over $1.6 billion in cash.

Secure the industrial ramp up at BT, while we [burn] [ph] down challenging projects. And as we’ve demonstrated, we will continue to manage liquidity prudently to protect and complete the turnaround, and position ourself for deleveraging.

With that, operator, we’re ready for our first question.

Good morning. Thanks for taking the question.

Good morning.

Good morning.

So I just wanted to – I think, Alain, you said your future is aviation. Obviously, a lot of speculation out there in the press was regard to what you might do with BT.

I guess, what has changed to kind of drive these potential divestitures, given that you’re still forecasting positive free cash flow in 2020 and you don’t have any maturity, debt maturities isn’t until 2021.

Good morning, David. We feel very good about where we are from a cash position.

It gives us like plenty of options. So optionality is a good thing.

What we’ve said is like we’re looking at opportunities to accelerate the deleveraging phase of the turnaround plan. So that is, in that context that we talked about looking at strategic options.

Okay. On the 7500, I think previously you have been talking about 35 to 40 deliveries in 2020.

Can you give us what that forecast is now and what issues are you seeing in terms of getting 7500s out the door? Thanks.

I think that 35 to 40 is still in the range. That’s for 2020.

The production ramp up is going extremely well right now. I mean, most of the aircrafts are in the system for 2020.

Last year, obviously, the challenges were on the integration of the acquisition wing from Triumph, so a lot of work was deployed on that front. So a lot of focus on the [dream] [ph] side of the aircraft.

This year, towards the end of the year, was more in the completion side. And it’s still the case today.

So the team is actively working at increasing capacity on completion. But by and large, most of the assets that we need for 2020 are somewhere in the system.

All right, thanks very much.

Thanks.

Yeah, thanks. Just a follow-up on the, I guess, the potential divestiture, additional divestiture question.

I mean, could you just talk a bit, at all about the process, I mean, maybe discussions on timing, when you might expect to make a decision here or is this sort of a fluid situation and you’re just exploring all of your options?

As I said before, I think that we feel very good now with the completion of the move of our A220 to Airbus. It gives us like plenty of liquidity to do the right things.

So we are looking at our strategic options, as you understand, I mean, this is very sensitive. We believe that we have like very strong assets.

We have a strong cash position now and we’re going to do it the right way.

Okay. I just – I mean, and maybe just a quick question on your pension deficit, I mean, I see at the end of 2019 $2.25 billion.

I think that excludes the Belfast Morocco aerostructures related to pension deficit. I’m just wondering if you could talk at all about what the split is on the pension deficit between, I guess, the transportation and then the remaining aviation segments.

Is it – just any kind of breakdown of that $2.25 billion?

Yeah, it’s roughly, I’d say, 40% BT, 60% BA, in that ballpark.

Okay. Perfect.

Thanks very much.

No problem.

Hey, good morning.

Good morning.

Good morning, Rob.

I want to – hi, guys. Just, John, for you, lot of moving pieces.

You talked about $4 billion in cash and – but given the timing on some of these moving pieces, if we just look forward to the end of 2020, if you keep the 2 primary businesses, BT and BA. I think you’re guiding to about a $1 billion in EBITDA.

What’s the net debt position pro forma for everything, RVGs, cash out, pensions? What’s your net debt to EBITDA pro forma for the 2 businesses for 2020 yearend?

You’ve got about $9 billion of debt. As you know pension liability, a couple of billion dollars.

And I’d say that total exit cost of all the commercial liabilities is in the neighborhood of about $0.5 billion. So that’s kind of your top number.

And we expect, probably at the end of next year to be in the ballpark at the end of 2020 of, I’d say, approx. $4 billion, so you’re going to get a number there if you add the [3, somewhere probably around 12 versus 5] [ph].

Okay. All right, that’s very helpful.

And the other questions on the wing, Alain, you just talked about 7500 wing.

It’s just the 12 versus 4, yeah, just a correction there. I just speak 12 versus 4, right?

I said 5, but I meant 4.

Right, okay. And then just on the 7500, you mentioned, the wing has been a gating factor, you took it from Triumph.

Before you acquired it, it was losing about US$200-million-plus in cash. How do we think about the progress there?

What’s the status of that wing and the cash burn there?

Yeah, you’re absolutely right. I mean, and this did put pressure on us in 2019, as we’re coming down the learning curve.

So as we took over, the team put a cost reduction plan in place to bring the cost of the wing down and that’s exactly what we’re doing. So that was additional pressure in 2019.

And it is part of the Global 7500 overall learning curve coming down over the next like 2 to 3 years. So we’re tracking as per plan right now.

We’re very pleased that we took over the wing. The most critical thing was to stabilize production and ensure security of supplies, which we did in 2019.

And it came with a bit of [fame] [ph]. But right now, we’re very pleased with this, with the fact that we’re owning the wing and that we’re managing it.

So hopefully, moving forward this will start reaping the benefit from this.

Okay. Could we get the breakeven in a couple of years?

That’s the plan on the wing and do better. The key here is at the aircraft level we are driving the learning curves as per plan.

That’s the key here.

Okay. Thank you.

Thank you, both.

Thank you.

Thanks very much and good morning. I think you had mentioned kind of a similar case of EBITDA margin expansion at aviation in 2020 versus 2019.

So just to verify that, that would take the EBITDA margin at aviation up to something in the high 12%s, as you got about 200 basis points of expansion year-on-year in 2019, and we can think about that margin on maybe a $7 billion business jet revenue base and that’s the contribution of business jets to that $1 billion of company-wide EBITDA?

Yeah, it’s pretty good math, Seth.

Okay, okay. And then, just the – I guess, the program – when we think about program tooling going forward, I think, it was about $280 million kind of capitalized development cost in 2019.

Where does that number in 2020? And what is it like at a normalized level?

I think you’re going to see a period here of some flat spend. So I think 2020, you should expect something very similar in 2019, and I think that’s kind of the expectation we have over the next, let’s say, probably 18 to 24 months at least.

Okay. Great.

Thanks. Thank you very much.

Thanks very much. Good morning, everyone.

Good morning, Walter.

So turning to your business jet emergent cadence, John, you mentioned, I think, it was mid-single-digit EBIT in the first half, and then full year something greater than 2020. Can you talk a bit about what are the major hurdles that will or risks that would love you to achieve those levels?

And then, as we go into 2021 and onward, what would kind of be the step function ramp that you would see from this business longer-term?

So I’d say that in terms of 2020, it’s really a matter of as we get through every tail, every units of the first 25, 30 units then we start to really see some margin production from the aircraft as we get closer to the end of the year. I think, the 2020 still is a ramp up year or transition year learning curve, but we see some tails especially in the back end of the year, is there to produce some profit as you go forward.

I would say that 2021 starts to get some normalized production as you will expect to get from mature rates. And then from that on it, I think, you got a business, including after-market, which is growing part of the other portfolio, continued just good cost management and synergies in the portfolio, we have 2 great aircraft in the 5500 and 6500 are come into service this year.

Those are going to be great aircraft as well though produce I think some expansion. So overall, I think, it’s a solid double-digit margin business, when you look at longer-term.

That’s great. Second question here is similar emergence in BT.

Once you through this problem contracts, is it effectively when they’re off the books you can go right back to kind of your emergent profile and around the 8% level. Or is there some – is it more gradual process have you built in extra cost to deal with this that you’ll have to get through.

And other words is 2020 going to be a year that’s still impacted by the problem contracts and after that could we see a fairly significant step up in 2021.

Yeah, it’s a good question. I need to be honest; we have gone through some volatility.

So it’s been a bit tough. And I think, which you can see in 2020 guidance that we expect to the portfolio still has that mid-single-digit capability.

So when you look at the bulk of the portfolio. But in the short-term, I mean, here over the next 12 to 18 months, we are continuing to work through some challenged projects and those projects are largely margin neutral.

At this point, what happens is that any [trucks] [ph] or adjustments go straight to the bottom line. So it creates volatility, which is why we guide conservatively this year on a total margin for the business.

We’ll offer some room for that BT volatility through 2020. In the fact that matter is that we put a lot behind this and we’ve got now to its work through – the portfolio through the next 18 months.

When you look further out, very encouraged by the fact that, we have built a strong backlog, it has a lot of follow-on work options and so on. We have good service components, signaling business and all of that has been built over last 2, 3 years here on the strength of standardizing the platforms and improving the business.

And that’s the benefit that we expect to get on a longer or sustainable term so for BT, I think, that’s – the objective here to be kind of mid- to- high-single-digit margins, is still fully intact. We’re working through 2020 and probably some parts of early 2021.

And then after that the portfolio should be, say, much lower risk and more stable. And that should generate good cash, good earnings, and that will completely focus, but we’re also pretty excited.

Okay. I appreciate the time.

Thanks. Good morning.

I have a question for you on cash flow, I think, free cash flow in the release talks about being positive in both businesses in 2020. And just making sure on a comparable basis, when I look at the free cash flow of BT Holdco, I think, it was minus $560 million in 2019.

Are those kind of comparable numbers that you’re going to take BT to that level or the 2 different definitions?

No. I am not sure, if I get this question clearly, but we did have negative cash production at the BT in 2019 and that’s very typical.

We did make some investments and as a result, how was the tough year for us including some of the timing and the inventory that remains track at the end of 2019. So with some of the work that was done through the year, and participate at the end of the year and kind of opening up and starting to be able to release product.

We do expect to have release of the working capital through the year. And for us that means that BT will go back to generating as it typically does generate cash on a normal basis.

But then also should benefit from the release of these projects and inventories that have not yet come through the system. So BT really is contributed to, I’d say, working capital release in 2020.

And then BT will continue to generate the positive cash as it’s been – sorry, be – I was going to say be able to generate positive cash as it has been in 2019, but also grow as the business continues to a top-line, but also to improve margin with the learning curve on the 7500. So across the board, both businesses improving cash.

Okay. And then just curious on cash taxes, I think, all cash taxes today here at BT.

Just curious, how far is the future there’s be a currently in vision not having to have those cash taxes given all the address just that I’ve heard?

Yes. You are correct.

The cash taxes or BT and everything else is really de minimis, but we expect that the positive tax situation for BA to sustain for quite a while, so nothing in the short-term here we generate any outflows of taxes for profitably of gain.

Okay. Thanks.

Yes. Good morning.

Thank you. I apologize if the numbers were given out, just a lot of moving parts here.

What’s the CapEx for 2020 looking like?

I think, it’s pretty stable to what we did this year. Looking about something 500, 550 range.

Okay. 500, 550, okay.

And the 160 aircraft you mentioned, this is always in a jet?

We’re going to have, I think, 3 jets on the CRJ side, but effectively the ones that’s the jets on the business jets side, de minimis 3.

Okay. And last question on the – given kind of the background what’s hearing on divestiture and strategic initiatives.

How do you think of BA the standalone company and potentially from a cost of capital point of view, obviously, this is a very cyclical business? Do you feel, this is a business that gets survival on good time as a standalone?

For sure, when I going to comment on that, Fadi, it’s – but I’ll just say that this is an amazing business, it’s like the base business aircraft franchise in the world would very amazing product portfolio, best brand in the industry, the Global, the Challenger and Lear, very, very strong backlog. So I mean, this is a very good business.

And we’re very excited by this business.

Okay. Thank you.

Yeah. Good morning, everyone.

Just for Business Aviation, could you may be mentioned provide some color about whether it be a booking in BA was impacted by the noise around the strategic review. And also what was the specific reason that drove the slowdown in business jet services this quarter?

On the overall market, I would say, that’s – no, nothing that we are seeing here. I mean, I think at the day, we’ve got great products to well position and there’s a lot of excitement around all the new aircraft to putting out there.

As you Challenger is the best value proposition in the industry as well. So our aircraft and our activity remain solid within the industry and given the new product entries that we have, nothing to comment on the service, I think, actually is doing very well.

They continue to grow and making investments, and there maybe did impact of the fact that you had training businesses and early part of the year and last year. But this year, we did sell the training business somewhere early in the year.

So that might be a compare explanation, but other than that, it’s going well.

Okay. And for the quick follow-up, John, could you mention about the split in terms of free cash flow between the first half and the second half and also the split between BA and BT overall for the corporate costs?

Thank you.

Okay. Thanks, Benoit.

No, no specific comments on BU cash generation as I said before at the prior question, I think, both will start to develop pretty good cash flows through 2020, and that’s an important part of how we get to our even positive cash flows for the full year. And with respect to first half, second half, I would just say that, we will have the difficult pattern here, so Q1 will see some usages that we build up working cap and inventory for deliveries through the year.

At the same time, we will have most of the RVG payments go through the first half of the year. So that does put a driving as it’s countered as part of free cash flow in the second half, I think, we’re going to see a lot of the release from BT start to move through the systems that will produce some solid cash flows from deliveries and working capital has been trapped up.

And then, of course, the 7500 continues to ramp through the year will be a good ramp, but at the same time, better in the second half. So Q4 will be another big quarter, but I think more normalized this time around.

Perfect. Thanks, John.

Hey, guys, good morning.

Good morning.

Good morning.

Hey, so at this point, I’m actually just very confused as to what the strategy of the company is, because your qualitative commentary sounds pretty good, it’s – we’re ending 2019 stronger than we started it. The BT challenged programs are making progress, the turnaround continues.

But you’ve now sold several businesses, a few of which seemed kind of recurring revenue high margin businesses. Rest of A220 out this morning at a number that I think was much lower than the markets, and certainly that you had on the books.

And there is several media alerts reporting that you’re in discussions on both sides of the remaining business. So it’s starting to look more like an asset, liquidation and the turnaround.

So I guess, my question is, has this always been the plan, I mean, does this look like what the plan look like when you started 3 years ago. And specifically with the recent review of strategic alternatives, why is there the sort of quick look to do all of this.

If the business isn’t fact getting better and turning around right now.

Well, simple term, and I know, it’s like balance sheet. That is not complicated.

And I’ll repeat that again, I mean, the reason why we’re looking at strategic options this to accelerate the deleveraging of the business that’s the reason. That is the fundamental reason.

We have in our strong liquidity position. We have strong assets now.

We have been doing a lot of clean up over that past 5 years, addressing some of the underperforming businesses the Q400, the CRJ, like the C Series was the biggest challenge in 2015, when we joined the company. We were losing a lot of money, it was a cash drain.

Today, I mean, we’ve just finalized that and the asset is that a good place. So the strategy was always to exit commercial aircraft, and we’ve done that very successfully.

And as I said in my comments, while protecting in our jobs, so with that, we’ve done that in a very responsible manner. We are now ending up would like 2 very strong franchises.

The train side and the business aircraft side, a strong cash position and we have options. And we’re going to continue looking at our options to see if there is a way, that we can accelerate the deleveraging space of the turnaround plan.

But Alain, why is that those urgency right now. If you’ve made the progress you’ve made, you’re guiding to slightly positive free cash flow this year.

You’ve increased the liquidity already, you pushed out maturities. The C Series program was several billion dollars to develop, you’ve now taken in $600 million.

I guess, I just don’t understand the urgency right now on these asset moves relative to the progress that you’re saying you have made in the underlying cash flows of good businesses?

Yeah. No, it’s not about urgency, it’s about being proactive.

It’s very different. And we’ve been managing this business in a very proactive way for 5 years straight now.

We’ve always committed to preserving 2.5 billion orders of cash on hand and more as we were going through is very complex and our turnaround journey. And now, we’re sitting at a very good place and we have options, and we’re looking at all of the options.

And I guess, this is what you would expect to do is to be proactive, and look at all we can trade value moving forward for shareholders.

We’ll move on to our next question, please. Operator?

Thank you, and good morning, everyone. Just wanted to a follow-up on the asset sales, so you have C Series, CRJ and aerostructures, all 3 kind of divested here.

And you spoke about some of the debt numbers that you have on the balance sheet and the pension all those things. Just wanted to make sure, these asset sales have been reduced some of the debt numbers on the balance sheet, including long-term debt or any other debt that you owe to government or suppliers?

I know about residual value guarantees, but anything else on the balance sheet that they have reduced? And then, is there any tax obligation that you owe from the sale proceeds?

Yeah, so, tax obligation is none. These were all the right proceeds.

We have plenty of tax attributes to absorb them. We’ve done, I think a tremendous job de-risking the balance sheet to reduce these divestitures, probably in excess of $2 billion of liability.

So if you think about it. I mean, I just list them off.

One is any future funding on the A220. And we talk about that today, $700 million.

We have significant pension plans for all these divested assets and those have all been moved over to the buyer probably in excess of $400 million of liabilities reduced. Government loans, I would say, on programs that were supported for growth, in particular, the UK, over $200 million, $300 million there.

And I would say that on an RVG basis, I mean, if you recall in 2015, we started off with total potential exposure over $2 billion. And today, essentially, we’ve moved off or settled or transferred all liabilities, except for about $400-million-or-so that we retained, which are all settled in the longer moving.

And of those $400 million or so, about half of them come through in 2020 and the other half over the next couple of years, so between 2021 and 2023. I feel very good actually about the de-risking of the balance sheet throughout the work that we’ve done.

And essentially now, can focus on generating cash and using the liquidity on hand to start to work through the deleveraging and debt pay-down phase eventually.

Okay, that’s great color, John. Thanks.

And then, secondly, on the liquidity position obviously, so you talk about more than $4 billion in cash position. So just wanted to understand, so you have some free cash flow this year, that’s excluding the $200 million RVG payment, you’re basically generating more cash.

And then, so that should improve the cash position. And then, would you have any other cash outlay?

You have preferred dividend. Would you have any dividends paid to the BT Holdco that you anticipate?

And any other cash outlay that we have not factored in and in these numbers? Thanks.

Yeah, sure, no problem. I think below free cash flow, you – because of the way IFRS’ accounting, there is probably somewhere $75 million to $100 million of lease liability of payments that fall below the free cash flow line.

And then we have probably somewhere in the neighborhood of $50 million, $75 million of, I call them, separation or transition cost as we separate some of these businesses. That will happen probably in 2020 and it will probably happen again in 2021.

We do some support and SLAs and other things as we moved the assets to the new buyers. So we put aside some cash for that.

And essentially that’s outside of free cash flow as well. So long and short of it, I would say, is that you’ve got – lease liabilities or couple of other payments for separation, the RVGs we talked about.

And that’s kind of it. We had an initial payment at the beginning of the year for the [CECL] [ph] that we have made prior to it, including the transaction.

That’s out of the system now. So what’s left is just the inbound divestitures.

That’s going to approximate $1.05 billion or $1.06 billion.

So just to be sure, nothing on BT, CDPQ dividend payment?

Yeah, good question. So we don’t expect a dividend payment in 2020.

We’ll revaluate that during the year. But I expect probably as we improve the business, we’ll go back to dividend probably in 2021.

So for 2020, don’t expect any leakage there. So all this together, I’d say that – we would say that something around approaching $4 billion.

If you think about the comment I made, said that we’re about $4-billion-and-change, the year pro forma, the $2.6 billion at the end of 2019, you add to that the divestitures, gets you to just about $4 billion. And I would say that if you take that, assume free cash flow breakeven, deduct RVGs and maybe the other payments I mentioned and you’re still somewhere approaching $4 billion end of year 2020.

Perfect. Thanks for the color.

Thank you.

Operator, we’ll take our last question, please.

Thanks very much, guys. Good morning.

Just 2 questions from me. First question in terms of the transport segment, I’m wondering how you guys are thinking about marketing campaigns in terms of potential new business, especially in emerging markets and what’s your view on – what level of diversity we could see in that business longer term?

Well, good morning. As you heard this morning, there is like – we had a very, very strong order intake in 2019.

One of the major projects was Cairo. So we are competing around the world.

That’s the beauty of the train franchise. It’s very global and we work in all part of the world, some time alone and some time with partners, and in South Asia and China.

So we believe that the business is well positioned to keep growing on the top-line front.

Great, thanks, Alain. And, sorry, I had trouble getting on to your call, so I had actually missed that comment.

Just one last follow-up, when we think about transport contracts in the EU versus outside of EU, is there anything more onerous about new contracts, either from a litigation perspective or government demand that maybe make those contracts a bit tougher versus other markets?

I wouldn’t say so. I think it’s the – each customer, they have their own set of requirements and expectations.

So I – it’s pretty much similar all over the world. It is a very global business.

It’s a solid business, solid growth. It’s like mid-single-digit growth.

So it’s a – like always a bit better than GDP growth. We are really focused right now on reuse, exercise of options.

So working with the existing customer base that we have, and new customers where they see the application of our existing platforms to suit their needs. So I would say very global, there is – I don’t see a big difference between EU and the rest of the world, whether it’s like North America, Asia or other regions.

Okay, let me leave it.

Thank you, Steve.

Thanks very much.

Hey, thanks.

Okay. Thank you, operator.

That concludes our call.