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Executives

Shirley Chénier - Director, IR

Pierre Beaudoin - President and CEO

Pierre Alary - SVP and CFO

Analysts

Robert Spingarn - Credit Suisse

Fadi Chamoun - BMO

Turan Quettawala - Scotia Bank

Walter Spracklin - RBC

Benoit Poirier - Desjardins Bank

Cameron Doerksen - National Bank Financial

Darryl Genovesi - UBS Securities

David Newman - Cormark Securities

David Tyerman - Canaccord Genuity

Deepak Kaushal - GMP Securities

Stephen Trent - Citigroup

Konark Gupta - Macquarie

Peter Arment - Sterne, Agee

Anthony Scilipoti - Veritas

Chris Murray - AltaCorp Capital

Ross Marowits - Canadian Press

Bombardier Inc. (OTC:BOMBF) Q2 2014 Results Earnings Conference Call July 31, 2014 8:00 AM ET

Operator

[Foreign Language] Good morning, ladies and gentlemen, and welcome to the Bombardier Conference Call. Please be advised that this call is being recorded.

I would now like to turn the meeting over to Ms. Shirley Chénier, Senior Director, Investor Relations. Please go ahead, Ms. Chénier.

Shirley Chénier

[Foreign Language] Good morning, and welcome to Bombardier’s conference call intended for investors and financial analysts. I would also like to welcome the representatives of the media who are with us today. And you will have the opportunity to ask your questions later on during this call, when we go to Q&A for the media.

Pierre Beaudoin, President, Chief Executive Officer, and Mr. Pierre Alary, Senior Vice President and Chief Financial Officer, will discuss Bombardier’s financial results for the second quarter ended June 30, 2014.

This conference call is broadcast directly over the internet. It’s also translated into French and in English. Broadcast on our website at www.bombardier.com and a 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 right now. All dollar values expressed during this conference call are in U.S. 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.

Pierre Beaudoin

Welcome to everyone and thank you for joining us. Quarters were inline with our expectation and we remain on track to meet our guidance for the full year. Both group revenues increase in the quarter and we are seeing a high of activity for our products.

During the quarter Bombardier transport continue to win a good level of the orders bringing in total amount to 9.7 billion for the first six months of the year. Needless to say, we will exceed the book-to-bill of one for the year.

In the quarter, Transportation also instigated further cost reduction measures as part of one BT imitative in order to increase efficiency and profitability. Now as you all know last year we announced dual organization structure by which BA will no long exist the group. This will lead to a wider structure.

I am dissatisfied with the execution of the both and decided that a major changes was warranted. We will as four business segment Transportation, Business Aircraft, Commercial Aircraft and the newly formed Aero Structure and Engineering service business as we intend to further market our expertise to the Aerospace industry. This new organization start it will allow us to increase our focus growth area in the context of upcoming entry into service of the product we have in development. The result will be more profitable, agile and flexible organization to better meet our customers need. The added benefit is more transparently as we plan to disclose our results on the basis of this new segment as of fiscal 2015.

And now I will let Pierre Alary walk you through the results for the quarter.

Pierre Alary

Thank you, Pierre. Good morning. Aerospace revenues for the quarter totaled 2.5 billion compared to 2.3 billion last year. This increase result from higher deliveries of regional jet at [Bombardier] (ph) partially offset by lower level of delivery and business aircraft mainly due to the transition to the Challenger 350, which was certified at the end of the quarter.

EBIT totaled 141 million or 5.6% of revenue inline with our guidance for the year, which compares to an EBIT before special item of 107 million or 4.7% last year. The transportation revenues totaled 2.4 billion compared to 2.2 billion last year this represent an increase of 6% excluding the impact of foreign exchange. EBIT margin is at 160 million or 4.9% compared to 150 or 6.9% last year. The decrease is mainly due to a lower level – lower gross margin in system and signaling due to the finalization of the major system project which are attributable impact last year partially offset by higher absorption of SG&A expenses.

On a consolidated basis, revenues totaled 4.9 billion, an increase of 9% compared to last, excluding the impact of foreign exchange. EBIT was up 257 million at same level as last year. Net financing expense amount to 41 million compared to 36 million last year and with an effective income factory of 28.2%, the adjusted net income totaled 192 million, or $0.10 per share compared to 158 million or $0.09 per share last year.

Now looking at free cash flow, as expected we use cash in the second quarter. Aerospace used 363 million of cash which is better than last year usage of 459 million. And use of cash is essentially due to our significant investment in program, which amounted to 509 million in this quarter.

Transportation use 47 million of cash in the second quarter, compared to last year usage of 21 million. For the full year, we expect free cash flow to be in line with our guidance. At the end of Q2 our short-term capital resources totaled 3.9 billion including cash and cash equivalent of 2.5 billion.

And now to conclude, we are reaffirming all our guidance for 2014.

Shirley Chénier

Thank you, Pierre. We will now start the question period for analysts and investors. So 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 I will be enforcing this. If you had any remaining questions at the end and if time permits, you can get back in queue and if not, you can contact or Ian after this conference call.

And we will start with the first question.

Question-and-Answer Session

Operator

(Operator Instructions) The first question is from Robert Spingarn from Credit Suisse. Please go ahead.

Robert Spingarn - Credit Suisse

Good morning. I was hoping you could talk a little bit about the commercial aircraft strength in the quarter both on the revenue side and on the margin side. And how you expect that to progress for the remainder of the year?

Pierre Beaudoin

Well if you look at our guidance for the year, we’ve said that the on the regional aircraft side and commercial aircraft side, we would have 80 deliveries, that’s the – approximately 80 deliveries which is quite a significant increase compared to what we had last year. So, basically, that’s inline with the guidance and the expectations and it’s following the orders that we receive from Delta some time ago and American Airline last year.

Robert Spingarn - Credit Suisse

So Pierre should we think about the second quarter, it looks a lot like your fourth quarter normally looks, so you sort of had a lower first quarter, higher second quarter, should we see a similar cadence in Q3 and Q4?

Pierre Beaudoin

Yes. It’s a gradual ramp up following the order that we received that I referred too. We increased the production rate, so it is impacting gradually in the quarter effectively.

Robert Spingarn - Credit Suisse

And the margins popped up….

Pierre Beaudoin

And imagine that it’s diving a positive impact on the margin.

Robert Spingarn - Credit Suisse

So its volume in our pricing. On the margins it’s more volume leverage and not so much pricing?

Pierre Alary

We will say so. Yes.

Pierre Beaudoin

Thank you.

Operator

The following question is from Fadi Chamoun from BMO. Please go ahead.

Fadi Chamoun - BMO

Good morning. One question. Okay, can you give us sort of an update on CSeries flight test program whether it is out right now and do you expect to resume. And may be if you can sort of dive into some details potentially into the sort of where is that process out bringing the flight back on and how quickly it can just happen?

Pierre Beaudoin

Okay. So we stayed with our statement that we expect the flight within week, but I can tell you that we have made substantial progress. And we have now received a solution from graph to go back to slide, and now our team is examining the solution asking the proper question, taking the time to make sure that from Bombardier perspective that we can have a safe return to flight and we should make a decision shortly. Of course, that’s why we continue to stay within week because this is a technical evaluation we are doing and we may have more questions to Pratt before we make a decision. So right now what you should keep in mind as we made substantial progress because Pratt has given us a solution to return to flat.

Fadi Chamoun - BMO

Okay. Have you received back in the engines from them in your cars or that does not happened yet?

Pierre Beaudoin

Yes. We have engines installed in FTV2.

Fadi Chamoun - BMO

Okay. So you started to retest in your engine – the basically right now?

Pierre Beaudoin

The engines have been tested as Pratt and we have one flight test vehicles that have engines installed on and I don’t know the state of the other one – for the other FTV.

Fadi Chamoun - BMO

Okay. And in relation to that are you prepared to sort of give us a any guidance about the key theory sort of delays have impacted or maybe not impacted the entry into service and the timeline for the other three business jet program the global Learjet 85?

Pierre Beaudoin

Well, lets keep the program separated for the C series we always said the entrance for service second half 2015 this is a six months windows, why did we give a six months window from the start these are flight test we know there is the – there is a event that happened in flight test one of them has been the engine event. So we still feel confident that we are within the window that we gave you which is second half of 2015. The other programs are making progress, we are always evaluating our priorities within the expert that we have in Bombardier but they are making progress.

Fadi Chamoun - BMO

Thank you, Pierre.

Pierre Beaudoin

Okay. Thank you.

Operator

Thank you. The following question is from Turan Quettawala from Scotia Bank. Please go ahead.

Turan Quettawala - Scotia Bank

Yes. Good morning. I guess maybe saying with the C Series Pierre you are front number of LOI here signed the air show I think about 40% commitments now are LOIs, I am just trying to understand if you can give us some help there in terms of based on what you know about the conditions behind these LOIs, how many of they do you think can be firmed up over the next 12 months or so?

Pierre Alary

That's a customer decision as you know, but I'd like the precise of the commitment there is also some auctions in there of existing customer which would not be part of the backlog. We choose to give you more transparency on the sessions that going on because there advance session with customers and you can see there is a lot of activity on the C Series. But as far as firming up if we talk about then -- we because we have had central discussions with the customers but firming up is in their hand.

Turan Quettawala - Scotia Bank

Are all the conditions around these LOIs based on performance stats or something on C Series is it maybe something else?

Pierre Alary

I – you know every discussions are different but customers express a lot of confidents in the performance of the airplane and the technical of the airplane of course the engine we had maybe disappointing to some to us also, because you know we had demanded for quite sometime but in the end its something that customers understand very well. They understand we’re in flight test, I don’t think that's a major issue.

Turan Quettawala - Scotia Bank

Okay. Thank you very much.

Shirley Chénier

Thank you, Turan.

Operator

Thank you. Next the following question is from Walter Spracklin from RBC. Please go ahead.

Walter Spracklin - RBC

Thanks very much. Good morning everyone. I guess my question peers on the aero structure and engineering shows division that you have curved out into a new separate reporting entity; I’m just wondering your strategy around that. Could you talk a little bit about the reason why you decided to create this division, whether its produce some of the good value you have created through your experience and some of your development programs? And specifically, as we try to model this, presumably you’ve been giving us with some historical data. But is there any reason why there is some thing a new focus placed on this division that would therefore have us model new revenue or new earnings or new kinds of patterns or trends that having existed over the historical data that you’ll provide us when you give to us for 2015?

Pierre Beaudoin

Well, of course, we still in discussion entirely of examine this competitive position, but the reasons for going forward is a couple of things. In the last few years, we’ve been invested in low cost countries to do structural work, Mexico and Morocco. We’ve invested in technology to develop accessories with the Learjet 85 and the Global 7,000 and 8,000 and they are very advanced technology that we think can be marketed. And most importantly, it’s the group, the Aerospace group has made a decision before it’s capital allocation between airplanes structures, if it’s the same FEMA was assessing the airplane seems to win all the time. So, we wanted to look at capital allocation based on returns for aero structure and we want to allocate the proper amount of money to go and be competitive in this market.

And the last point is that, as you know the aerospace industry, in the commercial mainly, has very big backlog and they are looking for high quality suppliers delivered both on quality and on time and Bombardier has this position. So, I think we have many elements that will permit us to grow the sector and be very competitive with the others.

Walter Spracklin – RBC

Just to clarify there as well, do you think it will be difficult to sell into potential some competitors and if that proves to be the case would you consider as this segment did gain traction spinning it off is a separate entity?

Pierre Beaudoin

Well the spin-off is not our intention, but to sell to the competitors we already do, we make the large components for Airbus. We make their tail for the industry, Roll Royce and others IAE. So there is sectors of our business where we do components for others and the feedback that we get, we are always one of their best suppliers after that. So it’s more.

I want to make sure that the discussions about the opportunities for Bombardier are at a level at the corporate level if we look at it from a investment prospective and we are looking to capital.

Walter Spracklin – RBC

Understand. Thank you very much.

Shirley Chénier

Thank you, Walter.

Operator

Thank you. The following question is from Benoit Poirier from Desjardins Bank.

Benoit Poirier - Desjardins Bank

Benoit Poirier from Desjardins. My question is related to the new organization of structure that we’ve announced I was just wondering here whether you could provide more details on, whether it will provide more margin of size on aerospace this year? And whether it will translate into some severance cost? And what we should expect?

Pierre Alary

Well, given we – it will not translate into more margins this year as we have to reorganize the group, unfortunately, we has to do some lay off part of this decision this is always difficult to ask lay off some of our employees. But in the end its about making a agile organization, a more flexible organization and one organization that can make decisions more rapidly and by reducing our overhead by about 15% we feel we will be able to achieve this. This will take next few months to do, yes, there will be a reorganization charge we feel this is – will be a special charge and this will be done in 2014.

Benoit Poirier - Desjardins Bank

Okay. And no amount or any idea about the time issues for the amount this year?

Pierre Alary

No its too early to give you the figures as far as the chart for the reorganization, but what you will see through the margin that the impact of reducing our overhead, we're talking about 1800 in direct so that is essential reduction.

Benoit Poirier - Desjardins Bank

Thanks for the time.

Pierre Alary

Thank you.

Operator

Thank you. The following question is from Cameron Doerksen from National Bank Financial. Please go ahead.

Cameron Doerksen - National Bank Financial

Hi, good morning. My questions on the transportation in the quarter is basically unchanged from Q1, thus sound you are sort of accelerating some of the structuring there, was there anything in the quarter of significance related to restructuring chargers that baked into the margin, in Q2?

Pierre Beaudoin

Well what we see in Q2 is that would be [indiscernible] as been what has been put in place at the beginning of the year in terms of reduction of some of the cost we can see that the SG&A is quite lower year-over-year, and also you know the impact vis-à-vis higher revenue and lower SG&A and values as been put an impact on percentage. So that's where we see it. And we will see it obviously more so in the third and the fourth quarter.

Cameron Doerksen - National Bank Financial

But whether any I guess quote, unquote especial charges in Q2 related to restructuring that would be part of that margin, it would make that margin lower than – otherwise would have been?

Pierre Alary

No. There was no special charges in this quarter.

Pierre Beaudoin

It's a more of a question of mix of contract as the year go by.

Cameron Doerksen - National Bank Financial

Okay. Thank you.

Shirley Chénier

Thank you, Cameron.

Operator

Thank you. The following question is from [indiscernible] from Goldman Sachs. Please go ahead.

Unidentified Analyst

Hi. Good morning, everyone. I believe you have a partnership I guess I am not exactly sure, exactly what kind of partnership, but a partnership with caterpillar for manufacturing of diesel locomotives and it looks caterpillar has talked about a potential depth in that business next year because of transition from a prior generation product to a next generation product. Is that something you are seeing and can you discuss that and if possible can you size actually how big that is for your transportation segment?

Pierre Beaudoin

It’s a small impact for us if there would be variations and aware of that specific to small within transport. It is not a partnership we have in assembly contract, we simply assemble there some of their locomotive on it Mexico. And they give us a contract per year how many locomotive and we just assemble that so it’s signficant for us.

Pierre Alary

I think that contract pretty much ended and so release that it has no impact on our results.

Unidentified Analyst

Okay. So that’s not – okay. I was looking at the release that talks about the India assembly in addition to what occurred in Mexico. But it sounds like you guys – but it sounds like it’s small and you don’t see an impact next year from that?

Pierre Beaudoin

And we don’t assemble locomotives for Caterpillar in India.

Unidentified Analyst

Okay. Okay. Thank you.

Shirley Chénier

Thank you, Noah.

Operator

Thank you. The following question is from Darryl Genovesi from UBS Securities. Please go ahead.

Darryl Genovesi - UBS Securities

Good morning. So, maybe just to take it back to seaters for a minute. You guys have been articulating an opportunity to reduce the normal flight test hours that you required to complete because of ground testing that you are doing in its place. But I don’t think you’ve ever really given us any help in terms of what that – in terms of quantifying what that does to your initial 2,400 hour forecast for the program. So, I guess that was – I was hoping you may help us size the benefit from the ability to do more of the testing on the ground?

Pierre Beaudoin

Our team is constantly looking out to optimize the target programs and tests. We gave you a general guidance in terms of hours, but I think it’s very unfair. I can’t take this specific quantities and magnitudes. I think there is discussions going on all the time on this one. It would vary, so the guidance we gave you is right.

Darryl Genovesi - UBS Securities

Okay. So you still think that 2,400 hour program is probably about right?

Pierre Beaudoin

Yeah. It’s more or less this, it could be a little bit less, it really depends what goes on in flight test. So, I know our team has discussed that some of the things that were planned to do in the air will be done on the ground. But in the end, we gave you a general view on how many hours is it.

Darryl Genovesi - UBS Securities

Okay. And then I mean maybe just I guess any quick thoughts I don’t want to take too much time, but you talked a little bit about the margin progression at Transportation in the second half but its look like you are baking any about 200 basis points margin acceleration in order to get your 6% number for the year. I guess, are there any discrete items kind of other than what you’ve pulled out already that would help you out, because it looks to me like at least a last couple of years the second half is actually been sequentially weaker?

Pierre Alary

Particularly the last couple of years the second half has been lower as there were some contract adjustment on the few contracts that we have issued that we refer too in the past couple of year, but typically the second half is stronger than the first half.

Darryl Genovesi - UBS Securities

Okay. And the guidance – the guidance does not include the restructuring impact is that correct?

Pierre Alary

That’s correct.

Darryl Genovesi - UBS Securities

Thank you.

Shirley Chénier

Thank you, Darryl.

Operator

Thank you. The following question is from David Newman from Cormark Securities. Please go ahead.

David Newman - Cormark Securities

Good morning folks.

Pierre Beaudoin

Good morning, David.

David Newman - Cormark Securities

Just – you just got back from Farnborough and always had some successful with the CSeries is LOIs and options et cetera. Maybe just kind of sense of where the market is on the commercial side campaigns that you might have going on, what sort of feedback you’ve got on your various offering with the CSeries in the Q400 obviously perhaps as an update on Russia?

Pierre Beaudoin

That’s quite a one question.

David Newman - Cormark Securities

You got it. Again gentlemen there.

Pierre Alary

That's for two maybe.

Pierre Beaudoin

So it is fast.

David Newman - Cormark Securities

I mean, obviously you are in contact with all your customers there, so I mean, just maybe just give the sense of campaigns and how you are feeling about the various product offerings?

Pierre Beaudoin

Let me start by Russia, if you don’t mind.

David Newman - Cormark Securities

Sure.

Pierre Beaudoin

This situation of course, that we’re monitoring almost on a daily basis and of course and will respect and obviously all of the government sanctions that are being put in place. So for us its something that we monitor for business aircraft as the economy weakness or not in Russia would affect our customers. We are monitoring it for transport because we have many different things going on in transport. And we have discussions going on in the commercial side particularly with the Q400.

David Newman - Cormark Securities

Correct.

Pierre Beaudoin

So its really making sure that we understand what we need to do as a company and where areas we need to adopt. So far everything is still going on, maybe except for business aircraft, the market is weak in Russia right now, and you can imagine that if the economic slowdown, it has an effect. But I think the situation that we need to follow very closely.

David Newman - Cormark Securities

So hasn’t stop then, Pierre, it is still moving forward, but slower, is that the sense of it?

Pierre Beaudoin

It hasn’t stop, still moving forward, but everybody is seeing careful on both sides as to what commitment we make on the long-term. At the same time, if there is specials going on that makes lot of business sense like the Q400 both sides are motivated through final solution.

David Newman - Cormark Securities

Okay. And the other one?

Pierre Beaudoin

The other thing is question?

David Newman - Cormark Securities

CRJ and the feature how you feel ultimately out of the show?

Pierre Beaudoin

Yeah. I think, I think the CRJ quite I am please on the fact that though there is opportunities globally and some in the U.S. as the regional color looking how they will fly for the major, taking the aircraft that they have brought and whether they need more and we're like in those special, like we have been think for quite a few quarters I think is the opportunity there.

The Q400 team has done a great job at creating variance to Q400 like the 86 passenger and like Cargo, [combi] (ph) version. So we are seeing good opportunities, yes, small volumes start, but this is how we – you know you get very large customers, is that they introduce the product their airline. So I am quite upbeat with the Q400 that we found many different ways to offer this product and to maximize competitive advantage.

David Newman - Cormark Securities

Okay.

Pierre Beaudoin

And the CSeries while you saw that we spoke a lot about it from LOI, is a lot of interest in our product and that still progressing of course our target of 300 units.

David Newman - Cormark Securities

Okay. And if I can just squeeze a quick one on air. You talk about the aero structure side and its obviously starting up very small and you probably want to build that and there is a growth avenue for you, would you look M&A in that type?

Pierre Beaudoin

Well that's not our intention. Its more intention to market our technology and product. At the same time I think it’s our job to look at every opportunities but that’s not follow our plan at this time.

David Newman - Cormark Securities

Very good. Thank you.

Shirley Chénier

Thank you, David.

Operator

Thank you. The following question is from David Tyerman from Canaccord Genuity. Please go ahead.

David Tyerman - Canaccord Genuity

Yes. Good morning. My question is on Bombardier aerospace margins, they have been pretty inadequate for an extremely long time. Aside from the gains you are going to get from the lay off, is there something you can do to accelerate the improvement here or really do we have to wait for increase revenue from the new products to make a big difference on margin from this business?

Pierre Beaudoin

Well, there is several factors consider like we said we have 1% dilution from the city and that does not include any G&A related to the future results so the 1% is more related to the inventory write-downs. So that’s a signficant amount and in this case we have just described. Also I agree with you that our team can be better in terms of margin, so creating a lighter more flexible organization, making quicker decision. We will see benefits not only because of the reduction of the personal but in our ability to take decisions more rapidly and to go after for opportunities.

So yes, big part of the reorganization is to increase the momentum on the margin.

David Tyerman - Canaccord Genuity

And as introduction of new product in the first two years of the introduction of typically dilutive of we expect the margin on the existing to improve, but then there is the introduction of new product initially will have a dilutive impact but like the contrary.

Pierre Beaudoin

Yeah because we don’t do averages as you know.

David Tyerman - Canaccord Genuity

Right.

Pierre Beaudoin

In the test.

David Tyerman - Canaccord Genuity

Right. Okay. It sounds like a long wait?

Pierre Beaudoin

It depends how you see the introduction of a new product, you get increased revenues but initially in the airplane business you will get some dilution by the introduction of new products, but that also creates a lot of growth for the company.

David Tyerman - Canaccord Genuity

Right. Okay. Thank you.

Pierre Beaudoin

You’ll hear this from any airplane manufacturer just the different weaker report.

David Tyerman - Canaccord Genuity

Right.

Shirley Chénier

Thank you, David.

Operator

Thank you. The following question is from Deepak Kaushal from GMP Securities. Please go ahead.

Deepak Kaushal - GMP Securities

Hi good morning guys. Thanks for taking my questions. Pierre I had a question about transportation. I was wondering if you could comment more on the changing competitive landscape Allison and GE, what you are seeing with Siemens and from the Chinese?

And to extend that, Brazil and India in country we’ve had a political change and in another country we may see one leader this year. I am wondering how those impacts the opportunities or the challenges in those key emerging markets for transportation? Thank you.

Pierre Beaudoin

Yeah I think the only major change in this quarter was that GE Allison transaction, from a competitive perspective I don’t think it will change much because we are facing a transportation group that we know already. They will add the single link from GE but essentially it’s the same Allison, with the same product line and there approach to the market and management team that we know. But of course we are monitoring this situation very, very carefully. We do see the Chinese show-up in markets where Chinese have a lot of investment, and as an example in South Africa you know we won a large locomotive contract but at the same time the Chinese one part of that contract from the customers.

So we are looking at that carefully in those markets, but if you take South Africa again as an example, which proven that we can compete with the faced these new competitors on the international. As far as market the only one that I would comment on at this point is India, I think the new Prime Minister made it very clear that investment in infrastructures is priority and that rail is also priority. So I think it will present opportunity for us and we have done a very – we have a very great success with the Delhi Metro who have a good reputation with customers in India, so I think its positions us well for the opportunities that are upcoming.

Deepak Kaushal - GMP Securities

Thank you very much. That’s good for me.

Shirley Chénier

Thank you.

Operator

Thank you. The following question is from Stephen Trent from Citigroup. Please go ahead.

Stephen Trent - Citigroup

Hi. Good morning and thanks for taking my question. Just actually a follow-up on the commercial aero side you know one of your competitors also telegraphing that nest year we would see more flow from the U.S. airlines and you partially commented on that. any sense is to whether that demand in 2015 could be as robust as what we saw last year? What's your feeling there in terms of need or demand for aircraft?

Pierre Beaudoin

As all I can say at this point is that it’s following pattern, we’ve seen in the past, and major airlines order some regional. They’re now in discussions with regional operator about operating the airplanes that they bought or and adding to those fleet. So I think that's represents a good opportunity for us, and we need to be very close to that. As far as the volume I would not like to comment at this point, as it is very quite.

Stephen Trent – Citigroup

Okay. Fair enough. I’ll leave that. I’ll leave the one question limit. Thank you.

Shirley Chénier

Thank you, Steve.

Operator

Thank you. The following question is from Konark Gupta from Macquarie. Please go ahead.

Konark Gupta - Macquarie

Good morning, and good to see some good progress there. My question is about the liquidity here, there is obviously some concern among investors that negative free cash flow, although it’s seasonal, but its not helping in already cash balance sheet, and that could attract your lender attention perhaps on the covenant side. So thinking what are your views on that given CSeries is not going to generate EBITDA soon? And I would appreciate if you can also provide some timeframe to numbers around those covenants? Thank you.

Pierre Beaudoin

Well, the – when you look at the overall results, its very much in line with the guidance and when we review our covenants or when we review with our vendors the you know the plant going forward was not obviously in line with their guidance and so on. And the first quarter much we have extended all of our specialty by an additional years, we basically have three year ahead of us committed and we are very much in line, we are on plan. There is really no concern….

Konark Gupta - Macquarie

Okay.

Pierre Beaudoin

We have the liquidity that we need to develop our product up to the entering the service.

Konark Gupta - Macquarie

Okay. So if you – if the cash burn does not like – that feeds your expectation or misses your expectation basically you burn more cash than you expect, like you think you have some flexibility with your lenders to kind of flex around the covenants or the time line?

Pierre Beaudoin

The answer yes, and we – and you imagine as we fund our liquidity, we do not fund liquidity exactly on the fund. I have some significant buffering to it, already. So I – that's I want to concern and one thing also to be consider is that the facility – bank facility we have in relation to LC so its not a funded facility its in fact guarantying you know the performance on our contract basically. It's not the cash we have is what we use for liquidity and we'll go with our level of liquidity.

Konark Gupta - Macquarie

Okay, good. Thank you.

Operator

Thank you. The following question is from Peter Arment from Sterne, Agee. Please go ahead.

Peter Arment - Sterne, Agee

Yes. Thank you, good morning everyone. Just one my question is just kind of follow-up to that. How many cash flow you’ve seen tracking in line with your aerospace that the guidance for the both of the deliveries and the CapEx – I think CapEx is just under $1 billion for the first six months. I just trying to get little bit our insight into the cash flow drivers for the second half, I know you got 60% of your deliveries will come and it is seasonal But what are some of the key drivers we should be thinking about regarding the cash flow or meeting your guidance for the year? Thank you.

Pierre Beaudoin

It’s typical that turn that we have on the aerospace, the spending on the program is pretty much even, but there is quarter spending on the programs that spend much even. On the working capital side we always see signficant in flow in the fourth quarter. So we build – particularly we delivered more in the fourth quarter and there is typically more activities also on the new order size and so on. So that’s the working capital is really on the positive side on the fourth quarter.

That’s where we see that’s what we add every year but typical that.

Peter Arment - Sterne, Agee

Okay. Thank you.

Shirley Chénier

Thank you, Peter.

Operator

Thank you. The following question is from Anthony Scilipoti from Veritas. Please go ahead.

Anthony Scilipoti - Veritas

Thank you. I was just going to – if we dig in a little bit more to the Bombardier transportation results. I was most drawn to the reduction in the gross margin, I know Pierre you spoke of the reduction in SG&A and we have seen that improve the – or at least fix the EBIT. But I am wondering why the significant 300 basis point here reduction in the gross margin?

Pierre Beaudoin

Yeah, well the growth margin with the contract adjustment we have made last year, and do note that under contract accounting we adjust in the quarter, we do to catch up adjustment and then going forward our margin on those same contracts at the reduced level. So, it puts pressure on the margin for the reminder of the time that we deliver on those contracts. So, that’s where the margin has been impacted mostly.

Anthony Scilipoti - Veritas

Is it specific contracts or what is it?

Pierre Beaudoin

Well it’s the contract that we made adjustment last year and the year before. So, we’ve talked about the German contract, French contract over the past couple of quarters. So, those contracts as we deliver them, and we deliver them at a lower margin than would be our normal margin. So it puts pressure on the overall margin if you can imagine.

Anthony Scilipoti - Veritas

So how long will that continue being at this lower margin?

Pierre Beaudoin

Well each contract vary, and some of the contracts we sign the new orders, we just signed new orders in fact one of our customers exercised one of its option. So that’s how we’ve helped in restoring the margin. So that’s over to next couple of quarters.

Anthony Scilipoti - Veritas

Okay. It’s similar on the – if we look at the aerospace side I am trying to make this above the one question, the gross margin similar fell in the aerospace side and I wondered how – if you could comment on that? Again, improvement on SG&A but the gross margin is down year-over-year.

Pierre Beaudoin

It depends on the mix that you – mix of products has an impact typically on commercial the margin level are lower so we have a higher level of commercial compare to the business across the mix of product.

Pierre Alary

There have been aircraft is only down – isn’t down by much.

Anthony Scilipoti - Veritas

Is it – could be flex chip that the flex chip business has a more significant margins and now you don’t have that anymore?

Pierre Alary

No, its not significant in terms of the impact on the margin percentage.

Anthony Scilipoti - Veritas

Okay. Thank you.

Shirley Chénier

Thank you, Anthony.

Operator

Thank you. The follow-on question is from Turan Quettawala from Scotia Bank. Please go ahead.

Turan Quettawala - Scotia Bank

Yes. Just a quick follow-up here on the CSeries again I think the Beaudoin said that the FTV2 has a engine back on I was wondering if you could give us a sense of how the repairs are going on FTV1? And also maybe talk about the how the software drops have gone through here I guess while you’ve been grounded in how much time you know – you could have – I'm sure you’ve lost time, but if you can give us a sense of if that’s been mitigated by some of the other work that you’ve been doing in the certificates inside? Thank you.

Pierre Beaudoin

Well, I can't give you precision on how much we mitigate, but yes, our teams have busy at the update from – updating component, updating. For example normal mode now we are already supply normal mode and as we repair in supply. As far as the repair STB 1, its making good progress. It will be back in flight, but we haven’t put it date on it, but we are making very good progress on that repair. And like I said before STB 2 engine is on and the other engines are somewhere in the state of being return to us whether there is still at frac being updated or there on the way, I know scan that schedule, but as soon as we return to flight we will start to see one airplane and then the other one so on. But can be sequence with days and between.

Turan Quettawala - Scotia Bank

That's perfect. Thank you very much.

Shirley Chénier

Thank you, Turan.

Operator

Thank you. The following question is Chris Murray from AltaCorp Capital. Please go ahead.

Chris Murray - AltaCorp Capital

Thank you. Good morning. In your business aircraft book-to-bill so far this year is been a little bit below, I’m wondering if you can maybe update us on any progress you may have made on bookings close to [indiscernible] similar to what you did with similar aircraft. Any thoughts on what the outlook looks like at least in the near term for new bookings?

Pierre Beaudoin

It is the same pattern as we have given you many times that business aircraft very strong demand on the stuff end, medium in the middle and light on the light sector. We don’t see a big change there. We still see strong demand for our big aircraft and we are doing very well for example, the challenger category. It will vary from month-to-month, but overall I guess where there is a big change in the U.S. is progressing very well. At the same time there is some uncertainty in other parts of the world that creates uncertainty for business aircraft. So overall it goes well.

Chris Murray - AltaCorp Capital

Do you think there is an opportunity you actually could be one times book-to-bill for the full year?

Pierre Beaudoin

Yes. But you know that's one step at a time.

Chris Murray - AltaCorp Capital

Okay. Thank you very much.

Pierre Beaudoin

Thank you.

Operator

Thank you. The following question is from Robert Spingarn from Credit Suisse. Please go ahead.

Robert Spingarn - Credit Suisse

Yeah. I am back I wanted to ask you about ILFC had pushed back some deliveries of CSeries by about five months into April of 16 and curious about why that might have?

Pierre Beaudoin

There is nothing significant there. We discuss schedule with customers. It is inline with the entering into service of the 300, if you look at the page we've given you. Nothing special it may be priorities of the customers and where these airplanes are going to be use, so you know I don’t have any additional comments on that, nothing significant.

Robert Spingarn - Credit Suisse

Okay. And then just on the 300 orders by enter into service is there any sensitivity to that number with regard to entry in the service of the – 100 versus the 300?

Pierre Beaudoin

There is more volume on the 300 then there is on the 100 and this is was plan this way for us because first we going to ramp up step-by-step so the 300 is majority of our orders at this point, but this is one of our business plan set and you know as we sell more 300 its only good for the business.

Pierre Alary

Well, Rob I think your question was on the level orders by entry into service?

Robert Spingarn - Credit Suisse

Correct. The timing of when you hit the – which aircraft?

Pierre Alary

Which aircraft?

Robert Spingarn - Credit Suisse

In other word gallantry of which aircraft is the deadline?

Pierre Alary

I would always said entry into service of the CSeries programs. So the target is the 100.

Robert Spingarn - Credit Suisse

Okay. Thank you for clarifying that.

Pierre Alary

Thank you.

Operator

Thank you. The following question is from David Tyerman from Canaccord Genuity. Please go ahead.

David Tyerman - Canaccord Genuity

It looks to me like you are capitalized interest has increased quite a bit in the quarter, that’s like was 77 million in Q2 and 58 million in Q1. I was wondering why would go up so much and whether we are going to see further large increases in coming quarters?

Pierre Alary

Basically relation to the level of investment we have. So it’s interest calculated on the level of investments. So as we continue to invest the capitalize interest will continue to grow proportionally.

David Tyerman - Canaccord Genuity

But they seems like –

Pierre Alary

Year-over-year –

David Tyerman - Canaccord Genuity

Proportional? From 58 million to 77 million in one quarter sounds like you didn’t invest that much more in the quarter?

Pierre Beaudoin

No it should be proportional so.

Pierre Alary

We are looking to it.

Pierre Beaudoin

We are looking to it.

Pierre Alary

I will give you figure on that.

David Tyerman - Canaccord Genuity

Okay. Just asked question [indiscernible] when that your average margin in the second half to get to your 6% got to be 7% understand the seasonality and so on. But it still sounds like an awfully a large increase, is there is a risk investing this number?

Pierre Alary

Our guidance is 60%. That’s all we can tell. We can tell you that’s our guidance.

David Tyerman - Canaccord Genuity

So, what would be the drivers to get to 7 in the second half when you only did 5 in the first?

Pierre Alary

Product mix and what’s going out in the market in terms of product mix or joint ventures, different investments we have in different areas of the world. So, we are in transportation delivers of trains, we have joint ventures. We have sometimes investments in equity in special PPP projects. So, we consider all of this and we see that we can – our guidance of 6% is what we should go by.

David Tyerman - Canaccord Genuity

Okay. Okay, thank you.

Shirley Chénier

Thank you, David.

Operator

Thank you. The following question is from [Indiscernible] from Deutsche Bank. Please go ahead.

Unidentified Analyst

Yes thanks. Just on the Learjet 85 I was wondering if you could provide us an update on the flight testing also the structure and what type of information you are awaiting before giving us more color on the EIS space?

Pierre Beaudoin

We are continuing this flight test of the aircraft, right now before we give anything for service we are in – we are evaluating all of our priorities we have flight test programs, two going on right now and the third one coming with the Global 7000, 8000. And I want to make sure that our teams have evaluated very well our resources and where we put our priority and this is always considered given the market for each of the aircraft. So that’s why we’re being prudent before we put entry into service announcement.

Unidentified Analyst

Okay. And just in terms of commercial China, could you give us update on the partnership with CO-MAC and where there is some Chinese companies are trying to do a something similar like Rostec in terms of putting an assembly line in China?

Pierre Beaudoin

We have active discussions on the Q400 on the similar project, but they are just at the decision level at this point. We think there is a big opportunity for several props in China, but as you are going to grab this opportunity you like have to assembly products locally.

As far as discussion with CO-MAC we continually look together where we should collaborate in order win, win situation from both organization particularly in China where for example they have a service network which we may not have to duplicate for the CSeries if we work with CO-MAC leverage.

Unidentified Analyst

Okay. Thanks for the time.

Shirley Chénier

Thank you, Benoit.

Operator

Thank you. The following question is from Deepak Kaushal from GMP Securities. Please go ahead.

Deepak Kaushal - GMP Securities

Hi. Thanks for taking my follow-up. It is regarding the recent organizational change you’ve announced and a question on commercial aircraft. In recent years you’ve guys have been globalizing your sales and marketing team this part of this change pull that process back and how do you look at things like customer support and specialization in services that has been shared between business aircraft and commercial aircraft, cay you split it up again, do they shared resource and which organization?

Pierre Beaudoin

Very good question. On the commercial side and business aircraft there is no sharing sales force procedure is different customer and we are going to continue to invest in the sales for development for commercial aircraft as our products are more and more global so no change there. As far as after sales yes there will be split on after sales but it doesn’t prevent one division giving the service to the other on the service agreement and that’s what we are looking at this point.

For example part distribution I don’t see the need of having separate warehouse as an example. So there is many of these discussions going on. And I think what you will see the division giving service to the others.

Deepak Kaushal - GMP Securities

Okay. Thank you. And does that apply to advance engineering like aerodynamics or avionics things like that?

Pierre Beaudoin

We are having these discussions right now. There is areas where we can share resources and maybe sales the service to each other as a service that we can tell also on the outside. So we are having these discussions now and we will decide in the next two months./

Deepak Kaushal - GMP Securities

Okay. Thank you for that I will pass once again.

Pierre Beaudoin

Thank you. Operator, do we have any more questions.

Operator

There are no questions registered at this time.

Pierre Beaudoin

Thank you. So this concludes the question period intended for investors and analyst. We will now begin the question period for media representative. Operator?

Operator

(Operator Instructions) Our first question is from Paul Vieira from the Wall Street Media. Please go ahead.

Paul Vieira - Wall Street Media

Good morning. Paul Vieira from the Wall Street Journal I was – during the call what we’ve heard – I wanted to get even additional color on top of what’s already been said about the real organization there was discussion that at least from there is so much precise action there was talk about – there was talk about of the need to do margins. I am just wondering whether this arrows the corporate revamp was part of the idea that use semester Bombardier can be more hands on given that every person will be reporting to you and that you wanted to have more of the hands on well in insuring that the C series is delivered as on time as they company has about?

Pierre Beaudoin

The answer to this question is yes. They want have a more direct hands on roll on the each of the division also that they we’ve invested a lot in new products in last few years and we feel that it's important to have business units directly reporting through our corporate so that we can benefit from these large investments that we have made in the last few years and monitor down more closely.

Paul Vieira - Wall Street Media

I guess, If I can just quickly on another subject that's also been talked about Russia, do not have any given the growing movement by western governments to isolate Russia I know you are monitoring, but are you not concerned about the impact this could have on deals with, deals what Bombardier have or existing arrangements and have you at all discussed with the Canadian government, have you expressed any concerns about going being too aggressive and trying to isolate and punish the [indiscernible]?

Pierre Beaudoin

We have a constant discussion with the Canadian government about this subject but about every – about many subjects whether its you know whether its this, or other subject. For us, yes, we are concerned about what's going on in Russia and we are looking at the effect on our business and how to plan for different scenarios. Well in the end you know it’s the government that will decide on sanction. They may first who will inspect the guidance that we get from the various governments to our Bombardier's active.

You know Russia is not only in many areas customer Bombardier but we also have suppliers from Russia so we have to evaluate that, but Bombardier is not in a unique position. Every global company maybe not every but many global companies have very deep relation and customers and suppliers in Russia. So the situation that needs to be monitored closely.

Paul Vieira - Wall Street Media

Thank you very much.

Pierre Beaudoin

Thank you.

Operator

Thank you. The following question is from [indiscernible]. You have the floor. Good morning.

Unidentified Analyst

Given your restructuring some speculated that this restructuring might be used by Bombardier to sort of sign off on another division via the commercial or the business that division. And I was just wondering if that’s one is the case?

Pierre Beaudoin

No answer or response, now this restructuring is not to get rid of any one division is just that we become more flexible and more agile. We can react and decide more quickly and we will be able to more closely monitor those units where big investments have been made. And to enhance all the investments in the aerospace division.

Unidentified Analyst

So you never thought that this might make it easier when it selling off decision perhaps acquiring a new partner?

Pierre Beaudoin

No, we didn’t do it for that reason. We did not intend to, to be for that.

Unidentified Analyst

Now I have another question [Amba] (ph) air has ordered lot of regional, now you too I believe in this C Series when it comes to a regional debt, can we consider this and due to the fact that the Embraer jets are gaining on traditional Bombardier original jets, response?

Pierre Alary

I don't think so client do recognize that our CRJs are very performing and we improve them all the time, if we look at the current version that was offer to American Airlines had 5% improvement, we are talking about continuing to improve the CRJ plant forms so that it would have a greater advantage – or greater competitive jet over Embraer. So when we are talking about market share Embraer has regional jets but they don't perform as well as ours.

Unidentified Analyst

But what about the new one?

Pierre Alary

Well I think the new one on the market is called evolution or something and that is for 2020. And we think we are ahead of that product they call I do believe evolution and we have an important performance edge and we think that our platform will remain competitive for whatever they will put on the market in 2020 when it comes to regional jet. We have improvement plans that will enable us to continue to remain ahead.

Unidentified Analyst

You have already planned on this?

Pierre Alary

Yes.

Unidentified Analyst

This is in the plan till after investing in this CSeries or is it done parallel?

Pierre Alary

Well what I told you we have a CRJ platform that is competitive the response we think we've got the good plans and we assure plans and customer how we intend to remain ahead with Bombardier. Thank you Mr. [indiscernible].

Operator

From [Richard] (ph). Please go ahead.

Unidentified Analyst

Hi. I would like to just ask another follow-up on the Russian situation. We hear very mixed signals from the Russian government and Russian agencies about their commitment to the Q400 program, what are you hearing are they getting cold feet on this program or are you confident that it will move ahead?

Pierre Beaudoin

Well, you know, this is a very complex industrial decision with Russia and how exactly we do this. A lot of details are been discussed between our team. Commercial discussions are continuing and both parties are motivated to for the assembly of a turboprop airplane. They motivated to have the Q400 assemble in Russia. So let see where the discussion lead, but they are continuing – we are continuing the discussions with Russia.

Unidentified Analyst

Thanks.

Pierre Beaudoin

Thank you.

Operator

Thank you. The following question is from [indiscernible].

Pierre Beaudoin

Yes. Good morning. I like to go back to what Mr. [indiscernible] asking you. When will the investments to improve the CRJ line of product, are we are constantly investing without coming up with specific announcement we delivered planes to American Airlines, 5% better, 5% improvement compared with previous year jet that we had delivered. We will move on giving improvement, making sure that platform evolves. We want to maintain the competitive averages.

Unidentified Analyst

How much investment overall?

Pierre Beaudoin

We are constantly investing in that platform. I don’t have a specific figure to give you.

Unidentified Analyst

Coming back to the fact Mr. I see left could you sort of explain what happened? I do understand that this is inline, this is because of the new structure but I guess people said that he wasn’t the right man to do this?

Pierre Beaudoin

Decided to retire and we decided to reorganize the company into three different business unit because we think we can become agile, flexible and make sure that we have wider structure.

Unidentified Analyst

You have less than six years of age, it’s pretty young to going to retirement?

Pierre Beaudoin

Retired that’s his own personal choice. Thank you very much for your question. Thank you.

Operator

Thank you. The following question is from Solarina Hugh from [Ryders] (ph). Please go ahead.

Unidentified Analyst

Hi. If you don’t mind I had couple of questions, one of each division. Just following up all the Russian sanction question, Does it have any impact or do you foresee any impact on the Russian deal in anyway just given what a large I guess order push in that for CSeries? And also along the evolution lines I have been reading report that the CEO said that they got better terms new and just wanted to see if you could comment on that?

Pierre Beaudoin

I don’t think there is an impact on the evolution deal today. Of course we have moderate situation as it evolve, but just to understand that the [indiscernible] deliver before 2016. So there is time for these situations to evolve. I can’t speculate in which direction but today does not an effect. There is always pretty commercial discussion between our customer and also confidential.

Unidentified Analyst

Okay. And just a question on Bombardier transportation I was wondering if you could provide an update on the labor situation under B plan?

Pierre Beaudoin

There is really not much to comment on. There is this [fight] (ph) going on. We made our offers very clear and we are not going to negotiate in public with our employee.

Unidentified Analyst

Okay. So no progress I guess so far then as far as solving the dispute?

Pierre Beaudoin

We hope to resolve dispute as soon as possible.

Unidentified Analyst

Are you expecting any delays as far as the deliveries are going?

Pierre Beaudoin

This is in our contract, we had a provision that [indiscernible] so we can – whenever the later strike will – would create, it does not effect contract between us.

Unidentified Analyst

Okay. Thank you very much.

Pierre Beaudoin

Thank you.

Operator

Thank you, Nancy. The following question is from [indiscernible] Please go ahead.

Unidentified Analyst

Good morning and thank you for taking my question. I would like to ask a question, that's a question on business aircraft and we’ve been seeing airline companies from the gulf space and especially Etihad do kind of filled in real apartments in A380 and I wanted to know whether this could have an effect on selling your private jet to business men and business women and I would like to know whether in this context you are maybe thinking on going to the super sonic side?

Pierre Beaudoin

As far as the super sonic I can directly answer this question, no, its not part of our plan. I don't think that you know luxurious first class in the middle east airlines the one you pointed it too, will effect business aircraft, business people own business aircraft for its flexibility, the ability to go into airports directly close their businesses with their customers ability to leave at the time they need to leave, whether they are going to the customers or coming back. So these products will not offer that flexibility so I don’t think that has any effect of this.

Unidentified Analyst

Thank you.

Pierre Beaudoin

Thank you.

Operator

Thank you. The following question is from [Venezulo] (ph) from the [Toronto Star] (ph). Please go ahead.

Unidentified Analyst

Hi, good morning, I just wanted a little bit more clarification on the situation in Russia. So is the plan or the attempt to get a joint venture for final assembly of the Q400 situation in Russia right now, may be just walking through the timeline?

Pierre Beaudoin

Commercial discussions are continuing between us and Russia and when we have an agreement or just – let me start again work – working hard to get to new agreement. So what’s going on in Russia has not affected our commercial discussion. Of course when and if we get an agreement we will actually consider the overall environment and sanction.

Unidentified Analyst

And you would see if that point the sanction would prohibit you from setting up final assembly there?

Pierre Beaudoin

Not right now, but this is situation that evolves everyday. So today just I don’t see – I don’t see that as restriction but it’s situation that resolves.

Unidentified Analyst

Okay. Thank you.

Pierre Beaudoin

We need to continue commercial discussion.

Unidentified Analyst

Okay. Thank you.

Pierre Beaudoin

Thank you.

Operator

Thank you. The following question is from [Daniel] (ph).

Unidentified Analyst

Good morning. I would like to go back to the jobs that will be lost, you spoke of 1800 jobs, are these basically non-unionized people?

Pierre Beaudoin

These are indirect jobs, so basically non-unionized people.

Unidentified Analyst

1800 overall what’s the overall total, if you look at the job that you are call indirect but they are not production jobs therefore. How many employees have you got overall using that definition?

Pierre Alary

37,000 employees in aerospace, so the indirect we have 12000 that are indirect. So I think that 18,000 out of 12,000, correct.

Unidentified Analyst

Going back to this year Jay, do you think that you might replace the motors on those, the engine on those?

Pierre Beaudoin

We are always trying to improve on our platform. It’s a great platform, well performing. People like the performance of this engine, but if there are other ways, who the platform we look at, but this is not better than right now?

Unidentified Analyst

[FTG5] (ph) you think you make sure that the FTG5 would come into service quicker than expected.

Pierre Beaudoin

Not of our plans right now. The FTG5 will be in service towards the end of the year. Thank you.

Operator

Thank you. The following question is from Ross Marowits from the Canadian Press. Please go ahead.

Ross Marowits - Canadian Press

Yes. I am wondering if you could first talk about when do you resume flight test for the CSeries, will you be able to make up any other lost hours somehow?

Pierre Beaudoin

Well, I think so that’s where we are looking with our team right now because we have done a lot of updates between the downtimes. But step at a time we now have to focus on getting back to flight in a space way and then we are going to look and how we can catch up some over the time.

Ross Marowits - Canadian Press

Now how would you be able to do that? Is it fly more aircraft in your plan or how would you be able to get more hours?

Pierre Beaudoin

It will not be more aircrafts but it would be more hours per aircraft.

Ross Marowits - Canadian Press

Okay. Second thing as I am wondering about the restructuring why is this happening now I mean your number is having being great for a while. Was there some event that promoted this or how long is this been works?

Pierre Beaudoin

Well the evolution of our platform or large investment we are making a new product and definitely a reason for doing it now as we get closer and closer to entry-into-service and the fact that the execution is not optimized as action we think that it was plan to make a change in order to get our team to execute more on schedule.

Ross Marowits - Canadian Press

But given that you won't have the details work that into for another you know number of months, was this is something which just happened suddenly?

Pierre Beaudoin

No, this is something that has been the plan for quite sometime.

Ross Marowits - Canadian Press

How long is quite sometime?

Pierre Beaudoin

Quite sometime.

Ross Marowits - Canadian Press

Okay. And just lastly in the change with aero structure separated you talked about you have you know low cost operations in Mexico and Morocco are there any plans to this to create a new center for low cost production?

Pierre Beaudoin

We have right now we are in a midst of creating the Moroccan low cost fabrication factory, is starting and the investment we started by the year and half ago. So the focus is on that one now developing that one in continuing to develop in Mexico.

Ross Marowits - Canadian Press

So now the third then?

Pierre Beaudoin

It's not in the plan.

Ross Marowits - Canadian Press

Thank you.

Operator

Thank you.

Pierre Beaudoin

Thank you.

Operator

The following question is from [Julia Asono] (ph) from [Lapares Canadia] (ph).

Shirley Chénier

Question from [Julia Asono] (ph). This was it.

Unidentified Analyst

Good morning Mr. Beaudoin, listen you are talking about the few weeks for the flight test for the CSeries to resume it’s been more than two months now that you have been grounded. Could you expect that this might be done in August?

Pierre Beaudoin

We are still talking about the few weeks because there is still some work to be done. This would be answer. We have sent this solution by tracking with me to go back to flight. We worked at solution with the technical team to make sure that the Bombardier team is comfortable with passing with these solutions and we will be making a solution sooner. We still have few answers – question that needs answer before we make a decision. So we are sticking to a timeline of [HOE] (ph).

Unidentified Analyst

Shouldn’t you say indefinitely that two weeks, two months this is quite long. Evidently you don’t talk to commit and to definitive date?

Pierre Beaudoin

I think a few weeks does represent what the present situation is and as I said we’ve made lot of progress with that which means we looked at their solutions and we will making a solution.

Unidentified Analyst

1800 employees that are being indirect jobs actually that are being lost in addition to those that were lost earlier in the year. So in aerospace will there by any more job cut in the near future?

Pierre Beaudoin

I think that we have come up with number of goals to make sure that we have a more flexible organization and their focus is that we put in place to see organization and make sure that we are well positioned to increase our profitability.

Unidentified Analyst

Well, there are might be other job losses, cut back in jobs if we want to be more flexible. Answer I will not speculate on that one. Our goal right now is for 1800 and we want to make sure that three new business units work adequately. Thank you.

Operator

Next – thank you. The following question is from [indiscernible].

Shirley Chénier

The next question is from [indiscernible]. Please go ahead.

Unidentified Analyst

Good morning everybody. I would like to check I mean lastly there were no explanation or there was no definition as to the in terms of the layout, in terms of geographies are we in a better position right now to talk about this 1800 job losses [indiscernible] answer?

Pierre Alary

No, we are not in a position to do that right now. We can not really this information we spoke of 1800 indirect job out of 120000 indirect jobs. Question very well I do understand that this reorganization is now mostly aimed at selling one of the unit were brining in more capital is that totally out of the question if the an opportunity came up answer that not why we are carried the reorganization and its not very well planned of this question. If the opportunity came up we do simply say no or look at it.

Answer, it's not the reason why are recognize, its not very well plans and I will not trying to speculate. [indiscernible] or may not happen in future. Question very well, then in terms of aero structure which will be set up which is now being set up could be set up or so anywhere else then in Canada, could it be this new division in a country where cost are lower?

Pierre Beaudoin

We have four shops where respecters were not talking about creating annual business. We had a plans [Delilah] (ph) it's quite important for our group in a respecters we have one in [Bellpas] (ph) and we have Mexico as well as Morocco. We had decided – we are now decided how to manage things in each of these forefront, in order to get value because we have a lot of expertise.

Unidentified Analyst

Question one, last thing you spoke Learjet 85 flight test which are also late, you spoke now three flight tests that might be a late for the Learjet 85 could you repeat what it is that you – what these flight test were?

Pierre Beaudoin

First of all its not a matter of being late on Learjet 85, I said that we have to manage our priorities. We have flight tests programs that are now underway or will be launched soon, with the CSeries, Learjet 85 and the global 7000 and 8000 will before and now thing, the intrinsic service thus the Learjet 85 I want us to revisit and look at our report and to manage our priority.

Unidentified Analyst

The discussions for opening and assembly plant in China for the Q400 is that is a down set as what you have in Russia.

Pierre Beaudoin

Answer no, but we are looking at that.

Unidentified Analyst

Thank you very much. That's good.

Operator

Thank you. The following question is from Frederick Komasco from [Bloomberg] (ph). Please go ahead.

Unidentified Analyst

Hello Mr. Beaudoin few short questions. I wanted to come back to finance announcement thing they postponed delivery of CSeries from 2015 to April 2016. Now have any others lines got in touch with you to perhaps postpone deliveries is that a possibility?

Pierre Beaudoin

Postpone when you say April 2016 actually it’s been line with the entry into service 300, delivery date is always what we can produce their needs – that needs to be meet. Yes, we actually discussed matters with all our customers when it comes to delivery day but there is nothing special when something has been postponed. I think it is a news but nothing major.

Unidentified Analyst

Very well. A technical question now. To start your flight test do you need either transportation permits from Transport Canada, new certification or some kind of authorization or can you just decide on D day that this is it, you are testing against.

Pierre Beaudoin

No, we don’t need an authorization as such. We always have transportation permits but Transport Canada is partner or ours and we always do it and agreement with them very well. Good question. When it comes to One-BT is been an existence for a quite a long now. Why did wait until now to cut 1,800 jobs additional jobs between now and end of the year.

Pierre Alary

This matter is involving a lot of decisions have been taken in the last year. This is just another step in organizing One-BT. When you undertake such major changes as we did in the transportation section, we go step-by-step and we’ve reached the stage that. Yes, we have to cut 1,800 jobs.

Unidentified Analyst

What about 2014, anything else to happen or it is just a step one, response?

Pierre Beaudoin

So One-BT has evolved an awful a lot. It’s there. I can speculate as for the future. We’re working on the next step, which will be to reduce the organization by another 1,000 jobs.

Unidentified Analyst

Thank you.

Pierre Beaudoin

Thank you. Thank you.

Shirley Chénier

[indiscernible]. You have the floor, sir.

Unidentified Analyst

Hello my question has to do with the decrease of the firm orders, the backlog rather you have client, has that increase?

Pierre Beaudoin

Yes. Since platform has started, we are very confident, I think I have been saying the same for five years now. Our objective is 300 units when it comes to entry the service and this is highest maximum we’ve ever had for any given platform at mobile. So we’re in a very good position. We are at 200 firm orders I don't think its problem of any sort of order, as said we just keep focusing on the target number which is – thank you.

Operator

[Machs Bot] (ph) please go ahead.

Unidentified Analyst

Thank you very much again for taking another of my question. I would like to know because given the fact that mechanization in the construction of airplanes is limited to compared to automobile contraction, could you maybe give some information whether there are more possibility in the future especially when it comes to impression in 3D, is this is a possibility to ramp up to mechanization in the airplane construction.

Pierre Beaudoin

Well first of all like you said you know, airplane factoring is relatively low volume compared to car. So where we do have atomization, it's mainly for quality and precision then for the benefit of you know mechanization as far 3D printing. It’s a good technology for seeing the ship of apart to look at how we assemble you know our first unit, but it’s not a technology today that can be use in the fabrication of cost.

Unidentified Analyst

Okay. Thank you.

Shirley Chénier

Operator, do we have any more questions?.

Operator

Thank you. The following question is from the [indiscernible].

Unidentified Analyst

Very quickly time to see this new part division what does that represent in your revenue figure and how big do you want to get in the year?

Pierre Beaudoin

We are not in a position to give you this kind of information as response we say at the beginning of the 2015 we will give you the figure as per the new recreated structures then you will see more to how it ways and overall structure.

Unidentified Analyst

Do you think there as a future just bit of sideline?

Pierre Alary

No, it isn’t major potential in terms of aerospace our knowledge and expertise..

Pierre Beaudoin

Thank you. Thank you one and all for having attend this conference call. Have a good day.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.

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