Bombardier (OTCQX:BDRAF)(OTCQX:BDRBF)(OTC:BOMBF) continues to be in a fragile state. While the company will be able to deleverage its balance sheet by selling its rail transportation unit to Alstom for $8.4 billion next year and become solely a corporate jet manufacturer, we believe that its future still looks bleak. As the founding family continues to have the majority of the voting power in the company, there’s no guarantee that it will not fail to create value this time, considering that, under its leadership, Bombardier suffered immense losses by developing and later selling at a loss its own civil aviation project to Airbus (OTCPK:EADSF). In addition, by operating in a small and saturated business jet market, it will be hard for Bombardier to drive growth in the following years. For that reason, we continue to believe that there’s no value left in Bombardier stock and the opportunity cost of holding its shares is too high even at the current price.

Weak Growth Prospects Ahead

Bombardier’s stock declined by more than 20% since we published our latest article on the company in July, and there’s every reason that its share price will either decline even more in the following months or it will be trading at the current levels for a while. The reality is that Bombardier was struggling to create value for years, and it was able to survive for so long, mostly thanks to the help of the government of Quebec, which supported the business through various financial instruments and programs. After spending more than $6 billion on its commercial aviation project, the company sold its stake in the project to Airbus earlier this year for less than $600 million and was left with an overleveraged balance sheet. As a result, Bombardier had no other choice but to divest its interest

Despite softer demand in the commercial aviation space, the forecast for corporate jets remains somewhat strong. According to new survey data compiled by Honeywell Aerospace, a company that builds engines and a wide range of other aircraft parts, demand for corporate jets should recover to 80-85% of pre-pandemic levels in the fourth quarter of 2020, a strong recovery coming out of a relatively soft summer.

The data comes as part of a broad, annual survey that Honeywell conducts to gauge the demand for corporate jets. This year’s data gives unique insight into that demand as the economy recovers from the long term effects of a sustained, worldwide pandemic.

On the commercial side of the equation, passenger demand and traffic has dropped precipitously, leading to a wave of grounded aircraft and many orders canceled or put into holding patterns. In April, Boeing’s backlog contracted by 300 aircraft as cancellations surged. That same month, Airbus cut production.

While flight volumes and demand remain low in the commercial space, the forecast for recovery in the respective airframe industry also continues to slip. According to the Financial Times and Boeing, it may take up to three years for that industry and the subsequent orders to recover.

Corporate jet demand, by contrast, appears to have only suffered a minor setback. According to the survey conducted by Honeywell, while 82% of survey respondents plan to operate current equipment less often than in 2019 — an obvious effect of the pandemic — 4 in 5 respondents also said that the current economy doesn’t affect their buying plans. Five-year purchase plans are also down only one percent versus the


a group of people on a sidewalk: Earnings season is expected to show the ‘haves’ versus the ‘have-nots’ created by the pandemic

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Earnings season is expected to show the ‘haves’ versus the ‘have-nots’ created by the pandemic

The U.S. third-quarter corporate earnings reporting season will kick off next week and the numbers will reflect a second quarter dominated by the coronavirus pandemic that has created an uneven playing field in which some companies thrive, while others shrink and fade.


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While stock indexes have set records and big technology and online retailers have outperformed, many other industries and individual companies are grappling with deteriorating sales and earnings as economic growth has slumped across the globe.

“A lot of company risk is not being captured by equity indices,” said James Gellert, chief executive of Rapid Ratings, a data and analytics company that assesses the financial health of private and public companies. “The equity market is showing a lot of optimism, but below the surface, there’s an ocean of companies that are dealing with a crisis.”

Companies doing business with bigger enterprises in hard-hit sectors that sell to or buy from them are aware of the financial health of those customers or vendors, he said. The market may suggest a company is doing well, but the difference between financial health and market health “can be very different.”

Sebastian Leburn, senior portfolio manager at Boston Private, agreed. “You’ve got the economy and the stock market, and you’ve got the S&P 500,” Leburn said.

chart, waterfall chart: A chart provided by Lindsey Bell, chief investment strategist at Ally Invest, depicts the differences between the ‘haves’ and ‘have-nots’ of the recovery off the post-pandemic lows. Mainly, the rich are getting richer as the smaller companies suffer.

A chart provided by Lindsey Bell, chief investment strategist at Ally Invest, depicts the differences between the ‘haves’ and ‘have-nots’ of the recovery off the post-pandemic lows. Mainly, the rich are getting richer as the smaller companies suffer.

Leburn noted that the S&P 500 index (SPX) is market-capitalization weighted, so its performance is skewed by just a handful of mega-cap tech stocks. Those companies, led by


NEW YORK/LONDON/MILAN/MELBOURNE (Reuters Breakingviews) – Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.


– Macy’s and Klarna

– UK companies and debt

TAKEAWAY. The Great Depression popularized layaway plans, where shoppers paid for items in installments and then took them home when paid in full. The pandemic is universalizing the reverse – and Macy’s wants in. The $2 billion retailer is joining the likes of Silver Lake and Snoop Dogg and investing in Klarna, the Swedish payments group, and under a five-year partnership, customers can pay in four interest-free installments after purchase.

Nearly a century may separate the two financing inventions, but the consumer impetus is the same. Consumers’ wallets are shrinking, and they are looking to spread out payments. Likewise, retailers are desperate for sales, and buy-now-pay-later plans do that in exchange for giving away a cut. So far, everyone is happy, especially Klarna, which was valued at nearly $11 billion in a September funding round.

But unlike layaway plans, which forced customers to be thrifty by forgoing consumption until the item was paid for, these plans encourage immediate gratification. A harder recession, or regulation to protect consumers, may bite them. (By Robert Cyran)

DEBT PANDEMIC. Britain’s small and medium-sized firms are drowning in debt just as Prime Minister Boris Johnson tightens coronavirus restrictions. Data from UK Finance, a bank trade association, showed on Tuesday that SMEs borrowed 40 billion pounds from the seven largest lenders in the first half of 2020. That’s almost double the 24 billion pounds they borrowed in the whole of 2019. Government-backed schemes, like Bounce Back Loans, helped.

Given cash-strapped SMEs have already maxed out on credit as their first line of defence, new lockdowns may do more

Andrew Rear, CEO of Digital Partners, a Munich Re company, is appointed Buckle’s new Chairman of the Board

Buckle, a tech-enabled financial services company, announced the appointment of two industry leaders. Kristi Matus, who was Executive Advisor for Thomas H. Lee Partners and CFO of USAA, is now the company’s CFO and COO. Andrew Rear, CEO of Digital Partners, a Munich Re company, and an insurance and insurtech investor, has been appointed Chairman of Buckle’s Board.

“Buckle is rapidly moving in its mission to provide insurance, credit, and advocacy to Transportation Network Companies (TNCs) providers and platforms,” said Marty Young, Co-founder and CEO of Buckle. “As USAA has provided top-rated banking and insurance to military members and their families, we are passionate about doing the same for the gig economy. Kristi’s in-depth experience, from beginning her career as an actuary and quickly moving to the executive ranks of insurance, credit, and investment management will allow us to progress in our charge and navigate the company through rapid growth.”

During nearly a decade with USAA, Kristi also served as President of Life Insurance and Investment Services and as President of the Life Insurance Company. She was also Executive VP and Chief Financial and Administrative Officer at athenahealth, Inc. and Executive VP and Head of the Government Services Segment at Aetna, Inc. Kristi currently serves on the boards of Cerence (CRNC), Equitable (EQH), and Alliance Bernstein (AB).

“Throughout my career, I’ve sought opportunities where there was a genuine drive to create the asset of long-term economic value for shareholders while building a legacy of delighting customers,” said Kristi Matus. “Being part of the Buckle team allows me to utilize 30 years of experiences in a way that can truly transform finance and insurance to support the gig economy, consistent with economic and