Business

Bombardier's flight risk

CEO Pierre Beaudoin on the benefits of taking big chances, and why Canada suffers from a crisis of confidence

Christine Muschi

Even with a handful of test flights completed, it’s still too early to call Bombardier Inc.’s new CSeries jet a success. The $3.4-billion program is months behind schedule. Airlines have placed firm orders for just 177 of the 100- to 149-seat planes, about half the number Bombardier has set as its target. And the company is competing directly with industry heavyweights Boeing Co. and Airbus SAS for the first time in its history.

Yet CEO Pierre Beaudoin doesn’t seem like a worried man. In fact, he says a decision not to go ahead with the CSeries would have been a bigger gamble for the Montreal-based manufacturer of planes and trains. “The recipe to being successful is to make sure you stay in front and invest in your future,” Beaudoin says. “Of course, it comes with risk, but if you don’t take risks in business you don’t go anywhere.”

Bombardier’s appetite for flying into the unknown is an increasingly rare trait in Canada, which is often criticized for a lack of competitiveness. The productivity of Canadian businesses and their workers—a measure of how much work they can do—has trailed the U.S. since the 1980s and ranks in the bottom half of OECD countries. But while Beaudoin says there’s clearly more to be done, he stresses that Canadian firms still enjoy a number of key competitive advantages, like a proximity to major markets, a highly educated workforce and generally business-friendly governments. “The one thing that concerns me is how much we’re focused on what doesn’t work,” he says. “I think we have a better chance if we emphasize what we do well.”

Beaudoin says being based in Canada means Bombardier, with 80 production and engineering sites in 26 countries, can be both a North American and European company at the same time (thanks in part to Quebec’s language and culture). That proved useful when developing the CSeries since the U.S. and Europe also happen to be two of the world’s biggest commercial aviation markets.

“The big airplane manufacturers want to build bigger and bigger airplanes,” Beaudoin says. “But that’s not necessarily what people want.” Hence, Bombardier is betting that airlines and their customers are more interested in smaller, fuel-efficient planes that can fly more frequently between a larger number of cities. Building a presence in Asia, where commercial air travel is growing quickly, was also seen as key to the CSeries’ long-term success. Bombardier partnered with China’s Shenyang Aircraft Corp. to build the CSeries’ fuselage—a move that may have helped land a deal with a Chinese leasing company for 30 of the planes.

Bombardier has, historically, benefited from significant government support as a major employer in an important high-tech industry. Ottawa has officially pledged $350 million in support for the CSeries alone, while another $118 million is being put up by Quebec. While that has drawn the ire of taxpayer groups, Beaudoin says it’s becoming increasingly difficult to determine where corporate interests begin and government interests end in today’s global economy. That’s particularly the case in Asia, where state-backed companies are more common. “In the aerospace business, particularly commercial airplanes, very often you will see an Airbus or Boeing deal in conjunction with a state visit,” he says. “And that’s [becoming] a reality for many enterprises. Countries are becoming promoters of what’s being done well inside their borders. That’s something Canada’s government has recognized.”

Where Canada needs to improve, Beaudoin says, is in its efforts to build a more highly skilled workforce. Despite a recent report from TD Economics that downplayed talk of a “skills gap,” Beaudoin says it’s something that needs attention. “We try to learn from our other plants in the world,” he says. “One of the advantages that we see in Europe is these very well-developed apprentice programs—especially in Germany and the U.K. We need to put an emphasis on developing these trade schools again.”

Canadians could also benefit from believing in themselves a little more. Beaudoin says that, by far, the toughest critics of the CSeries—and indeed of Bombardier—are at home. “I’m biased, but this is an airplane that can rival the best of the best,” he says. “Not many companies in the world can say that—only Boeing, Airbus and Bombardier. And one of those is in Canada.”