By Allison Lampert and Aatreyee Dasgupta
MONTREAL, July 30 (Reuters) - Bombardier reported a turnaround in second-quarter free cash flow above analysts' expectations on Thursday, but shares dropped almost 9% in midday trading as it delivered fewer private jets and contended with supply chain challenges.
Business jet makers are benefiting from strong demand, as a surge of wealth from AI startups and SpaceX creates new customers for private aviation.
Montreal-based Bombardier also reported second-quarter
profit above analysts' expectations.
Quarterly revenue grew 6% compared with the same three months a year ago to $2.15 billion, helped by strong demand for aftermarket services, despite delivering fewer planes due to one-off supply chain constraints such as windows.
Analysts say aerospace supply chains have improved since the COVID-19 pandemic with overall deliveries rising this year, but there are lingering concerns.
Bombardier delivered 32 business jets during the quarter, down from 36 planes a year earlier. The planemaker still expects to make more than 157 deliveries in 2026, with most being handed over to customers during the back half of the year.
Bombardier CEO Eric Martel told reporters that the availability of engines for some plane groups is in much better shape, while other engines still have "a bit of catch up to do."
He told analysts earlier in the day that one-off supply chain issues are being fixed rapidly, although they are "still a drag in terms of our cost and delivery profile."
This week, Bombardier's U.S. rival Gulfstream Aerospace, a division of General Dynamics Corp, said deliveries rose by three planes to 41 on an improving supply chain, while Cessna business jet maker Textron Inc said it is still dealing with issues from some key components.
Martel also told analysts the company was considering aftermarket performance by weighing a possible acquisition that would grow maintenance services.
He also sees opportunities for the company's defense business, which modifies global private jets into special mission aircraft, as Canada and Europe increase spending and diversify from U.S. defense firms due to geopolitical tensions.
Martel told reporters he thinks Bombardier will decide on a new Canadian site to support Swedish partner Saab's GlobalEye jet by late 2026 or early 2027.
He also said he is happy with a decision by Canada to join Europe's delayed Global Combat Air Programme (GCAP) fighter jet.
Bombardier's backlog stood at $21.8 billion as of June 30, up by $4.3 billion from the end of December.
The company reported $228 million in second-quarter free cash flow, a metric closely watched by investors, compared with a negative $164 million a year earlier, boosted by customers' firm deposits on new plane orders.
Analysts estimated the company's free cash flow at $45.42 million, according to data compiled by LSEG.
On an adjusted basis, quarterly profits came in at $2.50 per share, compared with analysts' estimates of $1.41 per share.
(Reporting By Allison Lampert in Montreal and Aatreyee Dasgupta in Bengaluru; Editing by Leroy Leo and Nia Williams)
