Bombardier Inc. (BBDB) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Bombardier's 2021 Virtual Investor Day. My name is Francis de La Fleche, Vice President of Financial Planning and Investor Relations. We are very excited to have the opportunity to share with you our path forward as a pure-play aviation company and how we will unlock the tremendous value of Bombardier's portfolio. Overall, we expect the format to last 2 hours or so. For the first hour, President and CEO, Éric Martel; our Executive Vice President and CFO, Bart Demosky; and our Executive Vice President, Services, Support and Corporate Strategy, Jean-Christophe Gallagher, will take you through our 5-year strategic plan and how Bombardier will become a more resilient and more profitable business going forward. We will then transition to a Q&A session where our 3 presenters will take your questions. Questions will be limited to sell-side analysts and institutional investors. [Operator Instructions] Before we begin, I would like to draw your attention to the disclaimer on Page 3 of our presentation. I wish to remind you that during the course of this presentation, we may make forward-looking projections or other forward-looking statements regarding future events, future results or the future financial performance of the corporation. Several assumptions were made in preparing these statements. These assumptions are based on the current knowledge as it exists today. I wish to emphasize that there are risks that the actual events or results may differ materially from these statements. I'm making this cautionary statement on behalf of each speaker, whose remarks today contain forward-looking statements. And with that, I'd like to turn it over to Éric.

Thank you, Francis. Good morning, everyone, and thank you for joining us today. Over the next hour or so, Bart, JC and I will share our vision for Bombardier and the actions we're taking to achieve this vision. As a pure-play business jet company, our goal is to lead the industry in our performance, in the value we provide to customer and shareholders, and in the manner in which we operate, which is with the highest commitment to our people and our communities. In other word, our goal is to bring the same exceptional performance that has defined our aircraft to every aspect of our company. At the same time, we are well aware of what is required for us to be successful as a pure-play company. We need to be extremely close and responsive to our customer. We need a highly engaged and nimble workforce. We need to obtain our position as a technology leader. We need to be active in every aspect of our product life cycle beyond the initial sale, including service, refurbishment, upgrades and resale. And finally, we had a cost structure and balance sheet that gives us the flexibility to deal with the market cycle and to invest in our future. The plan we're going to share with you today position us to achieve each of these requirement, and delivering this plan is the single focus of our leadership team and our 13,000 plus employees. The good news is that we are starting our pure-play journey with the industry's premier product portfolio and a strong backlog approaching $11 billion, giving us a very solid foundation to build upon. Our lineup includes the industry flagship Global 7500; the Global 5500 and 6500, which offer the largest cabin, longest range and smoothest ride in their class; and the Challenger 350 and 650, the latest model from the best-selling jet family of all time. Each of these aircraft was either introduced into new market or significantly refreshed in the last 5 years, giving Bombardier a portfolio of category-leading product and performance, comfort and reliability. Simply put, our past investment have positioned Bombardier well in the best, most profitable part of the market, eliminating the need for any large near-term investment, which, of course, removes the risk associated with development program. As you all know, in our industry, the biggest risk come during the large investment and development cycle, something that is now behind us. Finally, when looking at our product portfolio, it's worth noting that our Global and Challenger aircraft are also uniquely well suited for specialized mission platform. This is an area of growth that will get greater attention and focus in the coming years. Bombardier jets are attractive to government around the world for many of the same reason that make them the #1 choice for fractional operators: their range, reliability, low operating costs and wide cabins. Moreover, Bombardier jets have proven capabilities with difficult airfield, including short runway and high-altitude operations. And our large in-service fleets provide derisk solutions. From a customer perspective, multi-role platforms, aircraft that can perform medevac, transport and search and rescue missions with a single platforms are getting more and more attention. And with stretched budgets, we expect to see government move from purpose-built military aircraft to modified business jet platform. Turning now to our 5-year market outlook. As you can see on the slide, we expect 2020 will be the low point in deliveries, with a market recovery beginning this year. We estimate that it will take several years before the market recovers to 2019 levels. And we expect that the largest growth will come in the segment where we compete, large and medium aircraft. It is important to note that this outlook assumes the continued successful rollout of the COVID-19 vaccines, a gradual lifting of international border restriction and a continued economic recovery. Of course, in 2020, taught us anything, it is that the future is hard to predict. So we will be disciplined with our production rates and not increase them without a solid backlog. Even in this slow growth environment, we see a clear path to value creation. We believe there is tremendous value within the Bombardier portfolio. And our business is poised to deliver solid financial performance, highlighted by strong earnings growth over the 5 years. We also expect to turn free cash flow positive next year and generate more than $500 million in 2025. Again, we have a newly refreshed portfolio, one of the industry's largest backlog, and we are well positioned in the most profitable segment of the market, a market that is recovering from the pandemic. We also have a low-risk profile with no development or ramp-up risk as our major program investments are behind us. Also behind us are the investment needed to grow our service capabilities. This will allow us to further diversify our overall revenue as the aftermarket becomes a bigger contributor with its more resilient and profitable revenue streams. More on this growth and profit driver in a few minutes. But first, I want to talk about the other big profitability drivers, our focus areas as we transition from the COVID crisis and reset our operation. There are 4 initiatives driving our earnings growth, and they are already in motion: first is capturing the value associated with coming down the learning curve as we have now reached our targeted run rate of 35 to 40 aircraft per year; second is delivering on our previously announced productivity and cost reduction initiative; third is executing on our aftermarket strategy and reaping the benefits of our past investment to grow the network and our capabilities; and finally, we will effectively deploy the proceeds from the BT sales, lowering our biggest use of cash, interest payment and giving us more runway to execute the rest of the strategy. Okay. Let's dive into each of these drivers, starting with the Global 7500. As I said earlier, the Global 7500 is the industry flagship, and here is a quick snapshot of where the program currently stands. Since its enter into service, the aircraft has met or exceed its performance commitment, delivering an unmatched combination of speed, range and capabilities. The Global 7500 is also unique in another way. It is the first business jet ever to receive an Environmental Product Declaration. We are proud of this distinction. And we invite the entire industry to join us in disclosing, with full transparency, complete environmental performance information for all new aircraft. This is an important step in making our industry more sustainable. With almost 50 aircraft now in service, the program continues to mature as planned. Again, this is important because it means that many of the typical early-growing pains and ramp-up risk are now in the rearview mirror. Despite losing several months of production last year in the early days of the pandemic, we delivered 35 Global 7500, up from 11 in 2019, which is right at the targeted run rate for our 5-year plan. From a sales perspective, we are seeing very strong interest, and order activity is robust worldwide. The aircraft also continues to receive very high marks from its owners. I'll share some of that feedback with you today. [Presentation]

Great feedback from William. Very much appreciate the trust and confidence he and our other customer have placed into us. And we are committed to providing the very best value and customer experience at all times. Okay. Turning now to the Global 7500 learning curve. As a starting point, it should be noted that this year marks a significant milestone for the program, as the Global 7500 transition from being a drag on earning to becoming the biggest EBITDA contributor over the next 5 years. As you can see on this chart, a lot of the hard work has already been done with respect to reducing the material and engineering costs. And we are now executing on our road map to significantly reduce labor costs. This involved incorporating all learning from the floor, reducing the number of build position and eliminating the need of any out-of-sequence work as our process mature. Today, we have high confidence that we can achieve an additional 20% unit cost reduction by aircraft 100. Here's why. While we are approaching our 50th delivery, we have already started building aircraft #89 in our final assembly facility in Toronto. And the air fuselage for aircraft 100 is currently being assembled in our Queretaro, Mexico facility. So we have a clear visibility to our actual cost on these later deliveries. And they are coming in on plan. The bottom line here is that delivering on this profitability drive is all about executing on a clear, well defined plan. Turning now to our second big profit driver. As you know, last month, we announced our target to deliver $400 million in recurring savings by 2023. The overall goal here is to make the company more efficient and agile, capable of delivering stronger financial performance under the current market conditions while establishing a lower cost base to grow from once the market recovers. As a starting point now that we are a smaller pure-play company, our fixed costs will come down. This includes collapsing our corporate office group into the business and reducing a layer of management. It also includes the benefit of reduced professional fees, audit, legal and other consulting costs, reflecting our much simpler organizational structure and needs. Currently, we have identified and are executing on specific initiatives that will deliver $325 million or 80% of this target. We are confident that we'll be able to identify additional opportunity to close the gap and achieve our $400 million goal. Beyond the reduction in corporate costs, actions underway fall into 3 main category: improving labor productivity, in addition to the planned Global 7500 learning curve; cutting indirect spend; and optimizing our manufacturing footprint as we simply have more industrial and hangar space than we need. Again, these productivity actions not only support our near-term plan, they will also ensure that we have the right infrastructure in place to scale up at a much lower cost base when the market fully recovers. Moving on to our third focus area and profit driver, the aftermarket. The Bombardier aftermarket growth story is simple. As a result of our past investment, we are now positioned to capture a greater share of the growing market. Our strategy is also clear, to bring our aircraft home. JC will talk in depth about how we are going to do this. But a couple of key points. First, this is not a new strategy. We've proven it by delivering result over the past 5 years. And the aftermarket growth I showed you in our 5-year plan reflects the fact that we are now hitting our stride and positioned to accelerate growth. Second, we are in the final phase of the largest aftermarket footprint expansion in Bombardier's history. To put this in context, we are adding 50% more space to our worldwide network. And importantly, the investment and the risk associated with this expansion are largely behind us. So like our other initiatives, this is all about execution. The final point I'll make is that our expanded global services network and new capability allow us to better support our customer and drive brand loyalty. And in our business, maintaining brand loyalty is critical to sell planes. Okay. Turning now to the fourth focus area, deleveraging our balance sheet. Clearly, today, we have more debt on our balance sheet than we would like. And we're going to start addressing this in a number of ways. First, we are going to deploy the cash from the BT sale. We are going to look at a number of options to free up cash in the business to deploy toward debt paydown. The second way will address the balance sheet is by deploying the positive cash we're going to generate from our operational improvement and aftermarket growth strategy. As you know, we are coming off a heavy investment cycle, which means we are in good position to prioritize debt paydown over capital expenditures in the coming years. Bart will share more color on the debt management strategy in a few minute as part of his presentation. Okay. I'm going to shift gears here and spend a few minute talking about a developing market dynamic that could be tailwind to our plan. As we build our market outlook and plans, some of the key economic drivers we look at are wealth creation and private aviations market penetration with high net worth individual. In the years prior to the pandemic, the number of high net worth individual was growing at about 10% annually, representing strong growth in a key customer segment. However, during the same time period, we saw a much lower growth rate in both jet deliveries and charter flight hours, suggesting a significant untapped potential for private aviation. Now that we are a year into the pandemic, we are starting to see an interesting market trend, a surge in new customer, high net worth individual to private air travel as the health crisis has brought renewed attention to the safety and security private air travel provides. You can clearly see these trends in business jet utilization rates, which are well above commercial and travel rates and in the reports and statement of fractional and charter operators. As you can see from this statement, if there is a silver lining to the pandemic for our industry, it is the attention it has brought to the value of private air travel and the wave of new customer. I think it is fair to say that one of the closest watch trends in business aviation for the next 12 to 18 months will be the percentage of these new customer who will continue to fly private after the pandemic subsides and how these newcomers to private air travel will shape and drive demand when business and long-range travel fully recover. Clearly, this new customer base has the potential to drive demand to new high as international borders reopen, and business travel returns to pre-COVID levels. Of course, we are closely watching this market dynamic, which could offer some upside to our plan. Before I turn it over to Bart to walk you through the financial detail of our plan, I want to spend a few minute talking about our commitment to sustainability. Bombardier has long been a pioneer in sustainability, and we fully accept our obligation to be good stewards of the skies in which we have the privilege to operate. You can clearly see this commitment in our actions. As I mentioned before, our flagship Global 7500 is the first ever business jet to have completed an environmental product declaration. And we have been at the forefront in the push for greater adoption of sustainable aviation jet fuel, which we've been using in our demo fleet for years. In this transition year for Bombardier, as we reset our operation, we are also reaffirming our commitment to pursue ambitious environmental, social and governance goals. You can see a select number of those goals on the chart. At Bombardier, how we operate is just as important as the results we deliver. The goal is compete and win ethically, responsibly and profitably. Okay, let me stop here and turn the stage over to Bart to give more detail on our financial plan.

Thank you, Éric, and good morning, everyone. Let me start today by sharing my impressions of Bombardier after my first 3 months with the company. Even before joining, I could see that there is a great opportunity for restoring one of Canada's most iconic companies to a model of strong and consistent financial performance. As I took a fresh look at Bombardier's market potential, its cost base and capital structure, I became convinced of its ability to return to profitability and generate sustainable cash flows, allowing us to meaningfully deal with our debt over time. In fact, a critical step in the journey towards strong financial performance has already taken place. With the sale of BT, we are putting the pieces of the puzzle together, beginning with the repayment of our HPS loan facility and with plans being formed for the deployment of the remaining $2.8 billion in sale proceeds towards debt retirement. Still, achieving a stronger balance sheet isn't something that will happen overnight. We will need time to fully achieve the strategic priorities that Éric has laid out for us, but I'm confident we will achieve our goal. To make this plan successful, we must build a more resilient business, one that has a lower risk profile and is less susceptible to market fluctuations. Bombardier will achieve this by diversifying its aviation revenues and with our market-leading product line fully refreshed, through relatively low and stable CapEx requirements over the coming years. As you heard from Éric, to reach our 2025 goals, we will focus on our strengths: an unmatched product portfolio, a proven aftermarket growth strategy and a leaner cost structure, which we are aggressively pursuing. As we work on enhancing our operating performance, balance sheet improvements will be a priority, which I will talk about in more detail shortly. Now let's take a moment to walk you through our goals for 2025 and the 3 key elements of our strategy to achieve them. We expect to continue growing revenues at a rate of greater than 5% annually on average and are targeting $7.5 billion in 2025 as we reset post COVID. Our growth plan can be considered conservative in the early years as we carefully watch how quickly the market recovers. However, we are well positioned to fully capture market tailwinds when they occur. But the real story for Bombardier over the next 5 years is earnings acceleration driven by disciplined execution of the things we control. We are forecasting EBITDA to grow 750% by 2025. What this means in absolute figures is that we are increasing EBITDA from $200 million in 2020 to $1.5 billion in 2025. And we believe we can post industry-leading margins of approximately 20% by the time our plan is fully executed. Even when excluding the COVID impact last year, this number represents a 300% increase over the $500 million EBITDA we forecast for this year. And I'll take you through the drivers behind this in a moment. But it's important first to understand this earnings potential in terms of what it means for free cash flow. We see our business turning cash flow-positive next year, on the path to generating north of $500 million of free cash flow by 2025, the key to which will be staying disciplined with our capital expenditures. On that note, we are forecasting fairly stable CapEx of approximately $200 million per year over the next several years. This is a number we are confident in because we are both investing differently and benefiting from the significant investments recently made to refresh our portfolio. Furthermore, our methods for refreshing our aircraft have given us a proven track record to build on for achieving meaningful upgrades at a low cost with less development risk, as we accomplished with the new Global 5500 and Global 6500 aircraft. Most importantly, by achieving the financial targets I've just outlined, we see our net leverage falling from 10x EBITDA today to approximately 3x EBITDA by 2025 and a reduction in our annual cash interest cost of at least $250 million compared to last year. So let's take a closer look at projected revenue growth, which, importantly, is evenly split between new aircraft sales and aftermarket revenues at just around $1 billion each. Growth in revenues from aircraft sales is expected in the low single digits, assuming nothing more than stable market share across our product lines. Simply put, this reflects a conservative expectation for market growth over the period before any potential tailwinds from a post-COVID environment and the sales strength of our product lineup. We are even more bullish on our aftermarket service revenues, with an expectation for growth in the mid-teens and doubling of revenues from $1 billion in 2020 to $2 billion in 2025. While this forecast may seem ambitious, it's based on a proven strategy that has delivered double-digit revenue growth over the past 5 years. To build on this strategy, we will be opening 4 new service centers over the 2021 to 2023 period, which will expand our global aftermarket footprint while providing enhanced access for our customers to bring their planes to us for servicing. When factoring these trends, we see the quality of our revenue mix improving tangibly over the next 5 years, with the more resilient and profitable aftermarket services business growing from 18% to 27% of total company revenues. And when combined with the 30% or so of our revenues we expect from the Global 7500, we are talking about almost 60% of all revenues coming from our highest margin businesses. In short, we believe this makes our target of 20% EBITDA margins achievable. Let's now look at why we are confident in our plans for growing EBITDA to $1.5 billion in 2025 by leveraging the 3 key drivers I referred to earlier: an unmatched product portfolio, a proven aftermarket growth strategy and a leaner cost structure, which we are aggressively pursuing. Through execution of these business drivers, we expect EBITDA and margin growth to be steady and significant. Most importantly, execution on these earnings drivers is already in motion and largely within our control. Key to these controllables is the 7500 learning curve, transforming a negative contribution profile in 2020 to our largest earnings contributor by 2025, with more than half being contributed by next year and full run rate achieved by 2023. The $400 million cost reduction plan Éric discussed earlier is also skewed to the early years, with more than half contributed by next year and expecting to be fully realized by 2023. Finally, aftermarket contribution will be almost evenly spread over the 5-year outlook as growth kicks in with new service center openings and as we draw more Bombardier aircraft owners back to our shops. Given that backdrop, I'd like to provide you with a bit more color on each of the items I've just described, starting with the 7500. We have reached an inflection point in 2021, both on earnings and free cash flow, as we start to see a positive contribution beyond the 50th aircraft delivery in the first quarter of this year. We get there by executing on the 20% improvement in unit cost, which Éric explained, multiplied by the expected 35 to 40 deliveries annually. As we look out to 2025, the Global 7500 is a premium EBITDA margin business, well into double digits and accretive to our EBITDA goal, giving us visibility on the path to stronger earnings. This outlook is based on a couple of key factors. First, we are currently building the 89th aircraft. We are already seeing the positive trend on labor hours and will remove 500 people from the production line over the course of this year. Secondly, our production is sold out through 2023. We, therefore, have good line of sight on the price evolution as launch pricing moves out of the equation over time. The Global 7500 contribution is further supported by our cost reduction plan, targeting $400 million by 2023. Most of the actions supporting this target were launched last quarter, and we are moving rapidly on the 3 main categories of costs. The most important bucket is labor, accounting for approximately $150 million of savings. This represents mostly SG&A costs, including the corporate office, some engineering staff as we rationalize our spend and some indirect manufacturing headcount. This first $150 million will materialize faster than other initiatives, driving most of the 2021 savings. The second category is indirect cost, representing $125 million in savings. We will achieve this through 3 distinct streams: first, we are consolidating our corporate office within our aviation operations, which reduces expenses in line with having a smaller, more focused company, from adviser fees to the cost of insurance; second, we are putting the processes and tools in place, adjusting policies, reducing contractor and consulting spend and ensuring stringent spend monitoring against our zero-based pure-play baseline; lastly, we will benefit from the reduction in variable costs associated with our workforce reductions. Overall, these actions should lead to a 10% indirect spend reduction versus 2020. A third item is fixed costs associated with our footprint rationalization. We are reducing overall manufacturing square footage by a full third. This piece should contribute $50 million to earnings and is based on the sale of a portion of our Saint-Laurent facility in the Montréal area, the downsizing of our Wichita operations and the sale of hangar space, also in the Montréal area. While this initiative has an operating expense benefit, it is also expected to generate more than $100 million in cash proceeds this year. Finally, we are working on a further $75 million in annual savings on which we have a strong opportunity pipeline already established. Early opportunities focus on our bill of material spend and process improvements supported by our enterprise-wide operational excellence platform. And we expect to provide an update on these initiatives by year-end. Now let's talk about aftermarket. It's a business that I find particularly compelling for its resilience and its predictability. It's a lower risk business, and we are very bullish about our potential for growth. Its key traits include high customer loyalty, low capital intensity, high margins and a highly variable cost base, making its revenue stream resilient to market volatility over time. A good example of this was on display in 2020. In spite of the pandemic's significant impact on flight hours per aircraft in our installed fleet, revenues were down only 20%, and margins remained healthy and stable. To grow our aftermarket business going forward, we have the installed base of close to 5,000 aircraft to which we can offer services and upgrades that no other independent MRO can. And JC will talk more about this in a few minutes. From a CapEx perspective, we employ an ultra-low-cost model, where a typical new facility is leased with limited tooling costs required. And once in operation, we expect each facility to turn cash flow positive within 2 years. This is critical for us and a great opportunity to grow our free cash flows. Now that I've talked about our revenue growth prospects and earnings acceleration opportunity, I want to illustrate why I'm equally encouraged by our potential to generate positive free cash flow by 2022 and reach more than $500 million by 2025. Starting with the earnings drivers that I've already spoken about, we are working towards a $1.5 billion EBITDA plan. Secondly, our products have been recently refreshed, allowing us to sustain a disciplined capital program in the $200 million range per year. Further, the absence of new product launches keeps working capital investments to a minimal level, and cash taxes will remain minimal for some time as we benefit from significant tax asset pools. This brings me to the interest cost. Today, this is a large burden. But as we start generating free cash flow next year, we are confident we can both reduce debt and eventually the cost of debt. The annual cash interest cost is expected to decrease by greater than $250 million on a run rate basis, down to approximately $550 million as we deploy the BT proceeds in the weeks to come. Additionally, we believe that by 2025, our plan can lead to a further reduction in interest as our credit quality improves and we refinance maturities. This will bring our cash generation more in line with our leverage. Which leads me to our balance sheet and our approach to reshaping it, along with our capital structure in order to support our strategic plans. We will be taking a phased approach. In the short term, we expect to deploy proceeds from the sale of BT towards debt reduction. Our focus will be on near-term maturities as we look to clear a minimum 3-year debt maturity runway to focus on operations and execute our plan to grow earnings and cash flow. To fund these actions, we expect that the $3.6 billion from the sale of BT will come fully into play by midyear as we monetize the Alstom shares, and put to work the cash reserves on our balance sheet. As I mentioned on the earnings call in February, free cash flow seasonality and intra-quarter needs require us to have $1.5 billion to $2 billion of cash on hand. This is clearly not optimal. And we will opportunistically look to free up a portion of this cash through putting in place additional normal course working capital facilities. Our recent repayment of the HPS facility in mid-February frees up our collateral and could help us to achieve this goal. In parallel with these actions, we will look to opportunistically refinance and extend debt maturities. Achieving these objectives will allow us to focus on our operations, and execute on our growth plan in order to grow earnings and cash flows over the next 3 years without distractions from debt maturities. Over the longer term, free cash flow generated from the business will be allocated in a disciplined way to invest in our products and services or towards debt reduction. As we progressively reshape our business and reap the benefit from our various initiatives, net leverage should progressively come down from the current 10x EBITDA level and reach approximately 3x EBITDA by 2025. So let me stop here and summarize our plans as follows. Our 2025 goals are all about operational excellence and driving financial performance. As a pure-play business jet company, we are entirely focused on what we do best. And we are derisking the business model to both unlock our full potential and be more resilient to market volatility. Our strategy is already in motion with positive business momentum and early signs of a market recovery. We remain disciplined in our approach to navigating uncertainties in the short-term and see great potential towards 2025. Finally, we are strengthening our balance sheet proactively, creating a debt maturity profile which allows us to focus on realizing the full potential of this business while also staying agile on our path to heal the balance sheet. On that note, I will turn it over to JC for a deep dive into our products and markets. Thank you very much.

Thank you, Bart. So I'd like to put the context and data we have provided in our plan into perspective. That's why I will focus the next portion of today's meeting on one of the key recurring themes, our amazing products and services and the strategy behind them. Really, I have the easiest job of all today because our planes and our people are exceptional. Forgive me if I'm too passionate about what we deliver and what we do. But I hope that you can get a glimpse of just how proud our workforce of more than 13,000 people really is and how each one of us stands behind our products every day. Let's start by looking at the market space in more detail. In the last 5 years, Bombardier has delivered an average revenue market share of about 32%, which demonstrates the strength of our product portfolio. Today, the market is expected to grow by about 25% going into 2025 compared to 2020. Our plan is to maintain the average share that we've had over the last 5 years in this growing market. This will lead to our deliveries growing back to 2019 levels by 2025, which is something we know how to do very well. While it's a conservative plan, it allows us room to further capture incremental opportunities as we move forward. At our last earnings call, we announced that Bombardier will focus on aircraft in the large and medium categories. We further announced the ramping down and end of Learjet production towards the end of 2021. One of the drivers behind this very difficult yet strategic decision is that the large and medium categories will generate approximately 90% of total industry revenues from new aircraft deliveries. These categories have also shown greater resiliency throughout economic cycles. Bombardier is extremely well positioned for success in the large and medium categories. Between our Challenger 350, up to our Global 7500, we have a diverse portfolio of competitive business jets priced between $20 million and $75 million to capture market demand. This entire portfolio was updated and refreshed in the last 5 years. Our family of Challenger and Global aircraft are highly competitive. And let's take a look at the products. I'll begin with the industry flagship, the Global 7500. It's simply the best aircraft in private aviation, and it sets the benchmark for the most exceptional business jet experience ever. It has the industry's best cabin and best performance. This is highlighted by the numerous awards that it has collected since its entry into service. We're extremely proud and pleased with how customers and the industry have received the Global 7500 since its entry into service in late 2018. We are fast approaching the delivery of the 50th customer aircraft and the in-service fleet has accumulated more than 7,000 hours. The Global 7500 is not only operating as we intended, but it is exceeding our expectations with dispatch reliability already achieving those levels of a mature fleet. As the industry's pioneering true 4-zone cabin, the Global 7500 provides an unprecedented level of customization potential for customers. Its cabin is 12 feet longer than the Global 6500 and includes an available master suite with a full-size bed, a dedicated crew suite, a large full-scale kitchen and a dining suite that can accommodate 6 people comfortably. Speaking of comfort, the Global 7500 aircraft offers the lowest cabin altitude among our fleet. It also has the innovative Nuage seat, which redesigns comfort with its revolutionary deep-recline feature. From a technical standpoint, it's the first new seat architecture in business aviation in 30 years. The performance of this plane is equally impressive and stands out among competitive aircraft. This amazing business jet flies farther and faster, and it can access extremely difficult air fields. It can fly an industry-leading 7,700 nautical miles. Shortly after its entry into service, we flew from Singapore to Tucson nonstop, which is more than 8,000 nautical miles. And we still had leftover fuel in the tank once we completed the flight. And it's also super fast. It can fly at Mach 0.925, which is nearly the speed of sound. To put this into context, we flew from Los Angeles to New York in just 3 hours and 54 minutes. Despite its impressive high-speed performance, the aircraft can also land at extremely difficult air fields such as Gstaad, Switzerland or London City. This is due to Bombardier's unique engineering of the Global 7500's revolutionary wing, which allows for equally good performance in high-speed as well as in low-speed conditions. And seeing is believing. But really, once you see what the Global 7500 can accomplish, you might not believe it. Let me show you what I mean. [Presentation]

Isn't that impressive? The Global 7500 is an all-around no-compromise aircraft that simply can't be beat. Now I'd like to jump to the Global 5500 and 6500 aircraft, which entered into service in the last year. These next-generation business jets have inherited all the outstanding features from the high-performing Global 5000 and Global 6000 in terms of unmatched reliability. We fully refreshed the interiors, improved aerodynamics and equipped a new engine. Deep down, they still have the winning DNA and smooth ride of the original global aircraft, of which we've delivered more than 800. The Global 5500 and 6500 business jets have the largest cabins in their class with 3 living areas that offer customers wide open space and ample room to stand and maximize their movements. The innovative and extra-wide Nuage seating with higher arm rests also provide a more comfortable and relaxed flight experience. The Global 5500 and Global 6500 aircraft provide unprecedented range performance with a new purpose-built engine and a next-generation wing that delivers refined aerodynamics for an exceptionally smooth ride. These features also bring a whole new level of performance to the aircraft especially in hot weather and high-altitude conditions. They have the agility to get in and out of difficult airfields, like London City, for example, that other aircraft in the same class can't access. Moreover, the performance enhancements we've made to these planes open up brand-new city pairs for that segment in private aviation. They can fly up to 500 and 600 nautical miles farther, respectively, than their predecessors. Global aircraft are renowned for their outstanding reliability and performance. They are highly valued for their endurance, agility and they excel in demanding conditions. This is evident in the platform's dispatch reliability rate, which is second to none. Moving on to the Challenger 650. It's been the best-selling platform in the history of private aviation. And there's a reason for that. It's highly reliable, has the widest cabin in its class, offers a range that meets our customers' needs and it has the lowest direct operating cost in its class. And this is exactly why we have delivered more than 1,000 Challenger 600 series aircraft. If we look at the cabin, it has the same cross-section as the Global with 2 zones, and it's priced below $30 million. Customers purchase this aircraft to enjoy the peace and comfort that this wide cabin provides in this category of aircraft. And when you're flying a range of more than 4,000 nautical miles, it's essential for customers to elevate their comfort to a whole new level. We also brought the dispatch reliability of this platform to an unprecedented level of 99.9%. This is why the most demanding operators, such as the Air Ambulance and Maritime Surveillance operators choose the Challenger 650 over many other competitors. Simply put, this aircraft can be trusted to go when you're ready to go and at all times. And now we've arrived at the best-selling aircraft in private aviation to date, the Challenger 350 business jet, a true powerhouse in this industry. It's the best-selling aircraft in its class year after year, and it's the benchmark to which every other super midsized aircraft is compared. If you look at the most successful fractional and charter operators in the world, whether that's Flexjet, VistaJet or NetJets, you'll find the Challenger 350 aircraft. It's the undisputed champion. The Challenger 350 has been successful since it entered service and remains at the top of its game. Over the years, Bombardier has constantly enhanced it. For example, we recently introduced cabin soundproofing technology, refreshed aesthetics in the cockpit, a head-up display with enhanced vision, Ka-band high-speed Internet connectivity, and we've been steadily improving performance, including steep approach capability. Another essential feature is its unmatched dispatch reliability which it gets from its predecessor, the high-performing Challenger 300, and it's a major reason behind why we sell so many. With the Challenger 350 aircraft, you get the complete package of reliability, range, speed, performance, cabin experience and operating costs. It's the only jet in its category to have all of these key winning ingredients. In my opinion, this is also the best looking plane in the history of business aviation. These delivery numbers speak for themselves. We delivered more than 300 Challenger 350 aircraft in a few short years. We are leaps and bounds ahead of the competition. It has solidified its status as the most delivered aircraft in the medium category for many years. And the list of achievements goes on and on with no signs of letting up. Now that I've given you an overview of our fantastic product portfolio, I'd like to talk about our leadership position. We built a conservative plan based on maintaining our leading market share through time. And we see many opportunities to expand our position. As a company, we have the right combination of 3 fundamental elements. One, our product portfolio is the best in the business. It's perfectly positioned to capitalize on market trends. Two, we have a large installed base of loyal customers around the world who will be looking at us for replacement aircraft. Three, our customers know that our aircraft are reliable and that we are there to support them. What they will now see is a concerted effort to take this network and their ownership experience to a whole new level. Which brings me to a very important part of today's presentation, a topic that is very close to my heart, the growth of our aftermarket business. Bombardier's installed fleet represents nearly 5,000 aircraft to date. It's the largest fleet in business aviation. And while it's growing, it's also aging, leading to a 4% annual growth of our total aftermarket size. And we are poised to capture a larger share of that growing market. 2020 was a year that also demonstrated how resilient the aftermarket business is. While we saw a decline of 20% in revenues, we maintained profitability. The aftermarket represents not only a growth opportunity, but also a stabilizing force in Bombardier's portfolio through economic cycles. We're very confident today that the flight hours driving this business after having recovered to more than 80% of what they were, will reach again their full potential in 2021. We have a proven track record and an executable growth strategy to further mature our aftermarket business. We launched the transformation of this business back in 2016. We've proven that we can achieve double-digit revenue growth year-after-year and with an even larger yearly increase in profitability as we experience economies of scale in maximizing our parts distribution network. Through that time, one key factor has given us a strong tailwind, customer satisfaction. Above all, it's a key enabler for our growth, which has been a win-win for Bombardier and our loyal operators. Here's an example. [Presentation]

Going forward, we are targeting a $2 billion revenue level by 2025, which conservatively mirrors the growth we've been able to generate in the last 5 years. Along this journey, we've remained consistent in this strategy, which is to bring your jet home. Bring your jet home is about Bombardier working on its own aircraft in its own facilities. We are best placed to do this because we have the engineering expertise and the best trained people to provide a level of service and experience that just transcends everything else. And beyond that, bring your jets home from a business perspective is a parts channeling strategy. As we work on our own aircraft, we're able to distribute more of our own OEM parts without an intermediary. And OEM parts carry the highest quality level possible, longer warranties and ultimately provide more value to customers. This strategy complements our power by the hour program, which currently has approximately 1,500 aircraft enrolled, and provides recurring revenues based on long-term contracts. Our focus is also on expanding the number of aircraft enrolled in that program we call Smart Parts. So how do we bring our jets home? We need to build and expand our infrastructure worldwide. Today, we've already started all the key investments to build that infrastructure. And in the next 2 years, we are completing our worldwide infrastructure expansion, which will have increased our overall footprint by 50%. As we become more productive in that space, we will be able to apply twice the number of maintenance hours as we move toward 2025. We are also adding new capabilities to offer turnkey solutions to our customers. Capabilities such as component repair, engine maintenance, interior modifications and paint, among others. These added value services complement the regulatory maintenance capabilities offered at our service centers worldwide, essentially leading them to become a local extension or satellite of our own manufacturing capabilities. So what does this expansion look like? The heart of our support infrastructure beats in Montreal where we coordinate our worldwide support activities to our 24/7 customer response center. Through the CRC, our worldwide fleet of mobile response trucks and line maintenance stations support our customers close to where they are based, establishing trust and confidence that is essential to building customer loyalty. Strengthening the core of our relationship with customers through these entry points of services motivates them to bring their jets home to our service centers where we can provide heavy maintenance and even more value-added services. Our worldwide service network expansion began a few years back when we deployed new facilities in key locations such as China, Singapore and the U.K. A series of smaller scale expansion followed in the U.S. and Continental Europe. Today, even larger expansion projects are coming to fruition worldwide. Let me show you where the expansion of our footprint is taking place. Late last year, we acquired full ownership of a facility in Berlin in which we had a small share in association with Lufthansa and ExecuJet. Berlin is an important part of our service network, and I'll explain why. We've been supporting customers at this facility for 20 years. Berlin was the original Bombardier business jet service center for Europe back then. Today, Germany has the highest density of Bombardier aircraft in Europe. And we now have a wholly owned heavy maintenance facility strategically located in this important market. Supporting this facility, we are proud of the approximately 250 dedicated and talented employees that bring highly technical skills, a profound understanding of Bombardier aircraft and solid relationships with our long-term customers. Singapore was our first significant expansion into Asia Pacific, which began with a small hangar in 2013. With the growth of our worldwide fleet and the ability of our aircraft to fly farther, we saw the importance of Bombardier having a presence in Singapore, a significant aerospace hub. Today, we're in the process of completing a massive expansion of this facility, which will be ready by the summer. The expansion will quadruple the amount of space, including 2 full bays dedicated to a paint job and providing tip to tail capabilities for customers. The Singapore facility is a central hub for Bombardier in Asia Pacific, and firmly positions us as a leader in aftermarket services in the region. Our London service center located at the Biggin Hill Airport opened in 2017, and we are now expanding it to create an even larger facility. Since we opened here, the Biggin Hill Airport has seen unprecedented levels of growth in terms of airplanes flying in and out. This expanded facility will be one of Bombardier's new supercenters and will offer customers a wide range of service capabilities. The facility's location is what makes it ideal. It's within a 7-minute helicopter ride from Downtown London where so many of our customers from the Middle East, Asia, the Americas and Europe fly in and out many times a year. The next location in our footprint expansion is Melbourne, Australia. It's an important market for us where Bombardier is currently delivering many global aircraft. This new facility is located at the Melbourne Essendon Fields Airport and will be ready in approximately 1 year. This is a general aviation airport within minutes of downtown Melbourne, and it will allow us to service and grow the 100-aircraft strong Bombardier fleet in Australia as we move forward. Finally, the new flagship service center for us in the United States is located in Florida. It will enable us to capture demand in the southeastern United States as well as from Latin America. This is our brand-new Miami-Opa Locka service center, which will be the largest service center under one roof in the United States, and it will provide tip to tail capabilities for all aircraft in the Bombardier fleet. This facility can support up to 16 Global 7500 aircraft simultaneously and will cater to the larger aircraft being delivered to the U.S. market as we move forward. It's truly an amazing facility. And in fact, Éric and I were there in the last few weeks, and we're making great progress to deliver an operational facility in 2022. Beyond the investments in our physical footprint around the world, a significant part of what the aftermarket team is focused on is improving our digital infrastructure to provide new and innovative services for customers. A key strategy is for us to connect our fleet with technology that enables these aircraft to be in sync with Bombardier's customer service response teams in real time. Such advanced technology and the use of big data will allow us to enhance our customer service response times and effectively and efficiently troubleshoot customer aircraft. We recently began a campaign that will see us start to retrofit our existing installed base with Smart Link Plus. This will provide added value to our customers and entice them to bring their jets back home into our service infrastructure, allowing us to capture more aircraft in our own service facilities. We're excited to offer the Smart Link Plus program. Please take a look at this video, which provides additional information on this new and revolutionary capability. [Presentation]

As we continue to enhance our infrastructure, both physically and digitally, our vision for tomorrow is to engage our customers throughout the ownership life cycle. Our increased infrastructure offers an opportunity for us to be more involved in every aspect of customers' ownership experience through the life cycle of their aircraft, something we traditionally haven't been involved in before. The future of business aviation lies in the ability to expand beyond simply selling and maintaining aircraft. And as a pure-play business jet company, we can now focus on diversifying our offerings to further grow the aftermarket business. We need to set our sights on new opportunities, such as the management and handling of aircraft; upgrades and modifications; aircraft resale and late-life disposal, where business jets have more value being torn down than being resold. Having the OEM involved in these opportunities is advantageous because it deepens our connection to our customers, allows us to be with them through the various stages of their ownership experience and then also help us increase our share of new aircraft deliveries. As we've outlined today, we have a resilient business with great potential for growth. And as a result of our past investments and proven strategy, we are positioned to capture an even larger share of the growing market through services and support. Growing and diversifying our services through new capabilities and opportunities will allow us to better support our fleet, increase customer satisfaction and drive brand loyalty. These are key to maintaining relationships and ultimately helping to sell more aircraft. So this is an overall view of the aftermarket strategy and the vision of how we are going to grow our aftermarket business to 27% of our revenues by 2025.

Thank you, JC. This concludes the formal portion of today's event. Hopefully, you all now have a clear understanding of how we will unlock the tremendous value in Bombardier's portfolio. With our unmatched product lineup and the actions we discussed today, executing on our aftermarket growth strategy, reducing our cost structure, maturing the Global 7500 and addressing our balance sheet, Bombardier will become a more resilient and more profitable business. With our market in recovery and each of our key initiatives well underway, we are confident in our ability to deliver. With that, we will now take a few minutes to share a video showcasing our exceptional company. And then Francis will go over the instruction for our Q&A session. [Presentation]

We'll now begin our Q&A session, which will run about 1 hour. Questions will be limited to sell-side analysts and institutional investors. [Operator Instructions] We're now ready to begin. I'll turn it over to the operator for our first question. Operator?

[Operator Instructions] Our first question is from Seth Seifman from JPMorgan.

I think I was muted, I apologize. Sorry, danger of -- yes, sorry, the danger of these times. So I wonder if maybe we could just start off with sort of a detailed walk through how the BT proceeds are going to be deployed through this year. And then when we think, on a pro forma basis, the $550 million of interest expense that you talked about, is that kind of the go-forward interest expense until there are further efforts to address the capital structure?

Yes. Seth, thank you. Great questions. So as we begin to -- well, actually, we've already begun to deploy the funds from the BT sale. We've already deployed just about $800 million to pay down the HPS loan, which has the added benefit of freeing up the collateral that supports that facility. And I'll talk more about that later, I'm sure. We're very much focused on deploying the remaining proceeds towards debt, first and foremost. We will have a target on the nearer-term maturities. Although I would add that we obviously want to be, I think, very structured in the way we go about this and optimal in the way we deploy the cash to minimize the negative carry that we currently have. Regarding the interest expense reduction that you mentioned, we would see that $250 million run rate of interest expense reduction achieved by about the middle of this year. We expect to have fully deployed the proceeds from the BT sale by then. And if you're trying to do the math on that, it's simply with about an additional $3 billion of cash to deploy and a roughly average 8% coupon, that gets us to close to that $250 billion (sic) [ $250 million ] mark. We do want to work continually on reducing interest expense further. It's one of our largest expenses in the company. We think that the outlook that we've given for both EBITDA and cash flows by 2025 is conservative. And with ourselves turning to free cash flow positive by next year, we're confident we're going to have incremental cash to deploy towards further debt reduction to bring the interest expense down. Ultimately, it will be about building a sustainable balance sheet and derisking the company, but that's the plans today, Seth. Hopefully, that helps.

Yes, yes. No, absolutely. And then if it's possible to kind walk through the guidance, including the special items for the better-than-$500 million of cash burn this year, going from there to positive next year, just walking through the underlying operations, the interest, the special items, the facility change that's happening in Downsview and everything.

Okay, Seth, yes, sure. So this year, we are forecasting a free cash flow burn of better than $500 million. There's a few critical items that are going to support us getting to a positive cash flow next year. The first one is that we do have some nonrecurring items in -- that are occurring in 2021. Those are approximately $200 million. Part of that, which is the RBG, will also occur in 2022. That's about $60 million. We are working on reducing our costs within the business very hard. Eric spoke about that in detail in his comments, as did I. But we would expect that to contribute about $150 million as well. So building up further. We also have earnings growth coming from the 7500. Although that is skewed towards 2023, we will start to see good benefit in 2022 as the platform becomes more and more profitable. And then, of course, we've got interest expense reductions of $250 million run rate by '22, albeit part of that -- we won't get that fully in '21. So that's partially offset by about half. So we see a clear line of sight to get to positive cash flow, almost entirely through things that are completely under our control or are already in flight, particularly with the cost reductions on the 7500.

If I may just add one element. There's also the cost reduction program that we've announced of $400 million by 2023, Seth. And I think we've already have made significant progress having the initiative already starting to pay off. This year, there'll be, as we said, an EBITDA contribution of about $100 million. Next year is going to be in the area of $250 million. So we're making quick progress there. And that, of course -- will, of course, contribute to our free cash flow improvement next year.

Okay. Great. Excellent. And then maybe one follow-up for -- for JC, if I can. Just when you think about the -- within the aftermarket revenue mix now, you think about the mix of spares versus services and then think about how that looks at the end of the plan in 2025. Just in terms of ballpark numbers, is there -- is there anything you can tell us about how that evolved?

Yes. Absolutely. So thank you for the question, Seth. So when we look at the forecast for Bombardier's aftermarket going forward, we go from bottom up. So we look at scheduled maintenance going forward, unscheduled maintenance going forward, and then we look at modification and upgrades. So we're very, very confident in our forecast for the growth of that market, which we've mentioned is about 4% per year. And that's because we have very good visibility on all of these different elements of the fleet. So the plan is to go from the 38% share that we have today, which is already much better than what we had in 2015. We were about 26% back then. And we're looking to be at roughly 50% of that market by 2025. Hence, the $2 billion revenue level that we've set. Now the largest part, to your question, of that revenue is obviously our parts. Parts is really the core of our aftermarket business. And our increased focus on maintenance is really a parts channeling strategy. So for us, it's really about developing the lowest cost possible channel to market. And when we look at how historically this marketplace has operated, we've worked with a lot of third parties, and the way we've structured this market is by giving significant discounts on our parts to these third parties so that they would work on our own airplane. As we move forward, we're looking at applying those hours ourselves. And that's, by far, the lowest cost channel to market for these parts, which are the most significant part of our plan as we move forward.

And I think, if I may, JC, access to our facility is definitely going to bring quite a bit of growth also to our aftermarket business. We've been there before. When we built it in 2012, the Singapore facility, we build it at a certain size because we were not serving that market at all in that continent. An airplane had to fly in North America, which was making it very difficult if they wanted to reach out to our service center. But as soon as we had that presence in 2012, the business has grown. So people are coming to our facility because we're available. We have parts. We have capability, very capable people also to take care of their airplane. And I think the proof is there right now. We are tripling the size of Singapore to be able to accommodate even more customer because the demand is there. And that's the strategy that JC has been pursuing right now with all the service center that will come into service in the next coming months.

The following question is from David Strauss from Barclays.

So I just wanted to put this EBITDA margin, 20% EBITDA margin target in context. I guess how do you benchmark that against where the business has been in the past, number one? Where your peers are today? And the high point that you've seen out of any of your peers over, call it, the last 10 to 15 years.

Yes. It's a good question, David. And we do study, of course, and we do benchmark ourselves with our peers so we have comparable. We would be looking at sales per employee, different benchmark as an example. And we feel very strongly about where we are in terms of the capability to deliver that EBITDA growth over the next coming years. I think we've been in the double digit before. Of course, right now, we are prudent with volume. I think as we said, we want to change the mix also. Our aftermarket business is a good, profitable business. So we'll have a bigger piece, of course, of the pie. We are going to have the impact of the -- the cost reduction program that we've announced. Also, that will help our EBITDA to grow. And the major turnaround in the next 6 to 12 months is also the fact that the learning curve on the 7500 is coming down. So if you look, we've already achieved about 40% reduction at airplane 50 from airplane 1, and we're aiming for another 20%. And when we compare ourselves on the hours that we've put on -- that we are -- that are needed on other platform, this is clearly achievable. So we feel very comfortable that we will achieve this plan also in that sense. So between the cost saving program, the Global 7500 stabilizing and reaching out to airplane 100 and the aftermarket growing, we feel very solid in being able to build that EBITDA that we are guiding today.

Eric, if I could just add?

Yes. Go ahead.

David, it's Bart here. Just a quick add-on to what Eric was just speaking about. In terms of the drivers of EBITDA growth over the next 5 years, I think it's important to keep in mind that about 90% of those drivers, as we see it right now, are within our control and largely baked in. So we're well through our cost reduction activities. We're well along the learning curve of the 7500 Eric spoke about. We're at our 89th aircraft now on the production line. So we know what our cost curve is and where it's going to go to from here. And then as well with the previous 5 years of growth that we've seen in the aftermarket business that JC has been leading and a proven strategy with more to come, we're confident that that's going to contribute significantly to our EBITDA growth from here. The one offset to that is we're being very conservative in our view on growth in new aircraft sales. So if we did see a return to past days with much higher sales, that could bring the overall margins down a little bit, but that would be a first-class problem to have, believe me.

And I think it's important what Bart is saying here, David. Our plan is not built on major growth volume. It's based on performing. The plan is -- you look at the number of airplanes we're planning in the next future. We're in the 130-ish figure. We've done 200 in the past. So the capability is there, but it's not what our plan is built on. So we have a potential upside also if we have a little bit of tailwind. And the market right now, with the pandemic, our customers are really seeing the market right now and the business jet as a solution for being -- staying healthy and being safe. So we've been tremendous -- we've seen tremendous momentum. Some of our customers were talking about it today, mainly on the fleet operator side. We've seen the inventory on used aircraft going down. So there's a lot of leading indicator here that we are seeing new customer adapting business jet. But it's not baked in our plan. So this is a potential to grow our backlog and makes our backlog more solid. And we'll be extremely disciplined in the future if we have to increase the rate doing so.

And Eric, if I can add on this. There's a good statistic we look at, which is the percentage of first-time buyer that actually comes and buys a Bombardier aircraft. And what we've seen in 2019 is that percentage was roughly 16%. And what we saw in 2020, and especially with our sales late last year, was that percentage went up to 24%. So we see a lot of interest from first-time buyer in the marketplace right now.

Great. As a follow-up, Bart, I wanted to ask about a couple of the drivers within your free cash flow forecast. Working capital, you're showing it's neutral. But I want to see if you could dig a little bit into the pieces there. I would think there would potentially be some inventory unwind on the 7500. And then also pension, I didn't see pension anywhere in this. I think pension is a pretty meaningful cash headwind in terms of the contribution. What does that look like over the next couple of years? And what opportunities do you have to reduce that liability just beyond discount rates going up?

Yes, David, thanks. I'll maybe start with the pension piece and then -- because we really don't see it as a headwind. We do have an accounting deficit in our pension plan of about $1.5 billion. We've been very disciplined in terms of making our mandatory and regulated contributions over the years and will continue to do so. But we've also been very fortunate to have a world-class team of investment management professionals working in the company for years and with outside advisers. They have consistently performed at or above the market performance and the benchmarks that they look at. And so we are in a very good position on our pension and pension deficit going forward. So we don't see that as a headwind. We have built in, of course, though that we will continue to make contributions and would expect to do that as we go forward, but nothing over and above what we've had to do in the past. In terms of working capital, you mentioned flat. And we do see it as being flat. It's about $400 million currently. We'd probably see that ticking up a little bit as we move into a higher production rate and ramp-up rate on the 7500 in particular. And of course, if aircraft sales are stronger based on the trends that Eric was just walking through, we could see a little bit more working capital needs. But it will follow market demand. And we believe that investment and inventory management will be key to that. We'll be very stringent on that and are working strongly with our vendors to help us in that regard. And with backlog in place and growing, we'll be working hard to make sure that our customer advances nearer the capital -- working capital requirements for each of our aircraft. So we're not seeing a big increase there. In terms of the build-out of the free cash flow from where we are today, I talked a little bit about that earlier with earnings. Obviously, there's our target to generate greater than $500 million. Interest costs will be coming down by $250 million. That's a key component to it. Nonrecurring liabilities, as I mentioned, will contribute about $100 million to $150 million of that. The growth -- the learning curve on the $75 million would be a very significant contributor. That would be $400 million in total, or more than $400 million actually. And then the cost reduction initiatives that will be fully baked in at full run rate of $400 million by 2023 will also be in place. So you can see that a lot of this is actually front-end loaded and comes by '23, and that's why we have a high degree of confidence in our greater than $500 million by '25. Hopefully, that helps, David.

Our following question is from Fadi Chamoun from BMO.

Bart, what do you think is the right leverage for this business longer term? I mean you're getting to 3x in 2025. And it feels like the biggest risk to this program -- to this kind of profitability improvement program is these leases that are outside of your control, that you're still going to be financially levered. As you execute in the next 5 years on this plan and to the extent that there is some other events outside of your control that could represent the risk to that plan, obviously. And that's, I think, what has kind of consistently happened in the past. 5-year plans get kind of offside as economies change and demand change and all these kind of things. Has there been consideration for alternative ways to delever faster to recapitalize the balance sheet, including an equity proportion? Because it feels like still by 2025 and with kind of this very strong plan that you have, you're still kind of financially levered even then.

Yes, Fadi, great question. I'll maybe -- I'll take it and then happily turn it over to Eric as well and JC to add comments. But today, we have a net debt of $4.7 billion, and that's clearly more than we would want, and even once we've grown the business and delivered on the operational excellence and the financial performance of the company. So I would tend to agree with you, we'd like to see more improvement in that. We're not anticipating or contemplating equity issuance today. We need to be mindful of dilution, and we believe we have a really great plan to give the business time over the next several years to really find its legs, perform, deliver on the things that we know we can deliver on, which I was just describing, and build in greater financial performance for the enterprise. So -- and the earnings growth and cash flow generation will certainly help us do that. Longer term, to your point, we won't close our eyes to other options to recapitalize the balance sheet further. But we really want to see the -- how the business can perform first before we look to alternatives because we have so much of the benefit of the work that we've already done, the investments we've made in the fleet, the investments we've made in the learning curve of the 7500 and the cash we have coming in or that we have now to delever and bring interest expense down that we're highly confident we'll get to the 3x level. I'm a big believer in having what's called dry powder on the balance sheet, which means being a little bit underlevered towards your long-term targets. And so we'll see where we get to over time, and we will be free cash flow positive coming next year, and we'll be deploying more of that to debt reduction as well. So I think it -- in -- all said, it's -- let's perform first; make sure the business is performing very, very well; use the funds on hand. And that should get us to where we want to be, ultimately. We have a high degree of confidence in that, and then we'll take it from there. I hope that helps. Does that help, Fadi?

Yes. Very helpful. And maybe one follow-up quickly on what is the base interest cost, financing cost coming into this plan? Is it $750 million? Like, what -- I'm confused a little bit, net-net, what is kind of the base of interest costs that you're starting off with?

Yes, the run rate cost, Fadi, would have been around $800 million, including the HPS facility, which, of course, we've paid off now. But we only had that facility for half a year. So the total interest expense in 2020 would have been less than that. So those are the 2 numbers that -- for modeling purposes.

Our following question is from Konark Gupta from Scotiabank.

Maybe the first one for Eric or JC, whoever wants to take it. On the G600 -- G7500 actually, you guys mentioned about the unit cost reduction of 20% from 50th aircraft, which is almost today, to the 100th aircraft. Now based on your production rate, it looks like you will touch the 100th delivery at some point in 2022. So from that point onward, do you expect further unit cost reduction and further margin improvement for G7500? Or are we looking at a stable margin with a stable revenue profile from that point on?

I would say, Konark, that we will have achieved the majority of the savings. We were talking about another 20% reduction on unit cost between now and Aircraft 100. But clearly, our company always look at improving itself. So there is always conscious improvement. We always try to find a better way of doing the work and revisiting all the time our cost structure. So there could be, I would say, the majority of it will be happening between now and airplane 100, but there will be further incremental improvement after.

Great, Eric. And then for Bart, maybe. In terms of the CapEx that you laid out, flattish $200 million per year-ish or so for the next several years. So first clarification, maybe can you help us if the $200 million is also applicable in 2025 guidance? And secondly, what kind of split are we looking at between maintenance and the growth CapEx you need for those expansion plans you have with the service centers and all that? And is it -- is the 2025 number for CapEx reflective of the new investment cycle on the product side, if any? Or when do you expect that new product cycle investment to begin, obviously, given the industry was pretty competitive?

Eric, you want me -- you want to start on it?

Maybe, Konark, what I would say first is the answer is yes. We're planning to be in the zone of the $200 million between now and the end of our plan that we're presenting today. And clearly, within that $200 million, there is completing the service center build that has not been completed, but the majority of it has already been spent. The other thing is Bombardier has a long history of always improving our product, staying at the forefront of the technology, having the most competitive airplane. And part of that $200 million also, there is improvement to our product in the next 5 years. So to answer your question for '25, yes. And in terms of continuation of improving product year-over-year, we will definitely use that envelope of $200 million to do that.

Konark, maybe if I could just add to Eric's comments for you. Refreshing of aircraft and continuing to improve them over time, I think some companies have seen significant investments having to be made from a CapEx point of view. But we've recently come through 2 cycles with the 5500 and the 6500 both. And we know what those ones cost, those particular upgrades and updates costs. So we have a high degree of confidence that further upgrades and updates will easily be accomplished within that $200 million, plus or minus, CapEx over the next 5 years.

That's great color, Bart and Éric. But maybe just to clarify to my question on that. Is the $200 million number, I understand, obviously, is low right now, but then you have the investment cycle coming up. What kind of magnitude do you look at as sort of the high-water mark in any year for the CapEx? I mean could it be $500 million? Could it be $1 billion depending on the business investment?

Beyond '25, I think it somewhat depends on the approach we take to either future development programs or large and expanded refreshes on our platform. We're working very hard to derisk our approach. As you know, every time we do a new program, it's now today in the billions of dollars. Whereas 20 years ago, it was less than $1 billion. So these are high capital costs. I don't think we have a line of sight on a water -- high-water mark, we'd say, today, unless we came into a brand-new program. But as I said, we're working very hard to derisk that and use different approaches that will provide the ability for us to use far less of our balance sheet directly as we do new programs and upgrades. I don't know, Eric or JC?

If I may, Bart, and maybe JC, if you want to have. But clearly, Konark, the days of the OEM completely spending all their money to get an airplane into service like 5 years later, I think, are behind us. We're going to have to be disciplined, even in the second part of our plan for the next decade. We're going to have -- if we have to do a complete program, we're going to have to rethink the business model. And the business model will keep us in a band where we have much more capital discipline that we had before potentially. And we know today how much it costs to develop a new airplane. So there'll be clearly partnership, there will be contribution from other people benefiting of the program. So this is something that we have time because right now, we are starting the next 5 years with a completely refreshed portfolio. That's why we can have that capital discipline, investing in our -- in the aftermarket business. And continuing, again, as I said, have money to improve the product to keep them at the highest standard. But in terms of a new program, we clearly don't expect anything before the next portion of the decade, but it will be a complete different business model, which more -- much more conservative on using our own balance sheet.

And maybe just to add on the aftermarket side. So the structure we've adopted for those investments are long-term leases, 30-year leases, even beyond that. So we actually don't own any of these newbuildings that we're putting up. So in terms of our cash usage going forward, there's some small investments in tooling and equipment, other investments in digital, but those are very small in the overall envelope.

The following question is from Robert Spingarn from Credit Suisse.

I don't know if you have the slides visible to you. And I think I'm looking at Slide 24, which is the EBITDA growth. But Bart, this 50% CAGR from 2020 to 2025, I wanted to ask you how linear that is. You touched on it a moment ago when talking about the front-ended nature of the improvement on the 7500. But when we factor all this other stuff in, would you call it a fairly linear move from 10% to 20%?

No. Actually, it's much more front-end loaded. The vast majority will come in the next -- by the end of 2023 for a couple of reasons. First, I highlighted earlier that 90% of the growth is really things that are within our control. We're well through our cost takeout. We're actually -- the pipeline of items that are already going to be baked in and delivered in short order here is already up to $325 million of the $400 million. And then the learning curve on the 7500 will largely be in place by the end of 2023 as well. And building on our -- the one part that will be more linear is the growth in our aftermarket business. There's a very clear strategy that JC is executing on, but the growth in that business for Bombardier going from $3.2 billion of demand to $4 billion of demand is quite steady over the 5-year period. So that would be the one key contributor that would be quite linear. The rest largely comes by the end of '23.

Okay. And how have you factored in, if at all, pricing on 7500 before and after the G700 enters service, which I guess is in some point in '22?

JC?

So I think as all assumptions in our plan right now, we've been extremely conservative on that one, too. And we're going to continue to look at that as we move forward. But we feel very confident in pricing stability on that platform even with the oncoming competitors.

Okay. And then just...

I'm sorry, Robert, just to add on that. We're going to have a very comfortable installed base already as our competitors start to deliver their airplane. And you know that airplane has performed quite significantly. There's no re-questioning about the Global 7500. You've heard a customer. This is the undisputable leader and king of the air right now. And we believe we're going to keep that position. The airplane is flying fast. You've seen some of the performance during the video earlier. So we feel very strong. But again, to what Bart and JC have mentioned, our plan is conservative and we've been conservative on rate. We've been conservative on pricing. So the plan is achievable. If we have a build of tailwind, as we mentioned earlier, we will have the possibility to do better.

Yes. Robert, maybe if I -- sorry, if I could just add one last thing. We're actually sold out basically on the platform to through 2023. So aside from some aircraft that are coming back to us, a small number, which we'll be able to realize even better pricing on those aircrafts. So we have absolute certainty literally on the pricing, at least for the next couple of years.

Yes, that's good visibility. Éric, just as a final question, just wanted to ask you, as you think about the market expansion over the next few years, the 25%, do you expect any shift in the ratio of fleet buyers versus individual buyers? And does it change by segment?

Yes. I think it's an interesting dynamic right now. We've talked about the pandemic and the impact of the pandemic. We've clearly seen early sign in the pre-owned business. Our pre-owned inventory is going down. We see a lot of people going to fleet operator. Not everybody wants to have an airplane and his own airplane. So there is a market. And a lot of newcomer will also vote for that option. The good news here is Bombardier is extremely well positioned with all our product, with the Challenger and the Global platform with pretty much all fleet operator. Our airplane is so reliable, predictable. The cost of maintenance are low. That's one of the reasons why we've been selected by the main operator around the world. So if that upside, and a lot of people are buying shares at the fleet operator, there will be clearly an impact on our business, a positive one. So that's how we foresee that, but not everybody will buy his own jet. And it's a business model that some people will adapt. Some other people will go for the fleet. And we're fine. We're well positioned for both cases.

The following question is from Noah Poponak from Goldman Sachs.

Actually, I wanted to just follow up, right, on that last one from Rob really quickly. Could you just level set us on the exposure of each of Challenger and Global broadly to fleet versus individual person versus corporate flight department? Just as we all think through, the corporate flight department has been off, it's going to come back. But who knows how quickly as everyone's focused on costs. The new flyers that came to the market during the pandemic are individuals largely. And so I would just want to get those exposures that you have on a sort of mix basis so we can think through how you'll be exposed to those recoveries.

Okay. So we are extremely well positioned when I look at the fleet operator. So I will call it clearly an opportunity. We've been, right now, with the main operator being a big share of their portfolio of airplane. Our airplane are also extremely well received by the customer base. And it gives us the opportunity right now to continue to grow that. We have orders. We also have a lot of options that those operators can turn into an order. So it could be a nice percentage of our backlog, call it, 20%. It is significant. So the potential is there. If there's an upside on their side, then we may see the fleet trying to have more airplane if the growth is there. Because some of the airplane that they were taking were there to replace older airplanes because they were replacing their fleet with our airplane, but there's also a potential for growth here that we could tap in as we are extremely well positioned.

What percentage of Global and Challenger backlog is corporate flight department?

I don't know the exact answer to that. I don't know if you know, JC.

No, I don't.

But maybe, Noah, we can get back to you on this one. I don't want to quote a number here. But it's a big part, but it's also gives us upside on both sides, but we do have a fairly sizable portion of our backlog which is fleet operator.

Yes. Noah -- Noah, interesting stats that come to mind. I mean if -- from publicly available sources, if you look at the markets in which we compete and you look at deliveries over the last 5 years, Bombardier has had about 43% market share with fleet operators, right? So we've been extremely successful, NetJets, VistaJet, Flexjet. And it's one of the key statistics that comes to mind as you're asking your question.

Yes. And they're all fabulous partners of ours, and we very much enjoy the relationships with them.

Got it. Got it. On the 7500, I know you've spoken here to the position of being sold out through 2023. I don't know if you'd be willing to just share where the unit backlog stands at this point. But more broadly, I'm just -- I would love to get your thoughts on whether there's growth or not in the delivery profile, we've been kind of all looking at the 35 to 40 unit number for a little while. Sometimes new airplanes are -- have a higher number early because of the early demand and then that fades. And sometimes it's lower because it's new, and then there's a lot of growth over time. I guess, I'm just sort of wondering how we should be thinking on a longer-term basis. Should we just hang around the 35 to 40 for a long time? Does that actually need to fade at some point? Or do you think there's growth in that number over time?

Yes. No, we do -- I think, if I may, I think we do believe that 35 to 40 is the right number for now. And I'm talking just here specifically about the 7500, of course. And we will see. We'll assess. The market is reacting extremely positively. And at some point, we like the fact that we have, like, amazing backlog. Having too small of a backlog is a problem, having too long of a backlog can be a problem also. So we need to find the right place here. So yes, there could be upside. But to date, we believe that 35 to 40 is the number we're going to be working with.

I assume the 2025 targets have the Globals at fairly flat from here and then a recovery in the Challengers in that $1 billion of OE delivery revenue growth inside it.

It's that -- the share is roughly 60-40 between Globals and Challengers as we go forward or 55-45, in that range, in terms of the percentage of Global deliveries versus Challenger deliveries, if that can help you. Yes.

Okay. And then just one last one for Bart. If I look at the debt maturity schedule per year post using the Alstom proceeds towards a lot of what's due in '21 and '22, there's still a number due in '23, '24, '25 that's larger than what you're talking about for free cash flow. So can you speak to us about how you are looking at pushing those out, refinancing those? When can you do that? Can pricing be more attractive or less attractive compared to current if you do that?

Yes. Great question, Noah. So just to set up some numbers for you. We've got about $3 billion of available cash flow from -- remaining from the Alstom proceeds plus a little bit of excess cash that we have on the balance sheet to put to work. And we've got about $4.5 billion of -- sorry, $4.7 billion, I think it is, of near-term debt maturities. So we do have a bit of a gap. The market today, the debt capital market today is, as you know, is very robust in all parts of the curve. And in our looking at it, we know that it's open for us if we wanted to do some refinancing. So that certainly will be something we'll be looking at. And as long as it makes the right economic sense relative to the trade-off of being able to push maturities out, it's something we'll be looking towards as well. We're also looking at opportunities to free up cash on our balance sheet. So we've been very clear historically that to run this business properly, and given the intra-quarter use of cash that we have regularly, that we need about $1.5 billion plus, call it, between $1.5 billion and $2 billion, roughly, of cash on balance sheet to give us a really, really good cushion and absorb normal inter-quarter variability on cash flows. With the repayment of the HPS facility, we freed up our collateral that was supporting that facility. And one of the other things that we're looking at is perhaps replacing that facility, so long as that makes good economic sense, with something that will give us more financial flexibility, whether that's a revolver or a combination of facilities that will allow us to free up some additional cash from the balance sheet and put it towards debt repayment. So that's the plans now.

Yes. But I think Bart said it in his presentation also, we are clearly focused on our maturities up to January '23 right now, which, if we can address that, this will create -- clear the runway because the next one after that is December '24, which brings us almost in '25. So that's one of our strategy is to make sure that we do have that piece addressed. So yes, we have $3.6 billion roughly available. So we may look for another $1 billion somehow to achieve what we're doing here in terms of creating runway. And that $1 billion can come from different source, which we are looking at right now, could be using securities, revolver. So there's all kind of option that I would say we will consider in the next coming weeks.

Thanks, Noah.

Thanks, Noah.

The following question is from Yilma Abebe from JPMorgan.

My first question is a clarification on the question that was just answered. In terms of, I guess, minimum liquidity the company would need as you begin 2022 after you reduce your debt. What is that level of normalized liquidity that the company would need? And how does the credit facility you described fit into that?

Yes. I can maybe -- just in simple terms, in a year where we're looking at, in 2021, with cash burn of something better than $500 million, we've targeted $1.5 billion to $2 billion of liquidity as an appropriate number for ourselves. That would be too high, obviously, once we get into a free cash flow positive situation. So as we move through 2022, where we start being free cash flow positive and get to 2025, we believe our liquidity needs should be lower. The one offset to that might be if we have a little bit higher working capital needs. So we'll have to see how that balances out over time. But by delivering on the free cash flow that the business is planning on and we're working towards, we should be able to free up incremental cash off the balance sheet to help us repay more debt, absolutely. So hopefully, that helps, Yilma.

It does, it does. And I guess my second question is related to the aftermarket book of business. You're targeting about $2 billion of revenue by 2025. Can you give us a little bit of color around the margin profile of that business once you get to that $2 billion? What's the EBITDA margin look like? What is the free cash flow profile of that business?

So I'll start by answering. So obviously, it's our highest margin business that we have in Bombardier's portfolio. We have not disclosed kind of the exact numbers. But we're already operating today at a very, very good margin on this business. So what we see going forward is we're going to target close to double-digit growth in revenues as we move forward and slightly better in terms of margin improvement as we go forward. And that's explained by many different things but largely because we're able to push our current infrastructure and distribution network and put more volume through it. So we're going to see some economies of scale as we move forward. And what we've achieved so far, if you look at our slides and back in the past, is exactly that phenomenon. We've been growing at about 13% per annum on average in the last 5 years on revenues, but we've achieved close to 20% year-over-year growth on the profitability of the business. So I think we're going to see slightly better year-over-year growth on margin than you're going to see on revenues as we move forward.

How about on the free cash flow side? What kind of working capital should we expect that, that's more normalized [ component of our ] revenue?

The cash will follow the EBITDA of that business almost 1:1 as we move forward.

[Operator Instructions] Our next question is from Walter Spracklin from RBC Capital Markets.

Yes. So I'd like to come back to some of the upside opportunity, if it should develop. You talked a bit about how COVID-19 is resulting in a spike in demand. If it were to stay high, and you mentioned the possibility that it would, what confidence that -- do you have that it could stay high? And what metrics will you be watching? And if it does, how can -- can you -- how much flexibility do you have, say, on the margin to increase production for particularly the Global 7500? And would that come with higher CapEx if you were to do that?

I may start answering. Thanks. So clearly, the upside right now potential is with the newcomer that I explained earlier with the COVID -- one of the COVID impact that we have. So we see that right now. And I think JC quotes some number in terms of how many -- what percentage of newcomer we had in the past, how many we had this year. So clearly, there is an upside. We see an impact at the fleet operator also. But how sustainable is it going to be? Is it going to last a year or 2 or maybe that's going to be increasing quite significantly. There's also another indicator. We talked earlier about the number of billionaire in the world that has grown by 10% a year. We haven't tapped into this yet. And I think the pandemic will accelerate some of these guys to adopt business jet as a mean to travel. So all this being equal, clearly, we've been conservative in our rate. You see that our rate are slightly growing between now and '25. And we're in a year where we just get out of a pandemic, we readjusted the rates. So we're conservative moving forward. We will see how the market behave in the next 9 months, 12 months and how our backlog is growing. So if the backlog grows enough to justify line rate increase, we will do that because, as I said earlier, having too much backlog could become a problem. So we need to find the right size. But we need to see a couple of quarter of momentum continuing with newcomer coming in. And then I think we'll have a clear sign that there's more and more adapter, and we'll see also the same sign with the fleet operator. So we're monitoring the leader -- the leading indicator to your question are always preowned inventory is always one that we watch. And also, I would say, the fleet operator, the number of newcomer going to their business is another one.

Maybe -- no, I think you said it right. I think the preowned indicator is one of the most important ones to look at, and we're headed into historical lows as we speak. There was very, very strong demand for preowned aircraft in Q4, which created a big drop in available inventory right now in the marketplace. Now I think Éric said it all. When we look at the last 5 years in business aviation, in the markets where we compete, we've seen yearly deliveries of this industry between 600 and 500. And it's been hovering in that level for many, many years. We're at the bottom of the cycle now at 480 in 2020 for the industry. And what we're -- we've baked in our plan and our conservative assumption is going back to something like 570 by 2025, which is completely in the normal band of what we would see in business aviation. So I think to Éric's point, with further adoption, a continuing growth in terms of wealth creation, there is a possibility that we're going to leave that band, the traditional band of yearly deliveries as an industry and really move to something that's even higher than that. But again, the plan we've built hasn't taken that into consideration.

Okay. And then my follow-up here is on the interest and debt reduction. You addressed, Bart, a few other opportunities that you could have in reducing debt. I think you also, during your prepared remarks, looked at some potential proceeds from reducing your footprint. My question is whether you would -- you have been engaged with other parties, particularly government, in terms of providing some backstop financing as well to, again, to get that rate get that below, get that rate lower. Or would you entertain, as did the -- in prior years, JVs or having third parties partner up with you to reduce some of that burden?

Yes. Walter, I'll maybe take the first part of that, and I'll turn it over to Éric and maybe JC to tackle the strategic part of the joint ventures and whatnot. But we're certainly open to other means in order to either bring our interest costs down or facilitate aircraft sales. We have worked with the likes of EDC and CCC in the past to try and find ways to facilitate our programs and make the sale of our aircraft even that more attractive to our customers and our partners. So we're always open to those things. We're doing some things ourselves in terms of putting in place facilities like surety bonds or perhaps even letters of credit, if they're economic, to help facilitate sales for us as well. So we're looking at all of those things. In terms of the debt repayment, I mentioned the biggest driver there are -- 2 biggest drivers, I think, over the longer term, will be a positive growth in our free cash flows. And as Éric highlighted in his comments, debt repayment is going to be a priority for us over the next 5-year period. So as we see more cash available and with a low and steady CapEx rate, we'll obviously look to put that towards debt repayment. And then we have a large amount of cash, excess cash, I'll call it, on the balance sheet that, today, we need for liquidity. But if we were able to replace that liquidity with something like at a reasonable cost, we could perhaps free incremental cash up and use that to pay down more of our debt. So that's something we're working on right now. We're active in the markets and speaking with potential partners on that front, and more to come. Maybe on the JV side?

Right. Yes. On -- you want to go? Go ahead.

No. No. So JV side, I think right now, this is -- we could consider, on the long run, for new program, JVs and things like that. But I think right now, it's not in our card, I would say, in the short term. We are building right now a more resilient business to reach full potential. That's what we're focusing on. We have a great portfolio of -- ahead of us. We are focused right now on margin. We are focused on deleveraging the balance sheet. And we're going to look at the different instrument here. But -- and I think Bart already mentioned some of those. So everything is on the table, and we'll definitely make sure that we keep our objective in mind, which is optimizing our return and optimizing our free cash flow generation.

Our following question is from Myles Walton from UBS.

I was wondering if maybe, Bart, you could just give us a little bit more color on the walk to breakeven cash flow in '22. It sounds like RBG's net CapEx aren't really a help. It looks like from your EBITDA chart, maybe a couple of hundred million from the cost-reduction efforts in the 7500. And it didn't sound like, from your answer to David's question, that working capital was much of a help. So maybe just flesh out where -- what I'm missing in terms of that walk to the $500 million delta year-on-year from '21 into '22.

Yes. Thanks, Myles. You're right, CapEx won't be a help. When we're not planning on it, we expect CapEx to be quite steady. We do expect taxes to be neutral. We do have very significant cash tax pools that will be supportive of offsetting any income taxes that we have to pay for a number of years to come. So those we expect to be quite neutral. Most of the nonrecurring items will be behind us. RBG we will still have in '22 and '23. But, call it, a little over $100 million of the $200 million of nonrecurring items will not be with us in 2022. We have the benefit of the 7500 program, and it's moving into the profitability part of its cycle. That is a couple of hundred million as well. And then when we talk about the cost-reduction activities that, as I said earlier and Éric highlighted earlier as well, we've already baked in $325 million of that on our way to $400 million by 2023 full run rate. And we'll get somewhere in the order of $150 million-plus benefit from that in the year. And then, of course, there's obviously the interest expense reduction. So we believe we have a real clear line of sight to becoming cash flow positive in '22 when you add those elements together.

Okay. And then maybe one other one on aftermarket, and JC, you laid out sort of the [ guides ] there. But I'm just curious, do you think that 20 -- you get back to a full Bombardier fleet utilization in 2022? And if so, the CAGR of expansion from 2022 to 2025 from a revenue perspective looks significantly higher than what was realized for the pre-COVID 5-year strategy. So maybe just flesh that out in the comments there.

Yes. No, very good question, Myles. Obviously, it's going to depend on flight hours, but we'd like to be back to 2019 levels this year. Right now, the fleet is operating at about 81% of 2019 flight hours. And we're going to continue watching this. Obviously, this depends on when the international borders will reopen. Kind of what we see right now is there's a lot of domestic travel in the United States. That's very healthy for us in terms of flying. What we're missing right now are long-range global aircraft flights. And obviously, that's a good driver for revenues as we move forward. So -- but what I'm seeing right now is a recovery this year to 100% of 2019 level. We'll have our revenues realigned to that, and then we'll go from there. But I think what you're going to see more directly, at the heart of your question, is we have a lot of square footage that's coming in the next 12 months. So from Singapore just now, Miami and Biggin Hill early next year, Australia in the same time frame, we're -- we know that we're poised to have a spike in terms of our ability to grow. And I want to come back on the curve. I haven't changed the plan even with the COVID dip. Obviously, it's leading the short-term challenges where we have to maneuver to these lower flight hours, but I really want to come back on that trajectory as fast as possible. And the good news is that we've been building that square footage, and it's going to be right there when the world recovers fully. So that's kind of how I feel about where we're at right now, Myles.

Our following question is from Cameron Doerksen from National Bank Financial.

Just one question from me, and it's just on the, I guess, the transition of the global production line to the new facility. I mean, obviously, by 2025, that will all be complete. But can you talk a bit about the risks around margins and cash flow in the sort of intervening period here as that transition takes place?

There is no real risk for us, Cameron, because as we're moving the Global 5000 back here, the facility has been producing in the past the Global 5000. So we know exactly. Our people are still around. So we don't see any risk and any impact of those transition between the sites. So it's already in our plan, and it's going to be very minimal.

Okay. So you won't need to have to build up any inventory ahead of a change in the production line or anything like that?

Not at all. Not at all.

Following question is from Chris Wang from Barclays.

Just want to follow up on the aftermarket. I mean you talked about a lot of capacity coming online for you, and that's positive. But I'm just wondering what's the competitive landscape look like for you on the MRO side? And who is competing with you at this point and how easy it is for you to take some of those share back?

Thank you, Chris. Yes, absolutely. So great question. And it's a changing landscape right now. I think what you saw over the last few years is many of the airframe OEMs have had the same reflex to go back into their own aftermarket. And we've seen Bombardier's announcements and going after organic growth. And we've seen some of our competitors make acquisitions to significantly increase their own footprint. What's happening right now is you can really feel every OEM is taking their own aftermarket back, which is impacting third parties as we speak. So consolidation, obviously, is going on, and there will be more. But it's very clear that this is all a changing landscape right in front of our eyes. Now that said, none of us, in terms of airframe OEMs, have get a capability to cover the entire market. So there will be a healthy market for those third parties that are able to provide that level of customer satisfaction and that level of know-how on those manufacturers' aircraft. And you have very well-known organizations, Duncan Aviation is one of those in the United States, that will continue to operate in that third-party zone between the different OEMs. But to your question, it's a changing landscape. I think we will see less of the smaller players, consolidation of many third-party MROs to go through this transition that we're living through in the aftermarket of business aviation right now.

Got it. That's helpful. And then I just want to kind of crystallize the near-term '21 going on to the '22 numbers. The cost save is pretty clear to me, $100 million in '21 and $115 million in '22. In terms of this learning curve that you're talking about on the 7500, it looks like somewhere in the $200 million, $300 million in '21 and sort of similar amount of improvement in '22. Is that the right read in the near term to your front-loaded comment?

2 Yes. Chris, you've got those numbers right. It's about $200 million in each of '22 and '23 in terms of the benefit from the 7500, and there will be some beyond that as well. So it's actually greater than $400 million in total. But the further gains, obviously, there's a reduction in -- per year going forward. But as Éric had mentioned, I mean, the company and our operations is constantly focused on improving the reliability and the productivity of our production lines and workforce. So incremental gains year over year over year are definitely possible and likely as we move beyond the full learning curve. So we're excited about that as well, but we haven't baked any of that into our outlook or projections currently.

Got it. And then circling back on the aftermarket. Can you talk about the cadence of the revenue growth from the $1.2 billion to $2 billion? And also, what is the margin profile going to look like?

Yes. So as I mentioned, the market is growing at about 4% per year. What you see in the material we've given you today is that we'll be growing revenues in the range of 10% year after year. So we're going after share above and beyond what we're going to see in terms of the growth of the market. Now the growth of that market, as I mentioned before, the fleet is growing. The fleet is aging. There's a lot of large airplanes that have been delivered in the last 10 years that are coming due to major inspections. There's 120-month inspection on the Globals. A lot of these airplanes will go through those inspections in the next few years. So that's one of the big drivers of that growing market as we move forward. The second part of your question, I think I touched on before. I think we're going to see profitability grow faster than revenues within a couple of percentage points. But that's what the past has shown us in terms of maximizing our footprint and our infrastructure and our distribution network. And I expect to see the same kind of higher year-over-year growth on profitability than what we see on revenues as we move forward.

And then at the end of...

I'm sorry, Chris. I was just going to add. What's amazing for us right now is we have 5,000 airplane as an installed base. And this is what JC and his team are going to tap in. It was a question of geography right now, to be present in the right market and making sure we're there and available. So 5,000 airplane is a lot of airplane. And as an OEM, we know, to JC's point, when an airplane will be ready for a major inspection, a 5-year inspection, 10-year inspection. So we will be aggressive at pursuing those market. And I think right now, to your point, JC, it's a question of timing. We are still in the pandemic. It's going to be how fast the vaccine kicks in and how fast the border are reopening. Because right now, we see -- you've seen this slide earlier on the Global 7500. You look at the 7500 right now, the flight are about a duration of 2-hour, 2.5-hour on average, which is very short. But people are flying either within the U.S. or within Europe. So imagine when international flight and border will reopen, everybody is going to start reflying again. And of course, we're going to see that impacting positively our aftermarket business right away.

Yes. I think definitely a bigger opportunity for you especially compared to one of the lower hanging fruit, in my view. But lastly, just on debt management. It seems like you're suggesting potentially like a 2-step in terms of paying down debt with the proceeds and the cash balance that you have. You mentioned like a $3 billion, give or take, number that you have and also the potential to kind of raise secured debt with the collateral just freed up from the HPS deal. So just wondering, timing-wise, you mentioned towards mid-year this year, so what are you targeting first? And also, what are the -- is it by the end of the mid-year this year we should see any maturity that's within 2 years to be cleared out?

Yes. Chris, great question. We're certainly timing to have all of the cash deployed by midyear. That includes the funds that are currently tied up on the balance sheet. We do have 11.5 million Alstom shares that are in a short-term lockup. Those come out of lockup in May. So that forms part of the cash. So -- but we do have a targeted use for those funds because those shares are traded in euros, and we have a $400 million euro bond there, just over $400 million that's maturing also in May. So those are really spoken for. So by midyear, we expect to fully deploy the cash. We do want to be -- patient is not the right word, but somewhat opportunistic in the approach we use to deploy that cash and what comes first in terms of cadence. So I can't really get into those details yet because we haven't finalized them, but hopefully, that helps you from a timing point of view. The 2 key methodologies for putting cash to work, obviously, are repayment of bonds and as well freeing up more cash off the balance sheet with a, call it, a securitized facility or facilities or a collateral-backed facility or facilities. And that will give us incremental cash. So -- but which of those will come first, I can't really tell you right at this second. We'll -- more to come, and you'll see the announcements as they happen, okay?

Our following question is from Jean-Francois Lavoie with Dejardins Capital Markets.

Yes. So I just wanted -- you mentioned in your prepared remarks the potential to go after missionized aircraft. So I was just wondering if you could provide additional details on the contribution of these types of aircraft today in your business. And what's the size of the market?

I can start, and maybe, JC, you can carry on after. But [Foreign Language]. It is clearly a market potential driver for us in terms of number of airplane. Usually, the margin also -- because we usually sell a green airplane, install equipment on it, which we do have also, of course, the sales and profit. So we like that business. Our airplane, actually, for the reason you've seen earlier, because of their performance, the wide cabin, the reliability is also a differentiator. We have already a lot of airplane missionized in the world, either ambulance, rescue mission, communication system on it, and I'm sure you've seen some of those. So we've been approached in the last year or so to -- what we call the Mission House. The Mission House are usually the ones that do this work or work with us on this. And the Global and the Challenger are both extremely popular with the Mission House right now. So you've seen some announcement recently. We've been able also to capture backlog on this. And we do foresee that putting also our engineering capability that is unique at Bombardier because we -- of course, we know our product better than anyone, we could definitely also contribute to making more attractive our product. So that's the strategy. We haven't set a goal precisely in terms of percentage of contribution. But let me say this one is going to be a bigger piece than what it is today, for sure, in the next 5 years.

Okay. Great. And do you need -- you mentioned some -- that you have been approached by potential mission house, but do you need to invest? You talked about the engineering capabilities, but is it through partnership? Or you -- maybe you can invest in your products to go after the market differently. So just how you intend to grow in that segment.

Good point. The beauty of this contract is they are -- everyone's specialized. So we take one of our Global, that is off the line, the regular assembly line, and we do modify the airplane. But the contract cover all the costs, usually. We don't need any development program because it's very specific. So if we sign a contract with a mission house, and they want us to install and modify the shape of the airplane for all kind of reasons because they have equipment to install on it, then we'll do all the testing, but those testing and costs related to that, they will be covered by a contract. So no investment needed on our part. I hope I answered your question, Jean-Francois.

So we have now our last question from Kevin Chiang from CIBC.

Maybe just one question. Maybe to you, Bart. If I look at the 2025 objectives, it looks like you'll convert about 50% of cash flow from operations from EBITDA. But I appreciate 2025 is not the end of your journey here. But so look at some of the pure-play manufacturers out there like in the auto or heavy equipment, they can get up to like 75% to 100% conversion. Do you see that as an eventual realistic target for pure-play business jet OEM? Or are there any reasons why that makes it more difficult for Bombardier here?

Yes. It's a good question, Kevin. I think the first thing I would say is that clearly, there -- just given all the comments we've made today and the additional opportunities we have in front of us, that we've been conservative on our outlook for free cash flow by 2025. And we think there's upside to that if we hit our EBITDA goals. So we're actually quite constructive that our conversion rate will be higher than what you're seeing in the projections. But we do want to stay prudent at this stage. We're just launching ourselves today as a pure-play business aviation company. There's a lot of things in-flight, to borrow on a probably a bad pun, and things that we're working on. So our focus is really to execute first and then really deliver the potential. And as I say, I believe there's upside to it. But we have high confidence in the plan that we have now and look forward to achieving that upside. And I think as I maybe mentioned earlier, that will be a very, very first-class problem for us.

Thank you. This concludes the Q&A session. I will now hand it over to Éric Martel for closing remarks.

So first of all, I want to thank you for listening to the Investor Day today. I hope that we've laid out all the information. We wanted to be transparent with you. We wanted to let you know what the game plan is as we are becoming now a pure-play business. We are excited about the plan. I have a lot of experience on my team, years in our industry. We know that we have a real plan to win. We have an amazing product portfolio capability ahead of us, fully refreshed. We have very capable and dedicated workforce here. Our employee are excited with where we're going to be going. And we have a real possibility with the market that is ahead of us. Yes, we've said it many time, we are in a transition year. We have been conservative on our plan. So there is a real potential upside. We are excited about -- and growing our aftermarket business. And at the same time, a lot of the things we commented today, we are far advanced. We know exactly where we are, so we are becoming more and more predictable. We want to offer to you a more resilient business also and clearly reach to our full potential. A more diversified portfolio, as we said, our revenue will be more balanced with a bigger piece going to aftermarket, which is a more resilient market. And we are going to be focused. We are going to be focused on the Challenger and the Global platform, which compete in the medium and large segment, which are, as we said earlier, equal to 90% of the market in business jet. So we are competing within 90%. We are excited about it. We think we're well positioned. We're going to be extremely disciplined also, and we're going to be deploying our capital very strategically, of course, having in mind reducing our debt. So we are derisking our business model. We are going to be focused, and thanks for joining us this morning. Thank you.