Bombardier Inc. (BBDB) Earnings Call Transcript & Summary

[Foreign Language] Hello, everyone, and thank you for taking part in Bombardier's 2023 Investor Day. I'm standing in Bombardier's Laurent Beaudoin Completion Centre. Behind me is our dynamic completion line where exceptional global aircrafts are outfitted with hand-made interiors after they've flown in from our aircraft manufacturing facility in Toronto, Ontario and soon to be at Pearson Airport. Every day, thousands of employees contribute to the success of our organization and share their talent, craft and expertise in creating unique business aviation experiences. During this Investor Day, we are pleased to share the progress we have made over the past 2 years towards our 2025 goals and share our strategic priorities going forward. Our management team is excited to tell you the next steps in our strategy and securing Bombardier's position as a leader in business aviation. They'll also discuss how we will capitalize on new opportunities to ensure a promising future for all our stakeholders. Our presenters today include Bombardier's President and Chief Executive Officer, Eric Martel; our Executive Vice President, Aftermarket Services and Strategy, Paul Sislian; and our Executive Vice President and Chief Financial Officer, Bart Demosky. Throughout the event, our Vice President of Communications, Marketing and Public Affairs, Eve Laurier, will also introduce you to Bombardier team members who are instrumental in progressing important initiatives. We'll also leave ample time for Q&A period. Our 3 presenters will be happy to interact with you directly from our B Studio in Montreal. Questions will be limited to sell-side analysts and institutional investors. I'd like to remind you that if you'd like to ask a question during the Q&A session, please use the number posted on the Investor Day 2023 page of our website. Before we begin, I'd like to draw your attention to the disclaimer of our presentation. During the course of this Investor Day, we will make 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 our current knowledge as it exists today. I wish to emphasize that there are risks that actual events or results may differ materially from these statements. I am making this cautionary statement on behalf of each speaker whose remarks today contain forward-looking statements. And with that, I'll turn it over to Eric to get started.

Hello, and thank you all for tuning in. [Foreign Language] This session is an opportunity for Bombardier to connect with the financial community and shareholders to dig into the numbers and to talk to you about our vision of the future. We will also be communicating some important updates about Bombardier's trajectory. I am speaking to you from our Industrial Design Lab at Bombardier's Montreal area headquarters. What you see around me is the demo cabin for our newest business jet, the Global 8000 aircraft. In many ways, the Global 8000 is the perfect example of what we're capable of at Bombardier, a business jet that will fly farther and faster than any other. With cabin innovation that continue to raise the bar for the entire industry. As our talented teams bring amazing products like this one to the market, our company is delivering impressive financial results and making important strategic decisions to become even stronger. The future is extremely bright for Bombardier, and it's my pleasure to tell you more about the road ahead for this exceptional company. As you can see, we've made a significant progress since 2020. And with every passing quarter, we have built a foundation for a more resilient business. Our revenues have grown to $6.9 billion, a 23% increase from 2020. And during that time, our aftermarket revenues have increased by an astonishing 50%. We have more than quadrupled our profitability to $930 million EBITDA. We've generated $835 million in cash over the last 2 years. Perhaps the most important part of this story is how we've managed our debt since 2020. At the start of this year, our net leverage was down to 4.6x, and we've benefited from credit rating upgrades from both S&P and Moody's in 2022. Because we've been consistently opportunistic and proactive, today Bombardier's total debt is 45% lower than it was in 2020 when you include this year's debt-related transaction. We've made excellent progress to derisk the company. While we capitalized on strong demand for business jet, we stayed true our strategic priorities. All of our strategic priorities launched 2 years ago are perfectly on track or ahead of plan. Whether it's our Global 7500 contributions, our cost reduction program, aftermarket expansion or deleveraging, we have accomplished a lot. The achievements you see pictured here are the result of careful planning. Operationally, we've continued to evolve our business and position ourselves for the future. We launched the Global 8000 aircraft with extremely positive response. We started delivering the Challenger 3500 aircraft, the incredibly popular evolution of our best-selling Challenger 350. We created Bombardier Defense to grow our presence in this important market and to capitalize on our trusted platforms and our unique expertise. We launched a certified preowned program to offer high-quality Bombardier aircraft that come with a manufacturer's warranty. We grew our customer service footprint for Learjet, Challenger and Global Jet by a remarkable 50%. Last year alone, we opened and expanded 4 service centers in Melbourne, Singapore, Miami and London. Most recently, we broke ground on another service center project in Abu Dhabi. We're currently building a brand-new state-of-the-art facility at Pearson Airport in Toronto for the assembly of our Global business jets. The way we do business is as important as the results. We are using our talent not only to grow our business but to build a more sustainable future. We have a target to reach net 0 emissions by 2050 and a clear path to get there. Our EcoJet research project, which you can see on this slide, [ sees ] to dramatically reduce emissions by fundamentally changing the shape of the aircraft. We are currently conducting test flight using scale models. In addition to planning for the future, we're making real changes today. We recently announced a landmark agreement with Signature Aviation to cover the totality of our flight operation with sustainable aviation fuel through Book and Claim. Bombardier is the only business jet manufacturer to have published environmental product declarations for our newest aircraft. This is a third-party document that takes into account the entire life cycle of our products. There are many other initiatives underway as well. You'll be able to get all the details in our newest ESG report coming out in May. Turning now to market trends and revenue forecast. There is one important aspect to consider, growth in the medium and large categories in terms of absolute dollars. Over the past 18 months, we have certainly talked a lot about the pandemic serving as an accelerator for business jet adoption. Today, if you cross-reference our internal forecast with external sources as seen here, it clearly paints a picture that favors Bombardier portfolio. This is, again, exactly on plan with our strategic direction to focus on Challenger and Global Jet. While the light category is projected to shrink in terms of overall market value, medium and large jets will not only remain stable, but they are also expected to come in close to 90% of our revenues. This is particularly important because Bombardier is #1 or #2 in every geographic market we compete in. Focusing our energy and investments in this space was the right move and continues to be the foundation for Bombardier's excellent performance. Another important factor is resilience. Historically, the large category has remained very stable through economic cycles, and this trend continued to this day. Bombardier's industry-leading portfolio is well positioned to capture demand in this space. Our Global 7500 is the flagship of the industry, and we're currently evolving it into the Global 8000 aircraft, which is expected to enter service in 2025. These jets are the gold standard in business aviation, and we are clear leaders in this segment. The Global 5500 and Global 6500 aircraft, are high-performance, long-range jets with a proven track record of reliability and comfort. Our customers simply love these planes. Though Global 6500 aircraft is also a go-to platform for defense missions like airborne surveillance. The Challenger 650 continues to be a customer favorite, thanks to its range, large cabin and advantageous operating costs versus the competition. Finally, the Challenger 3500 business jet which entered service a few months ago is proving to be an extremely popular derivative of the best-selling Challenger 300 series. Here, Bombardier made a smart investment to protect its #1 position in the super midsized market on a product with good margins. Thanks to this outstanding portfolio, Bombardier had the highest number of deliveries amongst business jet manufacturer for the last 2 years as reported by General Aviation Manufactures Association. Thanks to our strong portfolio and the structural shift in demand, Bombardier's backlog is in an excellent position. It has increased by more than $4 billion since 2020, reaching $14.8 billion today. It is diversified across many different customer types as well as across all of our platforms. Today, our backlog spans 18 to 24 months, which we believe is the right range to balance our production rates, manufacturing costs and customer demand. This gives us predictability and confidence as we look at the next few years. Given this predictability, we now expect to reach a delivery volume of approximately 150 aircraft by 2025. This will also drive significant revenues, growth as we continue to deliver more medium and large aircrafts. You should also note that our plants are equipped to produce more aircrafts without further infrastructure investment, but we will remain disciplined in how we manage the business. I can't repeat enough, predictability is key, and it is something our workforce appreciate as well. Given our strong business execution and fundamentals, I am pleased to announce that Bombardier is updating its 2025 objectives. We are now targeting more than $9 billion in revenue by 2025 with an adjusted EBITDA of greater than $1.625 billion and a healthy margin of approximately 18%. We are completing the repair of our balance sheet, reaching a net leverage in the range of 2x to 2.5x by 2025. This is excellent news and a testament to the diligent work we're doing today to deleverage our balance sheet. We are predicting that free cash flow will reach more than $900 million by 2025. Bombardier's strong cash generation and credit metrics that are approaching investment grade will result in meaningful value creation giving us abundant capital allocation optionality during the second half of the decade. I am extremely pleased to share these new objectives with you today and to give you some context as to how we'll get there. When it comes to the overall industry landscape. We're happy to see that 4 fundamental tailwinds continue to provide momentum for business aviation. We've rebuilt our backlog, as mentioned earlier. Flight utilization level are 21% higher than 2019 levels. Preowned aircraft inventory remains low. And the number of people turning to business jet travel continues to grow. We expect these tailwinds to have the upper and over the headwinds facing our industry. We continue to see high interest rates and inflation as well as the potential for a recession. Supply chain disruptions are improving, but certain issues are persistent. I should mention that Bombardier is doing an excellent job to proactively address these issues and minimize disruption to our operation. Geopolitical tensions remain. And of course, we all must focus on sustainability. Let me repeat that Bombardier is being extremely proactive. We are leaders in building a greener future for our industry and we have positive messages for our stakeholders in this regard. With the economic fundamentals in place in the context of strong demand for our product and services the following strategic priorities will keep us on track to reach our 2025 and beyond. We will maintain our leadership position in the medium and large categories. We have the talent and the portfolio to stay on top. We are taking steps to materially grow our defense business. We created Bombardier Defense last year, and we see strong potential for growth in this area. We will continue our aftermarket success story. We are delivering exceptional service and are consistently coming up with new ways to enhance our customer offering, including our certified preowned aircraft program. Finally, we remain deeply focused on finishing the work required to repair our balance sheet. Bombardier is in a stronger position today than it has been in many years. And I thank my team for helping to get us there with such a bright future ahead of us. Our people continue to be integral part of our success. I am privileged to work with more than 15,000 talented colleagues, and we will continue to add talent as our company grows. [Foreign Language] Before we hear from Paul, who will present a more detailed look at our strategy, I'd like to hand it over to Eve Laurier, who is Vice President of Communications, Marketing and Public Affairs to tell us more about some additional features and content we'll be sharing during today's session.

Hello, everyone. [Foreign Language] Today, we are hearing a lot about how incredibly Bombardier has been performing from a financial point of view. But there are a lot of great talents in this company and tons of stories to tell. So you will see 3 vignettes in this presentation. We're also going to talk about the transformation of Bombardier because, yes, we make the most wonderful jets in the world, but we need systems and we need a vision. And David Murray is going to talk to you about transformation, but also about operational excellence, which is truly in our DNA. But before we do that, we would like to share this video with you, which underscores the importance of sustainability for us in this company.

Bombardier is committed, committed and focused on being proactive on issues that matter like protecting the environment, increasing diversity and having a responsible supply chain, and we have a plan. ESG stands for environmental, social and governance, 3 core factors measuring corporate sustainability. ESG is a framework for forward-looking strategies and goals that enhance our company's impact in the communities where we operate. It's an important tool in our journey to build a more resilient business for the future. Our vision to be the #1 leader in sustainable aviation by offering the most advanced and environmentally responsible aircraft. Let's take a look at what ESG really means for us. We aim to manufacture and maintain aircraft with the smallest possible environmental footprint. We're working on improving the energy efficiency of our production processes and operations using renewable energy and increasing the number of electric vehicles in our fleet. We're also optimizing our manufacturing practices to reduce water consumption and waste production. We want to lead in sustainable aviation through designing innovative and environmentally responsible products. And to achieve this goal, we're focused on our product's entire life cycle using sustainable, highly efficient materials and on the adoption of sustainable aviation fuel, SAF. The social component of our strategy is all about taking care of our people, customers and communities by being a vector of positive change regarding the health and safety of our teams. Our goal is to reduce exposure at the source and embed well-being and mental health support and our employee value proposition. To lead towards an inclusive world, we're focused on increasing the number of hires from underrepresented groups, we're equipping leaders to identify [ unconscious ] biases in decision-making, and we're measuring diversity progress across our company. We'll keep working on creating customer-centered products and services, supporting local community initiatives that fit with our sustainability goals and ensuring best-in-class personal data protection for all employees and customers globally. Finally, the G in ESG pertains to governance factors. We want to provide a strong governance to sustain shareholder value, uphold the highest ethical integrity and leadership standards. We aim to lead supplier practices and environment, ethics and employment. That's our plan. How will we know we've delivered on our plan? As a first step, we set 4 goals for 2025, cut greenhouse gas emissions by 25%, reduce lost time incident rate by 30%, 30% of management jobs occupied by women, 75% score on our employee engagement survey. Everyone has a role to play, and this is just the beginning. Join us in our journey toward a sustainable future. Find out more about our ESG plan at bombardier.com/sustainability.

Hello, everyone, and thank you for joining us. I'm thrilled to be speaking to you in my new capacity as Executive Vice President of Bombardier's Aftermarket Services and Corporate Strategy. Prior to this role, I spent the last 7 years on the Business Aviation management team overseeing our manufacturing operations, supply chain and industrial footprint. With that, I was deeply involved in all strategic decisions and overall orientation of our company. I had the opportunity to lead the talented people managing our entire operations and to successfully ramp up the Global 7500 aircraft. Over the past few weeks, I also had the privilege to meet with a lot of our new colleagues, and I'm truly energized by the opportunities that lie ahead. Today, I'll share more insight about Bombardier's priorities as we continue to grow and develop our business over the next several years. Before we jump into the details, I want to take a moment to acknowledge the exceptional venue that I'm in at the moment, the Bombardier Flight Test Center in Wichita, Kansas. Just behind me is our flight test vehicle for our new Global 8000 aircraft, the flagship of a new era. The Global 8000 leverages all of the outstanding attributes of our Global 7500 aircraft and is becoming the fastest and longest range business jet in the world. In fact, it's also becoming the fastest civil aircraft since the Concord. The talent and expertise at this facility goes well beyond our flight test capabilities. The team's skills are at the heart of our flexible Bombardier Defense business. In 2022, we designated Wichita as our U.S. headquarters, a testament to our long history in the United States. Our company has evolved in so many ways. The team has set the foundation for what is now a growing defense business. They have time and time again, proven to be flexible, mission-ready partner and secured key work in the United States Air Force. In fact, some of the most frequently flown Global BACN-equipped aircraft are operated under the USAF flag. Thanks to the combined forces of our engineering and product development teams right here in Kansas, our growth strategy as a partner of choice for defense missions is becoming a reality. But that's what we do at Bombardier, we make things happen. Having these 2 teams co-located right here at our U.S. headquarters, along with our world-class aircraft service center is really the perfect embodiment of Bombardier's growth strategy, product leadership, defense and services. Now for our first pillar, I'd like to start by looking at our market leadership position. Around the world, whether it's medium or large jets, Bombardier is an established market leader with more than 30% share in almost every region. This exceptionally strong market position continues to be fueled by our steadfast commitment to innovation, ingenuity and strategic development of our industry-defining aircraft. Our comprehensive portfolio is built to meet the needs of customers flying in the Continental U.S. as well as those looking for transatlantic or transpacific flights. We also have a diverse and regionally established team that is well positioned to continue capturing market share. Our installed base is also a competitive advantage with more than 5,000 Bombardier aircrafts flying today, of which 3,000 are medium and large aircrafts, our large pool of customers are constantly looking to replace and refresh their business jets and are proud ambassadors of our brand. As we all know, customer retention and loyalty are essential to business aviation. I can't tell you how many clients I've seen return as happy customers for Globals and Challengers in my time running production. At Bombardier, we are focused on providing an exceptional customer experience as well as continuing to push the boundaries of innovation to keep making the best aircraft in business aviation. And that passion for innovation is clear when you look at our actions. Innovation is at the core of Bombardier's DNA. We have maintained our market leadership, largely thanks to our ability to design and develop exceptional products. Over the past 15 years, we have produced an impressive 8 new aircraft launches, thanks to our talented and dedicated teams. We have also invested significantly in our product portfolio. These well-placed investments have enabled us to continue to innovate and implement cutting-edge technologies on our aircraft with the latest pilot upgrades, clean sheet designs, product upgrades and much, much more. This will ensure that our aircrafts continue to lead business aviation in the medium- and long-range segments. Bombardier's Challenger and Global aircraft families are world renowned for their smooth flying aerodynamics, exceptional cabin designs and overall performance and reliability. In the months and years ahead, we will continue to innovate and update our existing fleet to meet the highest standards for our customers. The core ability to design and develop the best aircraft in the world is something that does not appear on a financial statement line item, but it is something that very few in the world can replicate. These capabilities passed on from generation to generation of engineers are built into the fabric of our company and extends through more than 40 years that we have been present in business aviation. In order to retain our market leadership, we will continue to focus on 5 enablers of innovation. First, Bombardier relies on its passionate teams to bring the best products to life. Our skill teams around the world work relentlessly to imagine, create and support the most impressive products in the industry. We create and manage our intellectual property, take the Global 7500 wing, soon to be the Global 8000 aircraft. It's an award-winning once-in-a-generation design that has reset how high-speed wings can perform on takeoff and landing or at low speeds. It's a work of art, an engineering masterpiece, and is built on multiple Bombardier patents. Bombardier also counts on a solid ecosystem of partners to support the ongoing development of its platforms. Our priority is to offer the very best products, and we are proud to collaborate with the best partners in order to do so. We also focus on operational excellence. When we look at adopting lean manufacturing principles and a continuous improvement mindset, speaking the same language and approaching processes the same way is key. We have a solid foundation for this, and it continues to yield benefits to our bottom line. And that brings me to the last pillar, the balance sheet. Bart will cover this in greater detail, but it's important to note that financial health is important to all of us. As we near 2025, it's clear that Bombardier will have significant capital allocation optionality. The second strategic pillar we will cover is the Defense business. As Eric mentioned, 2022 saw the creation of Bombardier Defense, a new brand for an experienced team. Our Challenger and Global aircraft platforms are perfectly suited to conduct special missions and have all the capabilities to stand out in the defense market. Their performance speaks for itself. They offer speed, range, endurance and payload capabilities at an industry-leading altitude. More than the products themselves, our technical capabilities, world-class flight test center and engineering know-how are key differentiators that set Bombardier apart. We are leveraging the unique expertise we have within the company as well as a solid ecosystem we have built to support our growth in this sector. Some of our active platforms and customers are highlighted right on this page. As I noted, we are a long-time partner of the U.S. Armed Forces, and we proudly participate in and support programs like the Battlefield Airborne Communications Node, or BACN, with our Global aircraft. Our aircraft also supports the Pegasus program of the German Armed Forces as well Saab's GlobalEye Airborne surveillance solution has been chosen by Sweden and the United Arab Emirates. Bombardier has been strategically looking at defense market for some time now as an opportunity for growth. This opportunity has been further compounded by an acceleration in demand attributed in part to the geopolitical tensions and international security concerns that we're all witnessing. Given our leading portfolio of versatile aircraft platforms as well as our proven expertise, Bombardier has all the attributes to continue to increase its presence in the defense market. We identified 4 key defense markets in which our aircraft excel to support the growth of our division. Together, these 4 markets represent approximately 3,000 active aircrafts of all types, including modified business jets. First, Bombardier Defense provides reliable, safe and secure transportation for heads of state and VVIP clients. Our aircraft allow officials around the world to arrive efficiently and directly at destination and optimize productivity while flying. Our jets are ideally suited to perform maritime patrol missions allowing for quick transit out of base, more time on station and ultimately, to cover more ground. This is thanks to their endurance, versatility and class-leading range capabilities. Bombardier has delivered numerous aircraft with intelligence, surveillance, reconnaissance and target acquisition capabilities and is becoming the service provider of choice for multiple armed force services and foreign allies. In fact, Global 6000 and Global 6500 jets have become one of the most popular choices for these missions. And finally, command and control. The ability for our aircraft to fly at very high altitudes allows them to be at the center of the battlefield providing eyes and strategic oversight to support operations as airborne early warning or communication relays. Our platforms are used for the United States BACN and Saab GlobalEye programs, 2 key examples of the value that Bombardier adds for its customers. Bombardier Defense is the choice of governments around the world who trust our proven and established platforms and benefit from our aircraft's longer flight time and lower operating costs. We rely on our renowned expertise to deliver complete and flexible solutions and to support the aircraft during its entire life cycle. Turning our focus to the Defense market forecast now. Based on recent studies, the global demand for Defense aircraft over the next 10 years will be approximately 375 units within the markets we have identified. Bombardier is poised to compete for a significant share of this demand. We are actively answering several proposals and tenders. We are also positioning our sales team and engineering teams across the globe to ensure that we are offering the best solution for each of our customers' needs. This market forecast represents a need for more rightsized, flexible aircraft solutions and our business jets will compete against other aircraft types, including larger nonbusiness jets as well as smaller turbo props. As we compete and win in this market, we expect a portion of these deliveries to be incremental to the traditional business jet demand. We have seen good traction so far, but we must remind ourselves that defense programs are long to operationalize and the procurement, design and modification cycles can last many years. As such, we are preparing our company and infrastructure to enhance our participation in the segment for the long run. What is truly value added for Bombardier Defense is that we don't only participate in aircraft delivery, we're there through the life cycle of the entire aircraft. When clients around the world choose Bombardier Defense, they have access to Bombardier's tip-to-tail OEM expertise, from program development to program delivery, all the way to operations and sustainment services. Along with our partners, the solutions we offer range from turnkey packages of complete design, building, testing and certification to specialized engineering support and technical oversight of customer projects. Our teams leverage full in-house engineering resources and capabilities from aircraft modification and system integration, working in close collaboration with Bombardier Flight Test Center. Above our ability to build outstanding jets, we add value and see an opportunity to be more involved in the engineering services and aircraft modifications. As the manufacturer, we have access to performance data and in-house engineering expertise that can be tailored to the customers' needs. Participating in the entire life cycle allows for Bombardier to deliver exceptional, customized and flexible support to our partners throughout the life of these programs and provides us with strong recurring margins. We believe that we can triple our revenues from this business as we cross the second half of the decade. Growth will come from higher aircraft deliveries as well as from the modifications and engineering services that these defense programs will require. This growth has already started with the creation of a dedicated organization that has expanded its footprint in the United States. We're maximizing sales by ensuring our efforts are focused, and our team is active in talking to the right people. We will also continue to leverage our best-in-class aircraft to provide optimal solutions to our customers around the world. Finally, we deliver much more than an aircraft. We aim together with our partners to support our customers throughout the different phases of the program life cycle. Simply, Bombardier Defense is becoming another predictable revenue stream. We are growing this business responsibly and generate significant return on invested capital by leveraging our aircraft platforms and our world-class capabilities and facilities, such as the Bombardier Flight Test Center where I'm currently standing. And in case you missed it, our Bombardier Flight Test Center team recently pushed our Global 8000 aircraft supersonic. Here's an air-to-air video of the team at work. [Presentation]

Let's turn now to my new day job, proudly ensuring more than 5,000 jets fly on time, receive parts quickly and are maintained to the highest standards. I've just walked over to another part of our Bombardier U.S. headquarters here in Wichita, which is also home to one of our service centers. I am on site at this amazing facility to take you through our aftermarket expansion and certified preowned program, which is our third strategic pillar. Bombardier continues to invest significantly in its aftermarket business, and I'm proud to report we are well on our way to meeting our objectives. We have increased revenues by more than 50% over the past couple of years, are on track to meet our goal of $2 billion in revenues by 2025 and there is a clear opportunity for growth beyond that point. Over the last few years, we experienced several substantial achievements, which will provide a solid foundation for years to come. We added close to 1 million square feet of new service capacity to our worldwide network, bringing significant enhancements to our facilities in Singapore and London Biggin Hill. We developed new service centers in Melbourne, Australia and Miami, Florida to better serve our customers in Asia Pacific and the U.S., respectively. We also enhanced our service capabilities in Europe with the continued refinement of our Berlin Service Center and a new line maintenance station in Paris. And as the year closed, we broke ground on our newest service facility in Abu Dhabi to better serve our customers in the Middle East. Our worldwide service network was very busy last year with more than 8,000 unique visits. To better support our customers, we also added more than 250 skilled technicians to the team. As Business Aviation continues to flourish, we will continue to enhance our service capabilities across our network, adding new products and services to ensure we provide our customers with the best service experience in business aviation. Our strategy to bring your jets home is working and our market share is increasing. And to support this market share growth, there are 4 key areas that we are focusing on. We have spent the last few years constructing and commissioning new service centers and we have seen immediate success as they have progressively opened. From there, there is still much we can do to optimize this footprint, whether it's applying new methods and techniques, increasing our utilization in our new facilities and leveraging our Bombardier operational excellence framework, we will fully operationalize our new investments and better serve our customers. I am very excited about the opportunities ahead. We are a customer-centric organization with the customer experience at the forefront. Not only does this support our ambitions to grow the aftermarket, but it is also a key part in retaining customers and keeping them loyal to Bombardier over the long term. We've made great progress in improving our customer satisfaction over the past few years. And as I joined the aftermarket organization, I will strive to ensure we continue elevating our exceptional service. We will also continue to develop and grow our digital solutions. For example, our Smart Link Plus Connected Aircraft program contributes to ensure we have the requisite big data to help us develop the maintenance offering to provide the support services our customers have come to expect from Bombardier. Finally, we will continue to refine and drive our parts distribution capabilities throughout the entire service network. Parts availability is one of the key reasons why customers choose Bombardier. We have 7 Parts Depots worldwide, creating a global distribution channel that provides us with a strong competitive advantage. We are on a great path, and as we continue to develop these strategies, we will have the proper trajectory to create significant aftermarket growth going forward. I'm very excited to share that we continue to grow our certified preowned aircraft program, a new segment that we see as a strong aftermarket driver going forward. We introduced this program a little over a year ago, and thus far, it has shown definite signs of success. Each year, there is an average of 460 Bombardier preowned aircraft transactions. This is a significant market in which we see an opportunity to create value through a unique value proposition as the OEM. These are the only preowned aircraft, which benefit from the OEM advantages, including a 1-year warranty, refreshed interiors, the latest technology and an overall turnkey solution that provides peace of mind to our customers, particularly with first-time buyers. It provides another access point to high-quality OEM aircraft and increases the residual value of our jets. These jets sell at a premium to fair market value of comparable aircraft and have been recognized separately from the regular preowned jets by 3 major appraisal companies. As we've established this business model, we've managed each CPO aircraft as a project. Our focus over the next few years will turn towards operationalizing this business and increasing our participation in the preowned market. Our strategy is putting us on a clear path to reach our objectives and to continue to provide our customers with the best products and services in the industry. On top of this, the reason why our clients choose Bombardier over and over again is our obsession with customer service. This is the foundation of everything we do and what keeps our dedicated workforce motivated and striving for excellence. In a few moments, Bart Demosky will walk you through our financial overview and show you how our commitment to deliver exceptional products and services has allowed us to create significant value. Speaking of exceptional products, I'm pleased to turn it over to Eve Laurier, who had a chance to meet with some of our talented professional sales engineers to share some insights on the Global 8000 experience.

In 2022, in Geneva at EBACE, we launched a Global 8000. I was able to get a maximum security card for this. There's a lot of smart things happening in this lab. This is where we test the things that are super smart, talented individuals believe should go inside of an aircraft. So I'm going to take you inside and we're going to meet some of the really smart and very passionate people that worked on a global 7500 and 8000. Follow me. [ Mindie ], you work at Bombardier as an engineering professional. You know the Global 8000, what do you love about the Global 8000?

So the Global 8000 went supersonic, and that's one of the most amazing features that we were able to do. What's really interesting is when you have to certify the top speed of an aircraft, you have to be able to show that it goes Mach 0.07 more than the top speed. That means to certify AT Mach 0.94, we had to show that it could go at least Mach 1.01. The interesting part of this whole project, the supersonic project, was to find a [ chaste ] aircraft that could follow those speeds and have a calibrated airspeed. Interestingly enough, we went to NASA. We borrowed one of their F-18s when the Global 7500 started its speed campaign, the F-18s actually had to turn on their afterburners. So just picture those aircraft going at those speeds and this fighter jet had to turn on their afterburners. It's absolutely incredible.

It was a great day for Bombardier. Wasn't it?

It was.

SuperSonic. We did it. Thank you, [ Mindie ].

Thank you.

[ Melissa ], one of the things that customers tell us about or ask questions about is reliability. You know a lot about the Global 8000 reliability. I think you may have a few anecdotes.

Yes, I can tell you some. I remember a customer visit we did about a year after the Global 7500 had entered service, and we brought our demo aircraft, which was serial #6, the sixth airplane we ever built. And our flight crew was there. They started talking to the customer about everything they had done in their first year of operation. They went to 35 cities, logged over 1,000 hours of flight, and they covered a distance equivalent to 20 times around the earth. The customer could not believe we had done all of this in our first year with only the sixth aircraft that we had ever built. And now that the airplane has been in service for 4 years, we can really see a [ chime]. We see our most demanding customers are regularly doing 1,000 hours per year, which like just to put that number in context, it's more than double what an average business jet would fly. And on top of that, they'll do flights of 15 hours and more regularly. And to me, that really shows how reliable the Global 7500 aircraft really is.

[ Catherine ], I've had the opportunity to talk to you recently, and you told me that sustainability is really important to you.

Yes it is.

So when we designed the Global 7500, we looked at sustainability because we have environmental product declaration.

Yes. Exactly.

Okay. So tell us about that.

So sustainability is a very important aspect to Bombardier, and we actually helped lead the development of the first environmental product declaration for a business jet, EPD for short, includes the design phase, the manufacturing, the production and the end of life. So you really get a full view of the environmental impact for the entire aircraft, which is really interesting.

When we talk about innovation, about a jet company, people think speed and range, which we're covering, we are -- we're the fastest, furthest, but we also are in sustainability. So we will own up to our ESG promise, and we will do everything we can with people like you that are pulling us towards more innovation. [ Adriene ], you get to tell us about one of your passions, which is interior design, specifically the Nuage seat.

This is the best kept secret on the Global 7500, the Nuage seat. Right now, I had the opportunity with a couple that I introduced all the features of the Nuage seat. And one gentleman who was very tall. And I said, sir, let me extend the bottom cushion, so we can get a little bit of support on the back of your knees, have a seat. Just let's put you in that, recline the back, the back rest, so you can have a little bit of a comfortable seating position. I said you're probably looking for a little support under the back of your head. He said [indiscernible] . Tilt the comfort headrest, get the top surface right under the nook of your head. He said, "Oh! Yes." I said, you're one step away from the ultimate seating position. So look where your hands fall. Perfectly in line with the controls, hit that button, out comes the leg rest and there you are in the optimum position for your journey, sir. He just kind of sat back, and it was at that moment that I realized, that expression of happiness was really confirmation for at least for me anyway that we're doing something different at Bombardier.

I think you deserve to go sit.

Thank you. I think I will.

You are a step away from the alternate seating position. [ Chet ], over the years, I've had the opportunity to speak to a lot of clients, most of which want to talk about one very important thing. How far does it go? That's what they want to know. So tell us about the range of this aircraft.

Well, recently, I was with the Global 7500 aircraft in Asia. And I was showing some journalists and customer prospects, the range of the Global 7500 and the Global 8000 on a map, and they'd all say, well, this is practically the whole world. And I'd tell -- I'd have to explain to them that, yes, you are flying for 16 to 17 hours on this aircraft, and that's a lot of distance. And it's also real capability, right, that we've seen in service from our most demanding fleet operators and our own demonstration team. That's how we got to hold the record for the longest flight in business aviation that was from Sydney to Detroit, a whole 8,225 nautical miles.

Innovation doesn't stop at Bombardier ever. Thank you, [ Chet ].

As you just saw, what our talented teams are able to do from a design and performance standpoint to ensure the best customer experience is nothing short of amazing. As a matter of fact, I'm speaking to you from the best design business jet in the world, the industry flagship Global 7500. I'm sitting in the club suite, the first in 4 zones of this incredible aircraft. As our sales team often says, showing is selling. So this Global 7500 demonstrator flies across the globe to give potential customers see immersive experience of this unparalleled product offering, and it can house a full filming crew. As Eric mentioned at the start of our Investor Day, we have made tremendous progress since 2020. Our company had been consuming cash and generating negative earnings for many years. And now Bombardier is structurally generating both positive net income and free cash flow. We've done this by significantly improving our credit metrics, reducing our net leverage to 4.6x and achieving credit rating improvements. Our business is very resilient, and we have been able to reduce volatility by exiting the light aircraft market, diversifying our revenue streams through our aftermarket and defense offerings and build a significant backlog of 18 to 24 months throughout our medium and large aircraft platforms. Looking ahead, what gives me the most confidence about the future is the significant debt reduction. We've reduced our gross debt by almost half in just the past 2 years. And as you can see by the value creation drivers ahead, the future is very bright. Bombardier is poised to generate significant cash flows to the tune of more than $900 million per year starting in 2025, and we expect our credit rating metrics to improve meaningfully nearing investment-grade levels by the end of our plan period. We have significant earnings growth potential, not only through our aircraft sales and aftermarket but also through our defense and certified preowned businesses. Both are poised to grow well into the future. All of this puts us in great shape to have the right balance sheet, diversified business and cash flow generation to create meaningful capital allocation optionality. That optionality could include a combination of reinvesting in our existing operations and product lines, launching new clean sheet or derivative aircraft, growing our business through tuck-in M&A transactions, or continuing to evolve and improve our capital structure by further deleveraging or through shareholder return. Of course, as we are actively planning the next phase of our capital allocation, our focus will remain on the work at hand to finish the repair of our balance sheet in the next few years. And in order to finish repairing the balance sheet, we need to keep driving towards our 2025 objectives, for which we have a clear path ahead. 2022 was a great year for us. We exceeded our guidance on all metrics and kept up the momentum as we continued to grow our earnings, cash flows and improve leverage. Given the strong performance to date, we've updated our 2025 objectives to reflect the meaningful progress we have made. As we look to the future, we have a clear and defined road map to reach these updated objectives, and we are confident that we will deliver growth through 2025 and beyond. A quick word on our 2025 objectives. We are targeting more than $9 billion in revenues, which is more than 20% higher than our previous objective. We expect to continue our impressive margin expansion reaching more than 8x the EBITDA we generated in 2020. Our free cash flow is expected to be greater than $900 million, giving us ample flexibility to support our plans for the future. Finally, we are targeting net leverage to be in the range of 2x to 2.5x, which we view as approaching investment grade in terms of credit metrics. As you all know, we don't control credit ratings, but we do know that reaching these metrics will position us well for the future. Now let me walk you through the financials and our plan to reach these ambitious goals for 2025. Our revenue growth bridge from $6.9 billion to more than $9 billion is fairly straightforward. Aircraft deliveries are expected to reach approximately 150 units which is a 30 aircraft increase in medium and large deliveries versus 2022. This growth in volume will be further boosted by higher pricing, which we have seen increase over the course of the past 2 years. Our aftermarket business continues on its path to $2 billion by 2025 as we execute on the strategies that Paul mentioned earlier, representing a $500 million upside versus 2022. We are planning for our other growth businesses of defense and certified preowned to provide modest increases by 2025, with most of their growth to come after that point. Moving on to our earnings. There is significant upside ahead of us. We expect to grow EBITDA at a 20% CAGR between 2022 and 2025 adding more than $690 million to our bottom line. The most meaningful earnings contributor over the next 3 years remains the Global 7500. With target unit costs achieved in 2022 and the pricing secured in our backlog, we expect this program to continue ramping up its margin contribution through 2025. Our second growth pillar will be margin conversion on incremental volume. The approximately 30 more medium and large aircraft deliveries I mentioned between '22 and '25 will carry a good conversion into margin. Aftermarket has been a steady pillar of margin expansion and will continue to add to our bottom line as we grow our market share and forge our path to $2 billion of revenues by 2025. The last $70 million of cost reductions will also be fully achieved in 2023, capping off an impressive $400 million total cost reduction program, which we launched in 2021. We are also planning for some incremental costs to materialize by '25, particularly in 2 areas. First, cost inflation is starting to catch up to us as we expected to see happen. Over the past 2 years, we have seen a pickup in pricing, while the increase in the input cost of materials and labor has largely lagged due to the structure of our supply chain contracts as well as the timing of how costs flow through our balance sheet before being recognized in the P&L. This resulted in a tailwind as part of our 2022 results, but we expect this to reverse over the 2023 to '24 timeframe. Overall, we still see the same outcome as we did a year ago, with pricing and inflation roughly offsetting each other over the next few years. Although this is slightly dilutive to our percentage margins, we are still expecting to have the same EBITDA contribution from each aircraft. Second, we are continuing to strategically invest in our business to support our future growth, particularly in 3 areas. To continue pushing the boundaries of innovation, manufacturing practices and business intelligence, we need to keep evolving our systems and digital solutions. Bombardier is currently driving a digital transformation, including investments in our ERP system. And this is a key strategic priority that we will be progressively deploying over the next 5 years. As Paul mentioned earlier, innovation is embedded in Bombardier's DNA, and we are committed to continue developing new technologies that will be deployed on the next generation of aircraft. To that end, we are planning to increase our R&D spend to continue maturing these technologies. The prime example is our EcoJet program. And as a matter of fact, we expect the vast majority of our research and technology investments to be made towards sustainable aviation. Lastly, we do expect to have some investments in SG&A in order to support our growth areas of defense and certified pre-owned. These investments will remain relatively minor and will quickly be supported by the growth in revenues from those businesses. All put together, we have a robust plan that we expect will bring Bombardier's EBITDA and to more than $1.625 billion by 2025. And with depreciation expected to be around $500 million, we will be generating more than $1.1 billion in EBITDA. What I'm even more excited about is the significant free cash flow that this earnings growth is expected to provide. What we're illustrating on this chart is meaningful cash flow generation by 2025. We expect to produce more than $900 million in free cash flow and our cash flow bridge is very clean. Our 2 main uses of cash flow will be capital investments and interest payments. On the capital investment front, consistent with our message over the past few years, we are planning for $200 million to $300 million in annual CapEx. With this envelope, we can ensure proper maintenance CapEx in support of our plants, property and equipment. We can also make several investments in our existing aircraft platforms to keep our fleet refreshed and incorporate many of the latest technologies into our aircraft. When I look at our annual interest costs, we have made significant progress here. The number was close to $800 million in 2020, and we now expect it to be in the range of $300 million to $400 million as we continue to delever and look to reduce our overall interest costs. Interest expense on our bonds makes up the majority of the amount, but we also expect to have some standby fees on working capital facilities as we continue to optimize our liquidity as well as interest recognized here as part of our lease payments. Working capital is assumed to be neutral. Our management team is constantly looking to strike the balance between production rates, backlog length, customer demand and pricing. We expect to continue diligently managing and balancing these items as well as maintain discipline in our contractual terms to ensure that we are able to be working capital neutral at a book-to-bill of 1. The last element on our free cash flow bridge is a very significant tailwind. As we continue to grow our earnings, we expect to have minimal cash outlay for income taxes. This is because we have material deferred tax assets resulting from carryforward losses on our balance sheet, which will keep us from paying taxes well into at least the second half of this decade. Looking at our financial position as we reach 2025, we expect Bombardier will have significant capital allocation flexibility and many options at our disposal. These options include further deleveraging of the balance sheet, investment in a new aircraft platform, M&A growth opportunities and shareholder reward. Our management team is actively discussing this optionality, but there are a few key principles that will be followed as we make those decisions. First, we are a business aviation focused company, and this will remain our priority going forward. Second, we will focus on investments, which have a high return on invested capital. And third, we will only make investment decisions with the right balance sheet and not strain it by taking too much on at once. For this reason, debt repayment remains our #1 priority. And moving on to our leverage. I am very excited whenever I think about what we expect our balance sheet to look like in a few short years. Eric emphasized that finishing the repair of our balance sheet is a key strategic priority. We have already made significant progress, and we have the plan to finish the job. One of our core focus areas has been reducing our leverage. The plan we set out 2 years ago was to be at a leverage of approximately 3x, and we are now revising that objective down to the range of 2x to 2.5x. This represents our new long-term leverage target. We believe that at these levels, our credit metrics will be approaching investment grade, which will unlock many benefits, including better cost of borrowing and improved access to liquidity. Optimizing liquidity is one of our key priorities. Our objective is simple. We are moving from minimum cash on hand to minimum liquidity. We will do this by growing our working capital facilities, allowing us to release cash on hand towards debt repayment. We started this process in 2022 by establishing a $300 million revolver, and we will continue to look to grow this or other similar financial instruments to support our working capital needs. Concurrently, as our business continues to grow its earnings and diversify its revenue streams, we expect to bring down our minimum liquidity requirement further. 2 years ago, I told you we needed a minimum of $2 billion to run our business. We brought that down to $1.5 billion last year, and we now see the right liquidity target to be in a range of $1 billion to $1.5 billion. What this means is that we are also closing the gap between our gross and net debt which will greatly benefit our credit metrics and interest costs. As I look at our gross debt and maturities, I'm also starting to see a profile that is much more in line with an investment-grade credit, particularly as we look beyond 2027. For now, we continue to focus on maintaining a comfortable maturity runway. We have about 24 months of runway today, and we will continue to be mindful of this as we finish repairing our balance sheet. As you can see, we are also starting to build more manageable and more flexible maturity stacks, and this will be something that is top of mind as we contemplate refinancing options. Interest expense reduction will continue to be one of our key focuses. And I am really proud to say that since 2020, on top of the significant reduction in interest payments, we have also managed to slightly reduce the average cost of our debt, while in a rising interest rate environment. Finally, we will continue to be opportunistic in the debt markets. We are constantly monitoring for opportunities, and we will use all the tools at our disposal to capture any incremental value we can. When I look at Bombardier's prospects in the future, I am very excited about the significant value that we are poised to create for investors. We are an established leader who has the capabilities, installed base and global reach to win in a growing business aviation market with high barriers of entry. We have a diversified set of revenue streams, which include our Globals, Challengers, aftermarket and Defense businesses, all of which generate robust margins. We have designed our business to be resilient, whether through the diversification I just mentioned or through the diligent management of our cost structure. As a result, we do not need significant delivery volume growth to be profitable and cash generative. Our balance sheet is expected to give us ample flexibility going forward. For the next few years, there will be a transfer of value towards equity holders as we delever. And once we are in our target leverage zone, Bombardier will have significant capital allocation optionality ahead. Cash is key. And Bombardier is confident to become a significant cash flow generator with a strong free cash flow yield. The future looks bright and we are flying higher with every day that goes by. Thank you for watching our investor presentation. Hopefully, you have a clear understanding of our strategy and have seen the tremendous value proposition that our company offers. Our entire management team looks forward to continue to execute on our strategy with the discipline and transparency that you have come to expect. Before we move to our Q&A, Eve Laurier and David Murray, our Executive Vice President of Manufacturing, Operational Excellence and Information Systems will talk about Bombardier's commitment to operational excellence.

I'm here with David Murray. David Murray is the Executive Vice President of Manufacturing, Digital Transformation and Operational Excellence at Bombardier. One of his tasks is to make sure that our systems are producing value and he's passionate about that. So without further ado, hello, David.

Hello, Eve, how are you?

I'm great. So David, you have a very long title with many, many, many responsibilities. Today, we're not going to talk about producing the planes, but we're going to talk about our systems and everything else. So David, if I'm an employee working at Bombardier, and I hear operational excellence, what's the impact on my career? What does it mean to be in a culture that has that mindset?

Bring out your issues, bring out the problems that you're facing. Our employees, they know they're facing the reality of operations on a day-to-day basis. So just bring these issues that you're facing. So we could collectively work them out together, and it's going to be also very engaging. Removing all the roadblocks at the end, the customer is going to get the whole benefit of it. And that's what we're focusing on, making sure that we're fixing the issues, so the customer gets the best experience.

And as an employee, so I've been in marketing all my life and communication, first time in an engineering type of mindset, but really, truly, it's no more waste of time. If you're doing something that you think can be done in a more efficient way, speak up and be part of the solution, it sounds like Bombardier is allergic to wasted time.

Absolutely. So 2 things. So as we have thousands and thousands of parts on an airplane, there's all kinds of issues happening. So the first step is remove roadblocks and fixing issues that you have. So sometimes the teams will get together and say, hey, we have this and this issue. So how can we go back to a normal procedure? Second step is bringing to a different level. So we have the process. The process is working but we need to improve it, shorten the cycle time, improve quality, whatever. And the team are getting together and making that step-up into the business. And that's exciting because we're going into a journey that's never been done before. Exciting for everybody, exciting for the people on the shop floor, exciting for industrial engineering, exciting for engineering people, getting the best of the process.

And if I'm an investor or a potential investor listening to you talk, what do you want to tell me about operational excellence? Why does that make Bombardier a good choice for me to invest in this company?

Because it's part of our DNA and there's always in every business that you do there's ways to improve and the leadership team really believes into this. So first thing is the biggest believer into operational excellence is our CEO, is Eric Martel. So Eric Martel is going to go up and challenge the whole team, the leadership team in finding the root cause of the issues and getting better every day.

So we've had an amazing success over the past 3 years. I could say the turnaround story of Bombardier is fantastic. And people tend to focus rightfully so on how many airplanes we were able to put out there, sell, deliver. But really, it's also about people working together, collaborating, fixing problems and making the process of producing the airplanes more predictable.

Yes, totally, it's meeting the commitment. So we have made commitments of savings, and we've done so. So we're really happy with what we've done, but we're not going to end the journey there. So it's a never-ending story, which is exciting for everybody.

David, one of the things that I love when I get to speak to you about the future of Bombardier is your vision from a technology point of view. So we are going to do a huge transformation digitally, like many companies. But tell me about precisely a vision that you have. What are we going to look like when you're done with this transformation, you and your team?

Digital transformation is using the data in order to get ahead of the game to know in advance what to do versus most companies are using data to look backward. So this is called using algorithm. Algorithm that tells us in the morning -- tells the supervisors what to do. If I give you an example in the morning, the supervisors are coming in and they have all their employees together. They have parts that are coming in. They have quality issues that are appearing, which is normal in our industry. And with all these variables, I mean the supervisor has got to visualize what's the optimal route in the job to do in the morning. So what we're trying to do is create a digital twin of our operations. So where the machine learning is going to take all these variables and show the supervisors, what is the optimal route to build this morning. So digital twin is about building that sequence. So in the morning, the supervisor is going to come in and the computers and the machine and the algorithm built by our engineers will tell them this is this morning the optimal route. You have to do 1, 2, 3 and 4. And that's going to unleash a potential that we've never seen.

So she comes into work. She looks at what she was going to do and then wonders wait a minute, let me check with my digital twin, maybe there is a better way of doing this.

Absolutely.

No more wasted time.

Absolutely. And our supervisors can challenge also -- the beauty of this is this algorithm is going to change as the business evolves.

It's learning.

Yes, that's right. We will perfect that model through time and keep us ahead of the game. So you will know ahead of the game, what is going to happen. So your optimal sequence today is going to be based on information that's going to come tomorrow. This is amazing.

So when can I expect my Eve Laurier digital twin.

So it depends what you want to do in marketing. There's going to be opportunities for everybody. We're talking about operations. Digital transformation has started an example in the aftermarket, where we're currently tracking live the airplanes, and we know ahead of the game, what's going on. This has been started. What I want to do is copy paste this everywhere.

Fantastic. Thank you, David.

Thank you.

Thank you, Eve and David. We will now transition to the Q&A period of the event. Questions will be limited to sell-side analysts and institutional investors. If you haven't already, please join the queue now. We will take a few minutes to set up and get started shortly. We are ready for the first question. Operator, over to you.

First question is from Walter Spracklin at RBC Capital Markets.

Just want to start off by saying congratulations to you, Eric and the team. Very great results here out to 2025. They were bold forecast when we put them out there and raise them here today is certainly quite an achievement. I guess I want to start with what's the next level, right? I mean in 2025, I don't think you're saying that growth is going to go end there. You pointed us toward 2 pretty impressive new growth avenues, one being defense, which you indicated would grow to about $1 billion by the end of the decade. You also mentioned CP certified preowned which is also looking pretty interesting as well. Can you tell us what level you're at right now in terms of certified preowned, I know you started only in 2021? And giving us the $1 billion for defense, could you give us a framework for what we could anticipate in certified preowned perhaps by 2030 in the same vein? And would the margins on each defense and certified preowned be at or above your current manufacturing or average margins that you're currently driving?

Well, thanks for your comments, but also for your question, of course. Let me say by starting here, maybe I think when we started our journey about 3 years ago now already, we put our first strat plan together. And we came out with our 2025 objective. Last year, in our strategic plan cycle for the first time last fall, we really started to look at post '25. '25 to '30 is probably the range we've been focusing on the most. And clearly, we are, I think, stating this morning that not only we will be meeting but overachieving on our 2025 target, we started to look meticulously at the next 5 years also. And clearly, 2 of the growth paths for that second part of the decade will be, to your point, the CPO, but also the defense business. Not that they will have a significant impact by '25. But clearly, a much bigger impact moving forward post '25. So the CPO business, to just narrow your question a bit more. Clearly, right now, our focus, and that's one of Paul's focus, of course, is to operationalize the acquisition and upgrade process. So clearly, right now, we've been doing like, call it, maybe a dozen airplane so far have been going through the process. Now we're looking at scaling it up, and it's going to take a little bit of time, and we need to take care of -- take into consideration the actual market. But clearly, we are operationalizing and stabilizing and be ready to upgrade any airplane we're going to be buying on the market. There is a stable and a current end market actually of preowned Bombardier aircraft. If you look at it, there's about 400 airplane being transitioned all every year, like more even 450-ish. But actually, about half of them are the targeted market we have, which is the Global and the Challenger. So we're definitely planning to grow that business responsibly. Just as you have come to expect from us, that's been our nature, I think, since we relaunched our company 2 years ago. So we're clearly excited about the growth possibility for the second half of the decade. And of course, we will come back in the next year with probably more precise objective towards that business.

That's fantastic. My second question here, and I'll turn it over, is really on margins, and this is for Bart. Bart, all the e-mails I've gotten this morning have been around the movement from a 20% margin to an 18% margin. And I think the clear one, given that your aftermarket of $2 billion is steady. The growth that we're seeing is really some of the lower margin, albeit accretive delta in your revenue forecast. Is that the case, but and my question is, would we not see a little bit of a bigger offset by your faster ramp up, presumably higher pricing, those kind of trends that should point to a higher margin? Is that just not enough to offset the dilution? Am I looking at that the right way?

Walter, thanks for the question. So when we're looking at margins and margin growth going forward, the exciting part about our whole story is that we still have a long way to go. We've come a long way, but we have significant margin expansion that we do still expect to achieve. That said, as we're growing our revenues now to north of $9 billion by 2025, there is a mix question there, and I think you've pointed that out that the mix is going to be slightly different given that we'll have our aftermarket business target still to be $2 billion of revenues. So we're not changing that at this current point in time. But the other factor that's impacting the margins is really is simply a case of math. We've been selling aircraft at higher pricing on a continuous basis over the last couple of years. And inflation on our balance of materials is starting to catch up, and we're forecasting that it will be roughly balanced between now and 2025. But those incremental revenues are not bringing incremental margin. They're simply based on price. And as costs move along with it, it changes the math. And that's really what the primary factor is impacting the margin difference. It has nothing to do with operations or any changes in the other margin expansion areas that we've been focusing on.

If I may, Bart, maybe just to add one thing also. I think we have a much better clear path in terms of what we're going to be doing also for the next decade, which require today some strategic investment. We did talk about our research and development budget. So we are investing some money that, of course, affect the P&L in R&D. But we also have the digitalization. David just talked about how we will digitalize even more the company. So some strategic investment and capital allocation have been made towards that in terms -- and that's P&L money basically. But also on the SG&A, we're growing a defense business. If we want to have a defense business that's going to grow our results in the next decade, there is strategic investments that are happening now, okay, in terms of building the program team, building the sales team, making sure we bid properly on these projects. So clearly, those investments that we've made today, yes, have bring costs. But actually, they are very strategic for the next period of the decade.

Next question will be from Benoit Poirier at Desjardins Capital Markets.

Yes. Congratulations, Bart, Eric, Paul and also the Bombardier team for your achievements and so far in what I would call a very articulated plan. First, could you maybe provide some color in terms of assumption for the market environment, kind of the book-to-bill ratio, we should be looking on by 2025. And with respect to growth deliveries, whether it should be more skewed towards the medium or large. And maybe if you could address the competitiveness of the Challenger 650 these days? That would be great. .

So thanks for your comment, Benoit, and for the question. Clearly, right now, I think it's an obvious, there is some added volatility and uncertainty in the markets today. So there's -- nobody denies that. But I think we built this company to exactly to be able to go through these turbulence because we knew from the start that it was not always going to be like the same pad that we've seen and there will be turbulence at some point, and it's happening now. But this being said, with the 2 amazing year backlogs that we have today, as you know, over $14 billion, plus the stability that this -- and predictability that this brings for the next couple of years ahead of us, including a big part of 2025, it's actually very helpful for us to be able to do that. We've always been conservative in terms of our book-to-bill in terms of looking at our business forward, we've always predicted one. So we had more than 1 last year. We'll see what this year was going to bring and how fast the economy is going to come back. But clearly, we are planning conservatively, and we are capable of taking those little bump on the road right now and bring the business back. So what's important today is, yes, there's a bit of turbulence short term. But in the long run, in the long-term business visibility, the fundamentals, the fundamentals remain very, very strong. You talk about the portfolio. We have a very competitive portfolio. I was in Asia Pac, the other about 5, 6 weeks ago on the road with our team. And clearly, when you talk about our Global 7500 today and the 8000 coming in a few years from now, clearly, this is the recognition of this being the airplane is clearly unanimous. And I think we're proud of that. The airplane has been performing, as we said in the video, extremely well. We're well on our way to deliver the 8000. But what's important is that the portfolio is being solid. So clearly, the demand remains. And we still -- and of course, we're in a blackout period. I won't talk about specifically Q1, but still, there is demand, and we're going to manage according to what the market is, but also I think what's important is the product portfolio is helping. And on the Challenger, I think we got amazing demand. You remember, we came out about 1.5 years ago now with the Global -- not the Global, but the Challenger 3500 which was extremely well received and successful. And clearly, today, the Challenger 650 continue to sell on a regular basis. This is a proven platform extremely reliable, probably one of the most reliable, if not the most reliable of any business jet out there. And the cabin has always been usually what people buy it for also because of the amazing size of the cabin, length and width. So when I look at it today, yes, a bit of bump on the road. But clearly, a solid foundation to be able as a company to get through this. And clearly, we see still movement in the organization, delivery being taken, progress payment being paid and still order coming in despite what's happening. And we haven't seen also like we've seen in the past, like cancellation and things like that. So, so far, it's fairly quiet in that regard. So solid foundation and looking at the portfolio, I think we're in a very, very good place.

Okay. And just on the supply chain side, you've been quite good during the pandemic meeting the delivery expectation, could you discuss about the supply chain environment and whether we've seen improvement, especially given the search for talent as Airbus is looking to add 800 people in Canada.

So I think -- thanks for bringing that point. This is clearly one of our top monitoring items. When we think about supply chain today, I think it's out there. There's still issue. You're right to recognize. I think that we've done a great job. The team has done a great job last year to be able to deliver all the airplane, and that's still the plan, and we stand behind our guidance for this year, of course, but we've been very strategic also. I think I explained that we had people 2.5 years ago out there to help us monitoring potential issue that may arise and being proactive has been very helpful for our company. . We've been [ adding ] inventory also to be able to face some challenges. We have our presence at supplier. So we are still confident today with the visibility we have with the processes that we have in place to be able to reach out 150 deliveries by 2025. There is, I would say, probably less problem than we had a year ago. Some of them are still stubborn, I would say, and we're working them with our supplier. So -- and our 2025 assume pricing and cost inflation to offset basically. So this still holds true today, and we're very comfortable with that.

Next question is from Konark Gupta at Scotiabank.

I echo my congratulations to Eric, Bart and the team for great work and upgrading guidance for '25. I really have a couple of questions. So maybe first one, I can follow up a little bit differently to what Walter has asked you. If you look beyond 2025, could that pricing minus inflation bucket get incrementally negative, meaning it could become a bigger headwind for you as inflation continues to creep up. And then some of the identified cost advents that you've mentioned like inflation, digitization, EcoJet, G&A, et cetera. When you strip some of those out in a steady state, what would the margin profile look like on a normalized basis after '25?

Bart, do you want to go ahead? Or do you want me...

Yes. Konark, and thank you for joining us and for the questions. I'll maybe take the second part of the question on the margins. As I said earlier, there's a few factors that are impacting our revised margin outlook. Part of it is driven off of higher revenues due to higher pricing. We're forecasting that inflation on the aircraft, the bill of materials is going to roughly offset the pricing increase that we've seen. If we go back -- and we have a very high confidence in that. If we go back -- and Paul is here who is Head of Manufacturing. I'll maybe turn it over to him in just a moment to add some commentary on it. But he knows very well that his team, all the accomplishments they've had in the past to be able to, I'll say, basically offset inflation through continuous improvement activities in their business. So we don't really see that being a headwind going forward. Second thing I would say is that other margins that -- or other higher revenues we're bringing on for the company, we do see those having a fairly traditional margin profile for us. And the strategic investments that we're planning on making, those are going to be the enablers for us to continue to remain a high-margin business, be profitable going forward and to grow the other businesses, they're necessary. We need scalability. And we need those kinds of investments to be the leader and stay as the leader in business aviation. So we see them not as a cost headwind, but as something that's necessary to really realize our full potential. Paul, I don't know if you'd like to comment on the manufacturing and...

Yes. So Konark, thank you for your feedback on the supply chain. I think we've managed it extremely well. The only thing I can add to what Bart said is that you got to keep in mind that we place our POs 1 to 2 years in advance. So we already know what our buy price is going to be well into 2024. So like Bart was saying, in terms of the management of the sales price and the inflation on the BOM, I think we're in a pretty good place to understand where we're going to be by the back end of '24.

That's great color, guys. And if I can just follow up on, Bart, to one of your points. Once you get to a normalized leverage ratio of 2% to 2.5%, that kind of gets you near to about investment grade. What would be some of the options that would be on your plate in terms of rewarding shareholders once you get to that kind of level? I mean, like dividends had been part of the equation once historically with Bombardier. A lot of companies have been focusing on buybacks. You mentioned M&A. How do you balance all those buckets once you get the [ leverage ] your targets?

Well, I don't think we've quite figured out the magic formula yet, Konark, but I would say this that all of those options you just outlined are on the table. So investment in the business, perhaps investment in new programs, repaying incremental debt, other strategic investments via M&A and then obviously potentially returning capital to shareholders. And as a matter of fact, today, if you do look at our financials, we do repurchase shares even today to offset any dilution that could occur through our long-term incentive programs. So we are being very mindful of how we best allocate capital and will be a capital allocation question, ultimately, to drive the highest overall returns over the long term for our investors. So we'll definitely come back. Eric will be leading us through the strategic planning session here, the annual session here again shortly. We'll be meeting with our Board. Ultimately, they need to weigh in as well. But the most exciting part of this is we're looking towards a future where we're going to be able to make those decisions, and it's a fantastic challenge to have.

If I may, Bart, just to -- maybe to add one comment. I think the great news here today is that generating greater than $900 million of cash gives us a lot of optionality. And that's what we're going to be debating, discussing. And believe me, we're going to have the same discipline. So we're going to put all the options on the table, could be investing into a project, could be doing M&A, could be returning, but we'll have the same discipline, and we'll do what's the right thing to do for the shareholder. There will be no bias. We're just going to look at it from a pure financial point of view and return and also growth of the company.

Next question will be from Fadi Chamoun at BMO.

I want to echo the congratulation comment so far. I think you've definitely put this company on solid ground going forward, and congrats to the entire team for that. I want to explore further on this capital allocation optionality. I mean, you haven't invested beyond kind of maintenance CapEx for quite some time now. And you've mentioned potential aircraft project. Is it something within the mid to large -- I mean, the Challenger 600 has definitely been -- talked about as a potential target for the project. But is there an opportunity to invest in growth projects that you can maybe help us visualize at this point? It might be too early, but if you can help us visualize at this point. And alongside that is -- is the Learjet brand and programs definitely in the rear view mirror for Bombardier at this point? Or is there still potential to reconsider reentering maybe some parts of that market going forward?

So, Fadi, I will never say never. But today, it's not in the option if you think about us going back competing in the light market. Maybe in 5 years, 10 years, things will change. But I think when we look at our growth between now and '25, and I think Paul was presenting the market expectation, you can definitely see the large market growing between '23 and '25, you see the medium market segment also growing, but you see the light market actually going lower. So -- and it's already a very crowded area. So pretty challenging from me today based on the data that I have in front of me to say, we may go back into that market. And the world change we'll see in 10 years what it is, but that's not an option on the table today. If you -- if I go back to your first question about capital allocation, clearly, we are looking today at what our competitors are doing, what the market and the customer are asking and seeing, and we're getting always our product being surveyed on any platform. And we're taking that feedback. And again, it's a question of capital allocation. Where is it going to be for this dollar, the best return I can get? Is it going to be launching a new medium segment? Or is it going to be upgrading a larger airplane or launching a new larger airplane? And that's how those decisions will be made. And other potential also, it's not just about launching program. Of course, we need to secure the long term of the company and program usually helps doing that. But at the same time, how do we return the best -- how do we have the best return for our shareholder. And it could be acquisition, could be growing the company still in the market segment that we know today and the business environment that we know. So we'll be, again, extremely disciplined, and we'll look at every dollar we have, and we'll have a lot of these dollars right now with $900 million available of free cash flow starting in '25. So that's giving us all kind of optionality, and we'll definitely -- with this, what I just said, having in mind how we deploy that capital.

Okay. My second question is on the debt level. So I think after the repayment of debt you've done this year, you're probably had net debt of $3.9 billion. And the low end of your guidance range suggests $3.25 billion, I guess, by 2025 which suggests another maybe $700 million to $800 million of repayment of debt between now and 2025, maybe even closer to $700 million. Is that the right kind of framework you're thinking about going into 2025 as far as managing the debt and the repayment?

Go ahead. I'll let you go.

So just -- yes, thanks, Fadi. Yes, as we're looking at our long-term, I'll call it, capital structure objectives going forward, we've naturally, I think, reached the conclusion that a lower overall targeted debt level is the healthiest place for us to be. We're very focused on credit metrics, in that we believe as we achieve those going along and because we will be in a position, we believe, to be able to repay debt on an annual basis and go through refinancings, staying focused on those credit metrics is important because, as we all know, credit ratings tend to be a lagging indicator of how the company is performing. So we'll stay focused on those metrics. The 2x to 2.5x is in the range where we see ourselves getting very close, if not at investment-grade credit ratings. And it puts us in a very, very meaningfully strong position relative to our competition in terms of their balance sheets and where their leverage levels are. So those are a couple of things that we're very focused at or on. Obviously, we talk about the $900 million plus of free cash flow. We have not made a determination yet where we'll allocate that. But one of the options open to us could be to continue to repay debt beyond 2025 as well. So -- and between now and then, debt repayment will, of course, stay our top priority. Your numbers are not too much different than ours in terms of how we would forecast things. But obviously, we do tend to forecast in a way that is quite conservative, and there could be upside to that.

Okay. So that 2x to 2.5x is basically getting your long term, how you're thinking about the capital structure and where you want to be, not necessarily in the 2025 target because I'm thinking, based on your outlook for free cash flow, if you're taking that free cash flow towards debt repayment, you're going to be below the low end of that range?

That's certainly possible if we choose from a capital allocation point of view to put more of that cash flow towards debt repayment, certainly, that could be the case. We're working on that just now, though, in terms of where the best place to allocate the cash and the capital is. And we'll have more to come on that in due course.

Next question will be from Myles Walton at Wolfe Research.

Actually a follow-up with a clarification on Fadi's question, if I could. The 2x to 2x (sic) [2.5x] leverage target you have for 2025. Bart, is there something on operating leases that's growing your adjusted net debt between now and then? Is that perhaps part of the reason why it's not below the range?

No, we're not seeing hardly anything incremental in terms of operating leases. We've completed most of our aftermarket expansion program. We do have one more facility that broke ground earlier this year. So we're excited about that. There could be other options when it comes to the aftermarket in terms of our overall footprint, but we're not seeing any material growth in operating leases as being part of the equation.

Okay. I have to circle back with you on that. In terms of the discoveries of the last, I don't know, several years, there seems to be an elongation in certification cycles for all new aircraft. And I'm guessing Bombardier is actually benefiting right now from that because you had built a large and pretty comprehensive product line. Is that part of a benefit that you're directly seeing or are customers being patient at other competitors? And then secondly, Eric, I guess, when you think about any new aircraft, do you believe certification timelines are now structurally longer. Or is this emancipation of the current circumstances in the post-MAX world?

I think, again, in that regard, we're usually looking at it on a more conservative way. I think that clearly, with some of the circumstances that happened in certifying airplane in the last 5, 7 years, we are seeing more time needed for certification. And -- but the good news is we have certified a lot of our system on the Global 7500, so we can reuse it as an example on the Global 8000. So this also is being taken into account. But clearly, we're being conservative. We're looking at the kind of time we're going to be needed. We always look and work very closely here with Transport Canada to make sure that we also understand how we're going to be working together to get to certification of any future program we may launch. But clearly, certification is always something that we are reconsidering especially in this evolving world right now. To your first question, I think our Global 7500 has an established track record. We have more than 135 airplanes in service. We created the ultra long-range segment and we are extremely confident in our leadership position of that space today. I was sharing with you earlier some comment I got from customer. And clearly, they see our Global 7500 and 8000 as being the leading platform. So Global 8000 is pushing the envelope even further. And again, the customers are just recognizing that exceptional aircraft.

Okay. All right. And remind me the certification timeline currently for the 8000.

We're Q4 2025.

Next question will be from Chris Murray at ATB Capital Markets.

Maybe thinking about the CapEx spend and potentially new development Bart. I mean you talked about a $300 million envelope for -- essentially, it looks like maintenance capital but in some other development. And I was saying over the last couple of years, you've surprised us a few times with new product developments and upgrades inside that initial envelope. I guess thinking about a clean sheet or some new development, is there a reason to believe that you feel you could maybe do a new aircraft at longer than what would normally cost you being able to leverage either existing technologies or just some other work that you may have already been doing through this so that it maybe doesn't start with a B is the best way to think about it?

Yes. I'm going to turn this over to Eric and Paul, but just to comment on the CapEx, Chris. You make a good point, and it's an excellent point, that the $200 million to $300 million of CapEx that we've built into our longer-term plan does accommodate, it is the right level of support for both our regular PP&E maintenance and our sustaining a CapEx for existing platforms. So you're right. We've been able to do refreshes. We've been able to make investments, and that will be -- continue to be the case. And we believe that $200 million to $300 million over the next few years, we'll be able to accommodate that. But when it comes to the new programs and how it's going to go, I'll turn it over to Eric.

Thanks, Bart. So -- but clearly, part of the $200 million to $300 million envelope that we have of capital, there's into doing maintenance on our building, things like that. But there's also always some small product improvement. A lot of them are driven by new regulation as an example. I'll take, as an example, ROAS in Europe. So those are things we need to modify the airplane, test fly it, but it's usually captured into that envelope. To your next question in terms of is it possible to do a new program without starting with a B. But -- and I will separate it in 2 buckets. If you think about a Global 8000, it definitely not start with a B because it's we're basically using the same envelope, then we have the Global 7500 today. So it's clearly an upgrade of the product giving it more performance, more capability. So then that's manageable. If you think about a brand-new clean sheet, I don't see today how we can do it without a -- without a B, without billions of dollars. But clearly, we're going to start always to minimize these costs. We're going to look at reusing some technology, some of the things we've already developed to come out with the right product, a perfect product, but also considering the investment that needs to be made. So again, I think it's going to be taken care of by also the capital allocation discipline that we're going to have to make sure that we know exactly how much it's going to cost. Yes, we may always have in a new development program because this is high technology things that we need to take care of. But clearly, we'll be very disciplined and learn from past history also and reuse technology.

Okay. That's helpful. And then maybe turning to the military business and thinking about the strategic plan or review you may have done. I mean, for the most part, it looks like you're going to focus primarily on derivatives and extensions of existing product. Historically, though, you've been in other adjacent areas in the military business, be that into services or other adjacent markets. I guess 2 pieces of this. When you actually started thinking about the strategy, was there anything that you rejected out of hand in terms of places you wanted to be? And I know you divested certain products over the years. But the other question I think about this, is this an area where M&A maybe becomes the most appropriate part of where to deploy capital in the future?

So it could be an area where we want to deploy capital via acquisition or other means. But clearly, today, what we're proposing is we have very capable platform. I have to say the Global 6500 and the Challenger 650 are extremely popular and can deliver a lot of mission. Then after we have the capability we have in Wichita, which we are leveraging our capability to test, our capability to modify an airplane. So this is our center of excellence right now and our headquarter of defense located in Wichita in the United States, and this is where we are maximizing the knowledge of our workforce to go even beyond just having a platform. So we're modifying the shape of the airplane as an example, we're probably the best position to do that. On the Pegasus project, we are installing equipment. So we're not an equipment provider today, it's not in the plan, but strategic and mission now type of capability, we're working with many partners today. So it's not in the cards. But eventually, we may decide to be very strategic and say, this is a skill that we would like to acquire, what's the best way to acquire that skill, that skill set. Is it to grow this internally? Is it to make an acquisition? So all these questions will be part of our decision and future investment. But today, we are very very well positioned to go and seize some of the opportunity that actually the geopolitical environment today brings to the table.

Next question will be from Noah Poponak at Goldman Sachs.

Have you had any cancellations year-to-date or maybe anything above kind of a normal movement run rate? And should we be considering any risk to the cash flow guidance from an advances headwind given -- I think you have the 1.0 book-to-bill placeholder in there or are things proving more resilient than that in [ past ]?

So of course, you realize I'm 2 weeks away from the end of the quarter. So I'll be careful in making comment -- precise comment on Q1 as we will disclose our results. But to echo what you said, we haven't seen anything abnormal right now on the cancellation point. So nothing to be reported there. So we're still in a regular environment, if I may, I can say it this way. And in terms of our guidance, I think I said that earlier, we don't see a reason to update our guidance today. We'll provide more detail when we give you Q1. Yes, is this -- it's definitely a different environment than a year ago. A year ago was totally different, but this is not a -- as I said, we've been careful. Our guidance has been provided on a book-to-bill of 1. And that's what we're still working with.

Okay. Bart, if I could circle back to the margin discussion. I guess you've obviously had a lot of operational success and achievements and the margins have been really good. But I still just kind of mathematically struggle to get to the 18% even though that's been reduced. Just the amount of margin expansion and incremental margin implied in '24 and '25 compared to what you're guiding to '23, and that's working off a higher base, that's further down the 7500 learning curve, that's further into your aftermarket expansion, which is accretive to the margin. I just still struggle to see what drives more expansion, higher incremental margins in '24 and '25 compared to '23?

Sure. Well, there's a few factors, Noah, that we need to be mindful of. You did mention a couple of them. Yes, we're well along the path -- the growth path for our aftermarket business, but we do still have $500 million of what we believe growth in front of us between now and 2025. And that is a very high margin business. We've been quite candid about it. It's north of 20% EBITDA margins, and it's been that way for many years. Under Paul's leadership, he's an expert to operationalization of platforms and in bringing cost reductions to those platforms as well. So that's in front of us, and that remains exciting. We still do have about another $70 million of cost reduction to go on our $400 million target and objective. All of the actions that we need to take or needed to take to secure that additional $70 million have already been taken. So very confident we'll achieve that this year. And then you mentioned the learning curve on the 7500. That's only one part of the longer-term margin expansion and upside for the 7500. What's not as visible for people is the incremental margin expansion that comes with each aircraft that we're delivering at higher pricing. And as we exit launch pricing and early aircraft sales that were at lower prices than we've been seeing over the last couple of years, it will be a substantial -- it will bring substantial upside to our margin profile as well. So with all of that combined with the, I'll call it, some headwinds based on the strategic investments that we plan to make. We do see a path to the 18% and are confident in it.

Okay. Yes, your bridge -- a large portion of the bridge you showed, which is helpful is 7500 despite, I think, relatively flat units. So it sounds like that moving out of launch pricing into normal pricing piece is pretty -- is maybe more substantial than I [ would appreciate it ].

Yes. That's why I said it's probably not as visible amongst all of the benefits that we're seeing. But we did provide a slide the first year back in March, I guess, of 2021, where we showed what that margin contribution will look like, and you'll see that we're forecasting it to be quite significant.

Okay. And just last one. On the '25 free cash flow, you had the greater than $500 million. You then identified upside to it but held it with a placeholder for a possible capital deployments that could have been debt reduction, could have been new aircraft development. You've now gone to the $900 million. So just -- should I definitely read that as sort of ruling out that any new product development expenditure is -- would -- could be starting in earnest by 2025? Is that now off the table?

The timing of when we might consider a new [indiscernible] program ...

I can take that. I think today, as I said, I feel no pressure from either the customer base or competitor to launch a new program now. So which gives us time right now to think about where will be the best capital allocation. So clearly, we are working on -- always working on some platform and new idea and what could be potential launch. So we are a part of our R&D budget and part of our spending have these, but nothing to hurry up right now. There's no reason when I look at the market and how successful we are selling our platform in today's environment to say, "I need absolutely to launch something new." Could there be derivative or things like that potentially, but in terms of our brand new -- what we'll be working at it, of course, before and getting security in terms of what it is. But I think your reading is okay. I don't see any rush between now and 2025, clearly.

Next question will be from Stephen Trent at Citi.

I sort of had a longer-term question for you with respect to flight safety. So I mean not just you guys, I mean, the whole industry, there's been sort of maybe more publicized episodes that we've seen from at least here in the U.S. of narrow misses between planes. People severely injured with turbulence coming out of nowhere. On a long-term basis, any high-level thoughts with respect to hardware/software adjustments that you guys are thinking about, whether it's the next generation of fly by wire or some other kinds of initiatives as we move to greater aviation safety than we already have. And I know it's already good, but just love to hear how you're thinking about that. .

I think it's been the history of the industry, Stephen, that the bar has always been raising in terms of making our products safer and safer. Bombardier has been leading. We have event that we've been conducting for more than 25 years now at the -- like the safety stand down, always taking back comment from the pilot, from any of our customer and always pushing the bar and the technology also to make sure that the airplane gets safer and safer. Clearly, today, take the Global 7500, those are very, very capable airplane with fly by wire but also all kind of other tools to make the airplane safer than any airplane that may have been developed before. So I think as we look at new technology, new R&D, this is always something that we're trying to achieve. We're not just trying to put a new airplane out there with better performance, but also making the airplane safer and safer has always been part, I think, of our DNA at Bombardier, and we'll continue to do so.

Next question will be from Tim James at TD Securities.

My first question, maybe for Bart, I just want to clarify and make sure I'm understanding this correctly. In the EBITDA bridge, the benefit from Global 7500 and moving away from launch pricing, that is in the that bucket, which is labeled Global 7500 as opposed to being a component of pricing net of inflation. Is that correct?

Yes. You've got that right, Tim. Absolutely.

Great. My second question, I just want to return to the topic of CapEx. And I'm thinking about your plans for $200 million to $300 million for 2025. If I want to really stretch out and think very, very long term about this company, and I'm an investor, do I think over even, say, a 20-year period that, that is a reasonable long-term level? Or is that -- again, you mentioned that, that includes some maintenance and some sustaining CapEx. But when you get into a clean sheet design and you need to layer in that investment, I assume that number. And if we think about an average CapEx over a full portfolio development cycle needs to go higher than that. Is that correct? I mean could we even think of DNA as maybe a reasonable approximation for a very, very long-term average for CapEx?

I think clearly, you point out an important point here. We're a long-term business, and I think people need to think about us in terms of long term. I think today, when we often talk about the backlog, but we also sit on the very significant installed base of 5,000 airplanes and growing. And I think when you look at us, whatever we're going to be deploying our capital will always have in mind to say, okay, yes, we have the short-term financial, but we'll always have in mind to say how do we make sure that we do not just only replace because airplanes are retiring and -- but also how do we grow this installed base that we have worldwide today. This is going to be what's going to carry the growth of our business in services, but also having more airplanes coming into -- new airplanes coming into operation versus the number will be significant. So we need to make sure we always have a competitive portfolio in front of us so that we can trigger the market to buy our airplane and more airplane. So I think it's going to always be a balance of making sure we achieve our short-term objective but making sure also that we do the right capital allocation at the right place to ensure the long term of the company, which is basically protecting and growing the installed base that we have today, but also making sure that we have a competitive portfolio and that we continue to deliver airplane in the long run. We're going to be looking at different possibility also like we talked about CPO. Our CPO could have an impact in the next part of the decade. We also talk about defense, leveraging existing platform that we have to do even more with these platforms that are extremely capable. So I think it's going to be a mix of all of what I just said. But clearly, we're thinking about long term when we deploy our capital. The $200 million to $300 million envelope is like a bit of a sustaining envelope that we feel we need to manage the day-to-day of the business, if I say it this way. But clearly, the remaining of capital allocation will also have very real significant path to grow for the company.

Okay. That's very helpful. And just following on that, that $200 million to $300 million for 2025, should we at this point, take that as cast in stone? Or is it possible conditions might change and there could be a reason to revise that? I just want to make sure that we shouldn't be caught off guard if for some reason, there may be an opportunity where that number actually moves higher in the end? Or do you feel at this point in early 2023 that there's no potential developments that could create a need for that number to go higher?

I think we feel pretty good today about the range that we've allocated, the $200 million to $300 million, we should be definitely within that range. And I think your question, if I understand this right, is if ever we would be launching a program, I think we're saying we're going to be generating $900 million of cash flow. We'll decide what we do with that $900 million, could be paying more debt, could be thinking of a new program, if we're ready and if the market needs it, but that $900 million will be allocated in the different options that I kind of mentioned. But the $200 million to $300 million will secure what we need to do with our infrastructure today will be to continually improve our product to meet new regulatory requirement as an example.

Okay. That's great. That's very helpful. And just one final question, if I could, again, thinking out to 2025, you've talked about how the CPO business and the defense business, the growth there kicks in, I guess, in a more significant way in the second half of the decade. Does that have any impacts on sort of working capital? You've got neutral working capital in 2025 as the assumption. Maybe the way to ask the question is what are sort of the puts and takes we should be considering as influencing required investments in working capital in the middle of the decade around 2025?

So the way I look at it today in 2025, the 2 businesses we want to grow, which is basically our CPO and the defense business, don't require at this stage significant capital investment. I think the business of CPO as we operationalize it within Paul's organization, we'll make sure [indiscernible] time are extremely short so that we can turn airplane faster so that we don't grow inventory, but we will be extremely disciplined. And the guys know that we have a maximum capital allocation to that inventory, and we are always making sure that we work within that envelope. In regards to defense, usually, first of all, the platform already exists. And usually, the way that it's structured at the transactional structure, there's enough advances to cover either the inventory we need to carry or also any of the development we may have to do in Wichita. Paul, if you want to add something to...

Yes, yes. If I can just add one thing. Just going back to the CPO business. So you were talking about return on invested capital. I think that's one of the beauties of this business, is that we're not chasing airplanes. We want to target the right buys, bring them into our service centers, make sure we do the right modifications. The cycle time is extremely small. So we -- what it allows us to do is to have an extremely high return on invested capital. Within 3 months, we can have the aircraft entered, modded and then delivered. So need for capital stays low.

We have time for one last question from Elizabeth [ Grenfell ] at Bank of America.

I was hoping you could expand a little bit on the -- you hit in your presentation that there's potential for M&A focus. And I know you said there's potential in the defense arena, but I was just wondering if you could give us some more color, please, around how you're thinking about this in [ M&A ] and where that might be and when potentially?

You want to answer that ...

Yes. Thanks, Elizabeth. So yes, we do view M&A as one of the options open to us more down the road than anything else once we're achieving the level of cash flow -- free cash flow generation that we're targeting. So again, greater than $900 million by 2025. We do always look at the landscape out there in front of us and are looking at opportunities for more tuck-ins than anything I would say that we would materially change our business. But we're always constantly working to drive new, I'll call it, streams of revenues through our customers to provide them a better overall experience to give them more of what Bombardier can offer. And Paul being a big part of that now, I think, in the aftermarket is probably best equipped to speak about of what those opportunities might look like long term. But I wouldn't suggest that today is the time for us. We're going to remain very, very focused on our debt repayment strategies over the next few years until we get our balance sheet to the place that we're happy with it. But Paul, I don't know if you want to talk about the tuck-ins...

I was going to say the same thing actually I was going to say, we have a 5-year strategic road map. We're entering into the strat plan process with Eric and team in the coming months, and then we'll be able to properly define what those strategies are going to be and what opportunities lie ahead of us.

At this point, I would like to turn it over to Mr. Martel.

So thank you very much. I want to thank you, everyone, this morning for attending this session. [Foreign Language] Thank you for being with us to share our visions of Bombardier's future and to present our new objective for 2025. As I said earlier, Bombardier is in a stronger position today than it has ever been in many years. And this is thanks to the entire Bombardier team. So wishing you all good day. [Foreign Language].