*

High deliveries, demand boost net income beyond

expectations

*

Free cash burn at $164 million to build inventory buffer

against

potentially higher tariff costs

*

First delivery of Global 8000 business jet is expected in

second

half of 2025

*

CEO Martel highlights strong demand in defense markets

By Dan Catchpole and Aatreyee Dasgupta

July 31 (Reuters) - Business jet maker Bombardier

reported a slight drop in second-quarter revenue on

Thursday, though its net income beat analyst expectations thanks

to a rise in aircraft deliveries and orders, better pricing, and

strong demand for parts and repairs.

Those results were somewhat sapped by supply chain disruptions

and secondary costs due to higher tariffs on raw materials,

particularly aluminum.

The Canadian company burned through $164 million of free

cash during the quarter, far above the roughly $41 million that

analysts had expected.

The cash burn, a figure closely watched by investors, was

largely due to increasing inventory as a buffer against

potentially higher tariffs when Bombardier increases production

in the second half of the year.

The company's share price was down 5% in early trading.

Bombardier capped the second quarter with a $1.7 billion order

from an unidentified customer for 50 of its Challenger and

Global aircraft, plus a service pact and options for 70 more,

taking the value of its backlog to $16.6 billion. Deliveries of

those planes will start in 2027.

The company brought in 2.3 times as many orders as planes

delivered, far above what many analysts expected.

It delivered 36 business jets in the quarter, down from 39

in the year-earlier period.

The first Global 8000 business jet, described on the company's

website as the fastest civilian jet since the Concorde, will be

delivered in the second half of 2025, Bombardier CEO Eric Martel

told analysts on a conference call.

The company still expects at least 150 deliveries through the

end of this year, a rate it should be able to reach through

2030, he said.

Bombardier Chief Financial Officer Brett Demosky said during the

call that profits will be stronger in the rest of the year due

to higher deliveries of the company's more profitable Global

models and defense products.

Martel highlighted growing demand for the company's defense

business, adding that Bombardier signed a "strategic pact" with

French group Safran to explore "common defense goals

and technologies."

While Bombardier is still open to

buying its share

of Spirit AeroSystems' ( SPR ) operations in Belfast,

Northern Ireland, which make fuselage sections for the

Montreal-based company's business jets, it is fine with Boeing ( BA )

operating the site after it acquires Spirit AeroSystems ( SPR ), he

said.

TARIFF CONCERNS

Bombardier continues to contend with the uncertainty of U.S.

President Donald Trump's aggressive use of tariffs. In early

July, Trump called for 35% tariffs on imports from Canada. They

are set to begin on Friday.

Much of Bombardier's supply chain and its aircraft are exempt

from tariffs under the United States-Mexico-Canada Agreement,

but Trump has not made a final decision on the tariffs. Removing

that exemption would hurt the U.S. aerospace industry more than

in other countries, Martel said, adding that the U.S. remains

the company's largest market.

Canada's luxury tax has cut Bombardier's sales in the

country from about 10 airplanes a year to two or three, Martel

said during a later call with reporters.

Supply chain delays "have reduced drastically in the last

couple of months," but delays with one of Bombardier's three

engine suppliers - Honeywell ( HON ), GE and Rolls-Royce

- are the "remaining challenge," he told reporters.

He did not identify the engine maker.

Bombardier posted quarterly revenue of $2 billion, down from

$2.2 billion a year ago.

On an adjusted basis, it earned $1.11 a share versus $1.04 a

year earlier, beating analysts' average projection of $1.06.