Bombardier Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the fiscal year ended December 31, 2020

OVERVIEW	AVIATION	TRANSPORTATION	OTHER
6	48	66	74

All amounts in this report are expressed in U.S. dollars, and all amounts in the tables are in millions of U.S. dollars, unless otherwise indicated.

This MD&A is the responsibility of management and has been reviewed and approved by the Board of Directors of Bombardier Inc. (the “Corporation” or “Bombardier”). This MD&A has been prepared in accordance with the requirements of the Canadian Securities Administrators. The Board of Directors is responsible for ensuring that we fulfill our responsibilities for financial reporting and is ultimately responsible for reviewing and approving the MD&A. The Board of Directors carries out this responsibility principally through its Audit and Risk Committee. The Audit and Risk Committee is appointed by the Board of Directors and is comprised entirely of independent and financially literate directors. The Audit and Risk Committee reports its findings to the Board of Directors for its consideration when it approves the MD&A and financial statements for issuance to shareholders.

The data presented in this MD&A is structured by reportable segment: Aviation and Transportation.

IFRS and non-GAAP measures

This MD&A contains both IFRS and non-GAAP measures. Non-GAAP measures are defined and reconciled to the most comparable IFRS measure (see the Non-GAAP financial measures and Liquidity and capital resources sections in Overview and each reportable segment's Analysis of results section).

Materiality for disclosures

We determine whether information is material based on whether we believe a reasonable investor’s decision to buy, sell or hold securities of the Corporation would likely be influenced or changed if the information were omitted or misstated.

Certain totals, subtotals and percentages may not agree due to rounding.

The Financial Report for fiscal year 2020 comprises the message from our President and Chief Executive Officer to shareholders, this MD&A and our consolidated financial statements.

4 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

The following table shows the abbreviations used in the MD&A and the consolidated financial statements.

Term	Description	Term	Description
ACLP	Airbus Canada Limited Partnership	FVOCI	Fair value through other comprehensive income
bps	Basis points		(loss)
BT	Bombardier Transportation (Investment) UK	FVTP&L	Fair value through profit and loss
Holdco	Limited	GAAP	Generally accepted accounting principles
CCTD	Cumulative currency translation difference	GDP	Gross domestic product
CDPQ	Caisse de dépôt et placement du Québec	IAS	International Accounting Standard(s)
CGU	Cash generating unit	IASB	International Accounting Standards Board
CIS	Commonwealth of Independent States	IFRS	International Financial Reporting Standard(s)
DB	Defined benefit	Libor	London Interbank Offered Rate
DC	Defined contribution	MD&A	Management’s discussion and analysis
DDHR	Derivative designated in a hedge relationship	N/A	Not applicable
DSU	Deferred share unit	NCI	Non-controlling interests
EBIT	Earnings (loss) before financing expense,	nmf	Information not meaningful
	financing income and income taxes	OCI	Other comprehensive income (loss)
EBITDA	Earnings (loss) before financing expense,	PP&E	Property, plant and equipment
	financing income, income taxes, amortization and impairment charges on PP&E and intangible assets	PSU R&D	Performance share unit Research and development
EBT	Earnings (loss) before income taxes	RSU	Restricted share unit
EIS	Entry-into-service	SG&A	Selling, general and administrative
EPS	Earnings (loss) per share attributable to equity	U.K.	United Kingdom
	holders of Bombardier Inc.	U.S.	United States of America
Euribor	Euro Interbank Offered Rate

BOMBARDIER INC. / 2020 FINANCIAL REPORT 5

OVERVIEW

HIGHLIGHTS OF	KEY	IMPACTS OF	GUIDANCE AND	CONSOLIDATED	CONSOLIDATED
THE YEAR	PERFORMANCE	COVID-19	FORWARD-	RESULTS OF	FINANCIAL
	MEASURES	PANDEMIC	LOOKING	OPERATIONS	POSITION
	AND METRICS		STATEMENTS
6	10	12	14	18	24

LIQUIDITY AND	CAPITAL	RETIREMENT	RISK	NON-GAAP
CAPITAL	STRUCTURE	BENEFITS	MANAGEMENT	FINANCIAL
RESOURCES				MEASURES
25	32	33	39	45

HIGHLIGHTS OF THE YEAR

Focused on Bombardier as a pure-play business aviation company

On January 29, 2021, the Corporation closed the sale of the Transportation Business to Alstom. The results of the Transportation business have been classified as discontinued operations for current and comparative periods, and the related assets and liabilities are presented as held for sale as of December 31, 2020. Refer to Note 31 - Discontinued operations to our Consolidated financial statements for more details.

For clarity, continuing operations for 2020 include financial results of Aviation, including those related to aerostructures businesses which were disposed on October 30, 2020, as well as the existing corporate cost supporting both Aviation and Transportation, and the debt service costs of the current capital structure before applying the proceeds from the sale of Transportation. As such, continuing operations should not be interpreted as representing the future results of Aviation following the sale of Transportation.

6 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

RESULTS
For the fiscal years ended December 31	2020 2019 Variance
	restated(1)
Revenues(3)	$ 6,487 $ 7,488 (13) %
Adjusted EBITDA(2)(3)	$ 200 $ 684 (71) %
Adjusted EBITDA margin(2)(3)	3.1 % 9.1 % (600) bps
Adjusted EBIT(2)(3)	$ (211) $ 400 nmf
Adjusted EBIT margin(2)(3)	(3.3) % 5.3 % (860) bps
EBIT(3)	$ 912 $ (520) nmf
EBIT margin(3)	14.1 % (6.9) % 2100 bps
Net loss from continuing operations	$ (170) $ (1,541) 89 %
Net loss from discontinued operations	$ (398) $ (66) (503) %
Net loss	$ (568) $ (1,607) 65 %
Diluted EPS from continuing operations (in dollars)	$ (0.08) $ (0.65) $ 0.57
Diluted EPS from discontinued operations (in dollars)	$ (0.29) $(0.11) $ (0.18)
	$ (0.37) $ (0.76) $ 0.39
Adjusted net loss(2)(3)	$ (1,115) $ (406) (175) %
Adjusted EPS (in dollars)(2)(3)	$ (0.47) $ (0.18) $ (0.29)
Cash flows from operating activities
Continuing operations	$ (1,672) $ (253) (561) %
Discontinued operations	$(1,149) $ (427) (169) %
	$ (2,821) $ (680) (315) %
Net additions to PP&E and intangible assets
Continuing operations	$ 221 $ 366 (40) %
Discontinued operations	$ 133 $ 157 (15) %
	$ 354 $ 523 (32) %
Free cash flow usage(2)
Continuing operations	$ (1,893) $ (619) (206) %
Discontinued operations	$(1,282) $ (584) (120) %
	$ (3,175) $ (1,203) (164) %
As at December 31	2020 2019 Variance
Cash and cash equivalents excluding Transportation(4)	$ 1,779 $ 2,089 (15) %
Cash and cash equivalents from Transportation	$ 671 $ 540 24 %
	$ 2,450 $ 2,629 (7) %
Available short-term capital resources(5)	$ 3,203 $ 3,925 (18) %
Aviation order backlog (in billions of dollars)
Business aircraft	$ 10.7 $ 14.4 (26) %
Other aviation(6)	$ — $ 1.9 (100) %

(1) Transportation was classified as discontinued operations as of December 31, 2020. As a result, the results of operations have been restated for comparative periods. Refer to Note 31 - Discontinued operations to our Consolidated financial statements for more details.

(2) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and to the Analysis of results section and Liquidity and capital resources section for reconciliations to the most comparable IFRS measures.

(3) Includes continuing operations only.

(4) Includes cash and cash equivalents of $51 million from the aerostructures businesses presented under Assets held for sale as of December 31, 2019. Refer to Reshaping the portfolio section in Aviation section and Sale of Transportation business section of this MD&A, Note 30 - Disposal of businesses and Note 31 - Discontinued operations to our Consolidated financial statements for more details on the transaction and the accounting treatments.

(5) Defined as cash and cash equivalents including cash and cash equivalents from Transportation plus the undrawn amounts under Transportation’s revolving credit facility and our senior secured term loan.

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 7

(6) Included the firm orders amounting to $1.1 billion from the aerostructures businesses presented under Assets held for sale as of December 31, 2019. Also included 20 firm orders for CRJ900 as of December 31, 2019. The backlog for the CRJ Series aircraft program amounting to $0.4 billion was removed as a result of the closing of the sale of the CRJ Series aircraft program to MHI on June 1, 2020.

KEY HIGHLIGHTS AND EVENTS

Full year revenues of $5.6 billion from business aircraft activities, reflect a 3% year-over-year growth driven by the ramp up of Global 7500 aircraft deliveries, notwithstanding production rate adjustments on other platforms to align with market conditions, impacted by the COVID-19 pandemic.
2021 business aircraft revenues are expected to be better than 2020 assuming a gradual market recovery.[(1)]
2020 Aviation revenues also included $895 million from commercial aircraft and aerostructures activities which were divested during the course of the year.
Adjusted EBITDA[(2)] and adjusted EBIT[(2)] from continuing operations of $200 million and $(211) million, respectively, reflect the impact of the COVID-19 pandemic on aircraft deliveries and services activities at Aviation, and include the full corporate costs supporting both Aviation and Transportation. Reported EBIT of $912 million reflects the accounting gains on disposals of the CRJ and aerostructures businesses.
Adjusted EBITDA(2) is expected to be greater than $500 million in 2021, while adjusted EBIT(2) is expected to be greater than $100 million.(1)
- The adjusted EBITDA growth in 2021 is expected to be driven by the progress on the Global 7500 learning curve, potential growth in aftermarket services and the impact of the Corporation’s actions to improve profitability and cash generation announced in February 2021. The goal of these actions is to make the organization more efficient and agile, capable of delivering stronger financial performance under current market conditions. Such initiatives include a workforce reduction of 1,600 positions, the consolidation of Global aircraft completion work in Montréal, a review of options to address underutilized hangar and industrial space at the company's Québec facilities and the decision to end production of the Learjet in 2021. Collectively, the Corporation aims to generate $400 million annually in recurring cash savings from these actions by 2023. The Corporation anticipates recording a restructuring charge of approximately $50 million in 2021 in addition to a charge of $26 million recorded in the fourth quarter of 2020, both of which will be reported as special items.[(1)]
Fourth quarter free cash flow[(2)] generation from continuing activities before interest and taxes[(3)] reached $523 million, ahead of plan. Full year free cash flow usage[(2)] from continuing operations of $1.9 billion reflects pandemic-related disruptions, mainly due to unfavorable changes in working capital, and also include the full long-term debt interest cost and corporate expenses before the deployment of cash from the sale of Transportation. Continuing operations’ cash flow usage from operating activities of $1.7 billion for the full year.
Free cash flow usage[(2)] from continuing operations in 2021 is expected to be better than $500 million including one-time costs and investments estimated at approximately $200 million.[(1)]
(1) Forward-looking statement. See the forward-looking statements assumptions on which the guidance is based and forward-looking statements disclaimer in Overview.
(2) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and to the Analysis of results section and Liquidity and capital resources section for reconciliations to the most comparable IFRS measures.
(3) Non-GAAP financial measure, defined as cash flow from continuing operations amounting to $316 million for the fourth quarter of 2020, minus net additions to PP&E and intangibles from continuing operations amounting to $51 million during the fourth quarter of 2020, plus net interest and income taxes paid for continuing operations amounting to $258 million in the fourth quarter of 2020.

8 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

Bombardier begins 2021 with pro forma cash and cash equivalents[(1)] of approximately $5.4 billion, including $1.8 billion of cash and cash equivalents at Bombardier Inc. (excluding Transportation) as of December 31, 2020 and the approximately $3.6 billion of proceeds from the recently closed sale of Transportation once it becomes fully available, and a pro forma net debt[(1)] of approximately $4.7 billion.
Bombardier will be hosting its 2021 Analyst day on Thursday March 4, 2021. The event will feature updates from Eric Martel, Chief Executive Officer and the leadership team on the market outlook, the actions to drive profitability and productivity, and give the opportunity to meet the leadership team. This event will be virtual and followed by a Q&A session.

Completed divestitures to re-position Bombardier as a Business Aircraft Company

On June 1, 2020, the Corporation concluded the sale of the CRJ Series commercial aircraft program to Mitsubishi Heavy Industries, Ltd for a gross cash consideration of $585 million at closing.
On October 30, 2020, the Corporation closed the sale of its aerostructures activities and aftermarket services operations in Belfast, U.K.; Casablanca, Morocco; and its aerostructures maintenance, repair and overhaul (MRO) facility in Dallas, U.S. to Spirit AeroSystems Holding, Inc for cash consideration of $275 million, Spirit’s assumption of liabilities, including government refundable advances, pension obligations, as well as certain adjustments to the parties’ trading agreements favourable to Bombardier. The total transaction value is approximately $1.2 billion.
On January 29, 2021, Bombardier closed the sale of its Transportation business to Alstom for net proceeds of approximately $3.6 billion, including approximately $600 million in Alstom shares.[(2)]
(1) Non-GAAP financial measures. Pro-forma cash and cash equivalents include cash and cash equivalents at Bombardier Inc. (excluding Transportation) of $1.8 billion as of December 31, 2020 and net proceeds of approximately $3.6 billion from the sale of Bombardier Transportation, which assumes the full monetization of Alstom shares worth approximately $600 million, the release of any cash not immediately available and is before the deployment of proceeds against any debt payment. Pro-forma net debt is defined as long-term debt of $10.1 billion less cash and cash equivalents at Bombardier Inc. (excluding Transportation) of $1.8 billion as of December 31, 2020 less net proceeds of approximately $3.6 billion from the sale of Bombardier Transportation.
(2) Refer to Note 31 - Discontinued operations to our Consolidated financial statements for more details on the transaction and the accounting treatments.

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 9

KEY PERFORMANCE MEASURES AND METRICS

The table below summarizes key performance measures and associated metrics evaluated only on a consolidated basis. Our reportable segments use multiple other key performance measures to evaluate various key metrics. Refer to each reportable segment’s Key performance measures and metrics section for further details.

	KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS	KEY PERFORMANCE MEASURES AND ASSOCIATED METRICS
PROFITABILITY	• •	EBIT, adjusted EBIT(1)and adjusted EBITDA(1)as measures of performance. Diluted EPS and adjusted EPS(1), as measures of global performance.
LIQUIDITY	• •	Available short-term capital resources(2), as a measure of liquidity adequacy. Free cash flow(1), as a measure of liquidity generation.
CAPITAL STRUCTURE	• •	Debt service cost. Debt maturity runway.

(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures, Consolidated results of operations and Liquidity and capital resources sections for definitions of these metrics and reconciliations to the most comparable IFRS measures.

(2) Defined as cash and cash equivalents including cash and cash equivalents from Transportation plus the undrawn amounts under Transportation’s revolving credit facility and our senior secured term loan.

		FIVE-YEAR SUMMARY	FIVE-YEAR SUMMARY	FIVE-YEAR SUMMARY
For the fiscal years ended and as at
December 31		2020		2019		2018		2017		2016
			restated(1)		restated(1)		restated(1)		restated(1)
Profitability
Revenues(2)	$	6,487	$	7,488	$	7,321	$	7,648	$	8,765
Adjusted EBITDA(2)(3)(4)	$	200	$	684	$	453	$	210	$	141
Adjusted EBITDA margin(2)(3)(4)		3.1 %		9.1 %		6.2 %		2.7 %		1.6 %
Adjusted EBIT(2)(3)(4)	$	(211)	$	400	$	279	$	(13)	$	(133)
Adjusted EBIT margin(2)(3)(4)		(3.3) %		5.3 %		3.8 %		(0.2) %		(1.5) %
EBIT(2)	$	912	$	(520)	$	227	$	(144)	$	(454)
EBIT margin(2)		14.1 %		(6.9) %		3.1 %		(1.9) %		(5.2) %
Net loss from continuing operations	$	(170)	$	(1,541)	$	(87)	$	(667)	$	(1,099)
Net income (loss) from discontinued
operations	$	(398)	$	(66)	$	405	$	142	$	118
Net income (loss)	$	(568)	$	(1,607)	$	318	$	(525)	$	(981)
Diluted EPS (in dollars)(5)	$	(0.37)	$	(0.76)	$	0.09	$	(0.24)	$	(0.48)
Adjusted net loss(2)(3)	$	(1,115)	$	(406)	$	(7)	$	(468)	$	(635)
Adjusted EPS (in dollars)(2)(3)	$	(0.47)	$	(0.18)	$	0.03	$	(0.14)	$	(0.25)

(2) Includes continuing operations only.

(3) Non-GAAP financial measures. Refer to the Non-GAAP financial measures, Consolidated results of operations and Liquidity and capital resources sections for definitions of these metrics and reconciliations to the most comparable IFRS measures.

(4) Refer to the Consolidated results of operations section for details of special items recorded in 2020 and 2019.

(5) Includes both continuing operations and discontinued operations.

10 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

	FIVE-YEAR SUMMARY
For the fiscal years ended and as at December 31	2020 2019 2018 2017 2016
	restated(1) restated(1) restated(1) restated(1)
Liquidity
Cash flows from operating activities
Continuing operations	$ (1,672) $ (253) $ 587 $ (358) $ (621)
Discontinued operations	$ (1,149) $ (427) $ 10 $ 889 $ 758
	$ (2,821) $ (680) $ 597 $ 531 $ 137
Net additions to PP&E and intangible assets
Continuing operations	$ 221 $ 366 $ 307 (5) $ 1,195 $ 1,085
Discontinued operations	$ 133 $ 157 $ 108 $ 122 $ 116
	$ 354 $ 523 $ 415 (5) $ 1,317 $ 1,201
Free cash flow (usage)(2)
Continuing operations	$ (1,893) $ (619) $ 280 (5) $ (1,553) $ (1,706)
Discontinued operations	$ (1,282) $ (584) $ (98) $ 767 $ 642
	$ (3,175) $ (1,203) $ 182 (5) $ (786) $ (1,064)
Cash and cash equivalents(3)	$ 2,450 $ 2,629 $ 3,187 $ 3,057 $ 3,384
Available short-term capital resources(4)	$ 3,203 $ 3,925 $ 4,373 $ 4,225 $ 4,477
Current portion of long-term debt	$ 1,882 $ 8 $ 9 $ 18 $ 31
Long-term debt	$ 8,193 $ 9,325 $ 9,093 $ 9,200 $ 8,738

(2) Non-GAAP financial measures. Refer to the Non-GAAP financial measures, Consolidated results of operations and Liquidity and capital resources sections for definitions of these metrics and reconciliations to the most comparable IFRS measures.

(3) Includes cash and cash equivalents from Transportation of $671 million presented under Assets held for sale as of December 31, 2020, and $51 million from the aerostructures businesses as of December 31, 2019, respectively. Refer to Reshaping the portfolio section in Aviation section and Sale of Transportation business section of this MD&A, Note 30 - Disposal of businesses and Note 31 - Discontinued operations to our Consolidated financial statements for more details on the transaction and the accounting treatments. Also included cash and cash equivalents of the C Series aircraft program presented under Assets held for sale amounting to $69 million as of December 31, 2017.

(4) Defined as cash and cash equivalents including cash and cash equivalents from Transportation plus the undrawn amounts under Transportation’s revolving credit facility and our senior secured term loan.

(5) Included the proceeds from the sale of the Downsview property for approximately $600 million in 2018.

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 11

IMPACTS OF COVID-19 PANDEMIC

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant economic uncertainty and disruption of financial markets. This section aims to assist users in better understanding the impact of the pandemic on the Corporation by aggregating the disclosure found elsewhere in this MD&A.

COVID-19 response

The Corporation has been closely monitoring and actively implementing and updating its response to the evolving COVID-19 pandemic and its impacts on employees, operations, the global economy and the demand for its products and services. The Corporation has formed a committee composed of the senior leadership team and key leaders in the organization to monitor, on a daily basis, the evolution of the pandemic, to evaluate the measures being put in place by local and national governments and the resulting impacts on the Corporation, and to implement necessary contingency plans in real time as the current situation continues to unfold, with a focus on three priorities: protecting employees’ health and safety; supporting customers to the best of its abilities; and ensuring that the Corporation can successfully navigate through this global crisis. The Corporation’s actions are in all cases closely aligned with both the health and safety mandates and support programs that have been announced by the local governments in every region it operates.

The COVID-19 pandemic started impacting several Bombardier operations across the globe, including key locations in Europe and North America through the second half of March 2020 where activities were significantly reduced or suspended for several weeks. Starting in the last weeks of April and through the month of May, operations globally gradually resumed with new safety measures in place.

On March 24, 2020, the Corporation suspended its 2020 financial outlook(1) to reflect the uncertainty related to the financial impact of the COVID-19 pandemic on its global operations.

On a consolidated basis, the COVID-19 pandemic had a material negative impact on free cash flow(2) for the full year, mainly from a higher working capital balance associated with lower deliveries and lower order intake.

Impacts of COVID-19 on Aviation

Canadian operations, where Global and Challenger aircraft are assembled and delivered, were temporarily suspended in the last week of March 2020 and through several weeks during the second quarter due to the global COVID-19 pandemic. Key aerostructures operations in Mexico and Belfast were similarly suspended, impacting a total of approximately 15,000 Aviation employees globally. These disruptions, combined with the impact of reduced order intake related to the economic uncertainty, meaningfully increased free cash flow usage[(2)] at Aviation.

On June 5, 2020, Bombardier Aviation announced workforce adjustments in response to the COVID-19 pandemic. With industry-wide business jet deliveries down by approximately 20% year-over-year due to the pandemic, Bombardier adjusted its operations and workforce to ensure that it emerges from the current crisis on solid footing. Accordingly, Bombardier Aviation made the difficult decision to reduce its workforce by approximately 2,500 employees. The majority of these reductions impacted manufacturing operations in Canada and is carried out progressively. Bombardier’s worldwide customer service operations have continued to operate largely uninterrupted throughout the pandemic. Bombardier recorded a special charge of $56 million in 2020, including $4 million in the fourth quarter of 2020 for this workforce adjustment.

(1) Refer to our 2019 Financial Report for further details.

(2) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for a definition of this metric and reconciliation to the most comparable IFRS measures.

12 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

Impacts of COVID-19 on Transportation

Production at several locations, including key sites across Transportation’s largest markets in Europe and the Americas, was temporarily suspended in the second half of March 2020 and through several weeks during the second quarter due to the global COVID-19 pandemic. Approximately 10,000 Transportation employees globally were affected by these shutdowns. These disruptions, combined with the impact of deferred order intake related to the crisis, meaningfully increased free cash flow usage(1) at Transportation.

Measures to bolster liquidity in response to the COVID-19 pandemic

In response to the COVID-19 pandemic the Corporation has taken on or is pursuing the following actions to adapt to the current environment and manage liquidity:

The Corporation is managing costs through aggressive company-wide actions, including workforce reduction, cutting non-essential spending. Discretionary capital expenditures is also being deferred, mainly improving Aviation’s free cash flow[(1)] outlook.[(2)]
Where applicable, the Corporation is participating in various government support programs, including wage subsidies, bonding and letter of credit facilities, tax payment deferrals, pension contribution holidays and other measures addressing liquidity needs of corporations during the crisis.
The Corporation concluded the sale of the CRJ Series aircraft program to Mitsubishi Heavy Industries, Ltd for a gross cash consideration of $585 million at closing on June 1, 2020.
At Aviation, production rates were aligned to market demand. This reflects the extraordinary industry interruptions and challenges caused by COVID-19. The production ramp-up of the G lobal 7500 is largely unaffected by these rate changes given its solid backlog.
During the third quarter, the Corporation obtained a three-year senior secured term loan (the "Facility") of up to $1.0 billion from investment funds and accounts managed by HPS Investment Partners, LLC, providing additional liquidity to operate the business through the COVID-19 pandemic as it worked to close previously announced divestitures undertaken to reshape Bombardier’s capital structure.
On October 30, 2020, the Corporation closed the previously announced sale of its aerostructures businesses to Spirit AeroSystems Holding, Inc. (Spirit) for cash consideration of $275 million and the assumption of liabilities by Spirit, including government refundable advances and pension obligations, as well as certain adjustments to the parties’ trading agreements favourable to the Corporation.
On January 29, 2021, the Corporation closed the sale of Transportation to Alstom with net proceeds of approximately $3.6 billion.

Management believes that the net proceeds from the sale of Transportation, combined with its year end cash and cash equivalents of $1.8 billion excluding Transportation, will enable the Corporation to meet its currently anticipated financial requirements for a period of at least, but not limited to, twelve months from the reporting date supporting the Corporation’s ability to continue as a going concern.

Other

Refer to the Risks and uncertainties section of this MD&A for details on risk factors related to the COVID-19 pandemic. Refer to Note 4 - Use of estimates and judgment, to our Consolidated financial statements, for details on use of estimates and judgments in the application of accounting policies in the context of the COVID-19 pandemic.

(1) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for a definition of this metric and reconciliation to the most comparable IFRS measures.

(2) See the forward-looking statements disclaimer.

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 13

GUIDANCE AND FORWARD-LOOKING STATEMENTS

On March 24, 2020, the Corporation suspended its 2020 financial outlook(1) to reflect the uncertainty related to the financial impact of the COVID-19 pandemic on its global operations.

2021 Guidance[(2)]

Continuing operations only	2021 Guidance
Revenues	> $5.6B
Adjusted EBITDA(3)	> $500 million
Adjusted EBIT(3)	> $100 million
Free cash flow usage(3)	Usage better than $500 million including~$200 million of non-recurringoutflows
Aircraft deliveries (in units)	110 - 120

Revenues from business aircraft activities in 2021 are expected to be better than 2020 based on a gradual economic recovery scenario. Growth opportunities are expected to come from increasing market share in the large category and higher service revenues driven by increasing flight hours as well as an expansion of the global services network with major projects underway in Singapore, London, Melbourne and Miami.

Adjusted EBITDA[(3)] for continuing operations including corporate costs is expected to be greater than $500 million in 2021. This improvement is mainly driven by the progress on the Global 7500 learning curve, potential growth in aftermarket services and the partial impact of the actions announced in February 2021 to improve the Corporation’s profitability and cash generation. With amortization expected to be stable year-over-year at approximately $400 million, adjusted EBIT[(3)] is expected to be greater than $100 million.

Free cash flow usage[(3)] from continuing operations in 2021 is expected to be better than $500 million including one-time costs and investments estimated at approximately $200 million. Free cash flow[(1)] from continuing operations in 2021 is expected to be driven by:

adjusted EBITDA[(3)] of greater than $500 million;
negative changes in net working capital as customer advances are consumed, partially offset by improving order intake activity;
net additions to PP&E and intangible assets expected to be approximately in line with prior year;
lower cash interest, reflecting the deployment of the proceeds from the sale of Transportation towards debt pay down; and
non-recurring items totaling approximately $200 million, including legacy outflows related to credit and residual value guarantee liabilities and reverse factoring, and approximately $50 million of restructuring costs.
(1) Refer to our 2019 Financial Report for further details.
(2) Forward-looking statement. See the forward-looking statements assumptions on which the guidance is based and forward-looking statements disclaimer in Overview.
(3) Non-GAAP financial measures. Refer to the Non-GAAP financial measures and Liquidity and capital resources sections for definitions of these metrics and reconciliations to the most comparable IFRS measures.

14 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

Forward-looking Statements Disclaimer

This MD&A includes forward-looking statements, which may involve, but are not limited to: statements with respect to our objectives, anticipations and outlook or guidance in respect of various financial and global metrics and sources of contribution thereto, targets, goals, priorities, market and strategies, financial position, financial performance, market position, capabilities, competitive strengths, credit ratings, beliefs, prospects, plans, expectations, anticipations, estimates and intentions; general economic and business outlook, prospects and trends of an industry; customer value; expected demand for products and services; growth strategy; product development, including projected design, characteristics, capacity or performance; expected or scheduled entry-into-service of products and services, orders, deliveries, testing, lead times, certifications and execution of orders in general; competitive position; expectations regarding revenue and backlog mix; the expected impact of the legislative and regulatory environment and legal proceedings; strength of capital profile and balance sheet, creditworthiness, available liquidities and capital resources, expected financial requirements, and ongoing review of strategic and financial alternatives; the introduction of, productivity enhancements, operational efficiencies, cost reduction and restructuring initiatives, and anticipated costs, intended benefits and timing thereof; the anticipated business transition to growth cycle and cash generation; expectations, objectives and strategies regarding debt repayment, refinancing of maturities and interest cost reduction; expectations regarding availability of government assistance programs, compliance with restrictive debt covenants; expectations regarding the declaration and payment of dividends on our preferred shares; intentions and objectives for our programs, assets and operations; and the impact of the COVID-19 pandemic on the foregoing and the effectiveness of plans and measures we have implemented in response thereto; and expectations regarding gradual market and economic recovery in the aftermath of the COVID-19 pandemic. As it relates to the sale of the Transportation business to Alstom, this MD&A also contains forward-looking statements with respect to the benefits of such transaction, the use of the proceeds derived from the transaction and its impact on our outlook, guidance and targets, operations, infrastructure, opportunities, financial condition, business plan and overall strategy.

Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may”, “will”, “shall”, “can”, “expect”, “estimate”, “intend”, “anticipate”, “plan”, “foresee”, “believe”, “continue”, “maintain” or “align”, the negative of these terms, variations of them or similar terminology. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of our current objectives, strategic priorities, expectations, outlook and plans, and in obtaining a better understanding of our business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

By their nature, forward-looking statements require management to make assumptions and are subject to important known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecast results set forth in forward-looking statements. While management considers these assumptions to be reasonable and appropriate based on information currently available, there is risk that they may not be accurate. The assumptions underlying the forward-looking statements made in this MD&A in relation to the sale of the Transportation business to Alstom discussed herein include the following material assumptions: the realization of the intended benefits from this transaction and the deployment of proceeds towards debt pay down. For additional information, including with respect to other assumptions underlying the forward-looking statements made in this MD&A, refer to the Forward-looking statements — Assumptions section below. Given the impact of the changing circumstances surrounding the COVID-19 pandemic and the related response from the Corporation, governments (federal, provincial and municipal), regulatory authorities, businesses, suppliers, customers, counterparties and third-party service providers, there is inherently more uncertainty associated with the Corporation’s assumptions as compared to prior years.

Certain factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, risks associated with general economic conditions, risks associated with our business environment (such as risks associated with the financial condition of business aircraft customers; trade policy; increased competition; political instability and force majeure events or global climate change), operational risks (such as risks related to developing new products and services; development of new business ; order backlog; the transition to a pure-play business aviation company; the certification of products and services; the execution of orders; pressures on cash flows and capital expenditures based on seasonality and cyclicality; execution of our strategy, productivity enhancements, operational efficiencies, restructuring and cost reduction initiatives; doing business with partners; product performance warranty and casualty claim losses; regulatory and legal proceedings; environmental, health and safety risks; dependence on certain customers, contracts and suppliers; supply chain risks; human resources; reliance on information systems; reliance on and protection of intellectual property rights; reputation risks; risk management; tax matters; and adequacy of insurance coverage), financing risks (such as risks related to liquidity and access to capital markets; retirement benefit plan risk; exposure to credit risk; substantial debt and interest payment requirements; restrictive debt covenants; reliance on debt management and interest cost reduction strategies; and reliance on government support), market risks (such as foreign currency fluctuations; changing interest rates; increases in commodity prices; and inflation rate fluctuations). For more details, see the Risks and uncertainties section in Other in this MD&A. Any one or more of the foregoing factors may be exacerbated by the ongoing COVID-19 outbreak and may have a significantly more severe impact on the Corporation’s business, results of operations and financial condition than in the absence of such outbreak. As a result of the current COVID-19 pandemic, additional factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to:

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 15

risks related to the impact and effects of the COVID-19 pandemic on economic conditions and financial markets and the resulting impact on our business, operations, capital resources, liquidity, financial condition, margins, prospects and results; uncertainty regarding the magnitude and length of economic disruption as a result of the COVID-19 outbreak and the resulting effects on the demand environment for our products and services; uncertainty regarding market and economic recovery in the aftermath of the COVID-19 pandemic; emergency measures and restrictions imposed by public health authorities or governments, fiscal and monetary policy responses by governments and financial institutions; disruptions to global supply chain, customers, workforce, counterparties and third-party service providers; further disruptions to operations, orders and deliveries; technology, privacy, cyber security and reputational risks; and other unforeseen adverse events.

Readers are cautioned that the foregoing list of factors that may affect future growth, results and performance is not exhaustive and undue reliance should not be placed on forward-looking statements. Other risks and uncertainties not presently known to us or that we presently believe are not material could also cause actual results or events to differ materially from those expressed or implied in our forward-looking statements. The forward-looking statements set forth herein reflect management’s expectations as at the date of this report and are subject to change after such date. Unless otherwise required by applicable securities laws, we expressly disclaim any intention, and assume no obligation to update or revise any forwardlooking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement.

16 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

Forward-looking statements — Assumptions Forward-looking statements[(1)] in this MD&A are based on and subject to the following material assumptions:

normal execution and delivery of current backlog;
the alignment of production rates to market demand, including the ability of the supply base to support product development and planned production rates on commercially acceptable terms in a timely manner;
the ability to manage the learning curve as we ramp up production and deliveries of the Global 7500 aircraft;
continued deployment and execution of growth strategies, and continued growth of the aftermarket business;
the ability to invest in our product portfolio;
the accuracy of the analyses and assumptions underlying our business case including estimated cash flows and revenues over the expected life of our programs and thereafter;
the accuracy of our estimates and judgments regarding the duration, scope and impacts of the ongoing COVID-19 pandemic on the economy and financial markets, and on our business, operations, revenues, liquidity, financial condition, margins, cash flows, prospects and results in future periods;
the accuracy of our assessment of anticipated growth drivers and sector trends;
new program aircraft prices, unit costs and ramp-up;
the ability to understand customer needs and portfolio of products and services to drive market demand and secure new orders and grow our backlog;
continued deployment and execution of leading initiatives to improve revenue conversion into higher earnings and free cash flow[(2)] , through improved procurement cost, controlled spending and labour efficiency;
delivering on our cost reduction plan, through restructurings and other initiatives addressing the direct and indirect cost structure, focusing on sustained cost reductions and operational improvements, while reducing working capital consumption;
the effectiveness of disciplined capital deployment measures in new programs and products to drive revenue growth;
our ability to offset a portion of our new Toronto Pearson Airport manufacturing facility construction costs through land sales or other opportunities and to keep project spend on track;
the ability to recruit and retain highly skilled resources to deploy the product development strategy;
the stability of the competitive global environment, global economic conditions and financial markets in the aftermath of the COVID-19 pandemic;
the stability of foreign exchange rates at current levels;
our ability to access the capital markets as needed or opportunistically;
the ability to have sufficient liquidity to execute the strategic plan and to pay down long-term debt or refinance maturities; and
our ability to successfully defend ourselves against legal proceedings.

For a discussion of the material risk factors associated with the forward-looking information, refer to the Risks and uncertainties section in Other.

(1) Also refer to the Guidance and forward-looking statements section for the forward-looking statements disclaimer.

(2) Non-GAAP financial measure. Refer to the Non-GAAP financial measures for definition of this metric and to the Analysis of results section for a reconciliation to the most comparable IFRS measures.

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 17

CONSOLIDATED RESULTS OF OPERATIONS

Results of operations[(1)]

		Fourth quarters ended	Fourth quarters ended	Fourth quarters ended		Fiscal years ended	Fiscal years ended	Fiscal years ended
			December 31				December 31
		2020		2019		2020		2019
				restated(1)				restated(1)
Revenues	$	2,337	$	2,412	$	6,487	$	7,488
Cost of sales		2,248		2,109		5,971		6,447
Gross margin		89		303		516		1,041
SG&A		117		126		420		557
R&D		144		65		320		156
Share of income of joint ventures and associates		—		(56)		(2)		(34)
Other income		(7)		—		(11)		(38)
Adjusted EBIT(2)		(165)		168		(211)		400
Special items		(598)		1,628		(1,123)		920
EBIT		433		(1,460)		912		(520)
Financing expense		240		236		1,060		996
Financingincome		(28)		(93)		(27)		(226)
EBT		221		(1,603)		(121)		(1,290)
Income taxes		236		(75)		49		251
Net loss from continuing operations	$	(15)	$	(1,528)	$	(170)	$	(1,541)
Net loss from discontinued operations	$	(322)	$	(191)	$	(398)	$	(66)
Net loss	$	(337)	$	(1,719)	$	(568)	$	(1,607)
Attributable to
Equity holders of Bombardier Inc.	$	(423)	$	(1,770)	$	(868)	$	(1,797)
NCI	$	86	$	51	$	300	$	190
EPS (in dollars)
Basic and diluted	$	(0.18)	$	(0.74)	$	(0.37)	$	(0.76)
EPS from continuing operations (in dollars)
Basic and diluted	$	(0.01)	$	(0.64)	$	(0.08)	$	(0.65)
As a percentage of total revenues
Gross margin		3.8 %		12.6 %		8.0 %		13.9 %
Adjusted EBIT(2)		(7.1) %		7.0 %		(3.3) %		5.3 %
EBIT		18.5 %		(60.5)%		14.1 %		(6.9)%

(2) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for a definition of this metric.

Computation of diluted EPS[(1)]

		Fourth quarters ended	Fourth quarters ended	Fourth quarters ended		Fiscal years ended	Fiscal years ended	Fiscal years ended
			December 31				December 31
		2020		2019		2020		2019
				restated(2)				restated(2)
Net loss attributable to equity holders of Bombardier Inc.	$	(15)	$	(1,528)	$	(170)	$	(1,541)
Preferred share dividends,includingtaxes		1		(7)		(18)		(21)
Net loss attributable to common equity
holders of Bombardier Inc.	$	(14)	$	(1,535)	$	(188)	$	(1,562)
Weighted-average diluted number of common shares
(in thousands of shares)	2,419,541		2,397,868		2,408,209		2,383,987
Diluted EPS(in dollars)	$	(0.01)	$	(0.64)	$	(0.08)	$	(0.65)

(1) Includes continuing operations only.

(2) Transportation was classified as discontinued operations as of December 31, 2020. As a result, the results of operations have been restated for comparative periods. Refer to Note 31 - Discontinued operations to our Consolidated financial statements for more details.

18 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

Other non-GAAP financial measures[(1)]

		Fourth quarters ended	Fourth quarters ended	Fourth quarters ended		Fiscal years ended	Fiscal years ended	Fiscal years ended
			December 31				December 31
		2020		2019		2020		2019
				restated(2)				restated(2)
Adjusted EBITDA	$	(1)	$	259	$	200	$	684
Adjusted net income (loss)	$	(475)	$	11	$	(1,115)	$	(406)
Adjusted EPS	$	(0.20)	$	0.00	$	(0.47)	$	(0.18)

(1) Includes continuing operations only. Refer to the Non-GAAP financial measures section for definitions of these metrics and reconciliations to the most comparable IFRS measures.

Reconciliation of segment to consolidated results

		Fourth quarters	Fourth quarters	ended			Fiscal years	Fiscal years	ended
			December 31					December 31
		2020		2019	(1)		2020		2019	(1)
Revenues
Aviation	$	2,337	$	2,413		$	6,488	$	7,501
Transportation(1)		2,076		1,793			7,844		8,269
Corporate and Others		—		(1)			(1)		(13)
		4,413		4,205			14,331		15,757
Reclassification(1)		(2,076)		(1,793)			(7,844)		(8,269)
	$	2,337	$	2,412		$	6,487	$	7,488
Adjusted EBIT(2)
Aviation	$	(149)	$	143		$	(125)	$	531
Transportation(1)		(340)		(234)			(610)		70
Corporate and Others(3)		(16)		25			(86)		(131)
		(505)		(66)			(821)		470
Reclassification(1)		340		234			610		(70)
	$	(165)	$	168		$	(211)	$	400
Special Items
Aviation	$	(628)	$	49		$	(1,062)	$	(663)
Transportation(1)		(4)		2			8		48
Corporate and Others		30		1,579			(61)		1,583
		(602)		1,630			(1,115)		968
Reclassification(1)		4		(2)			(8)		(48)
	$	(598)	$	1,628		$	(1,123)	$	920
EBIT
Aviation	$	479	$	94		$	937	$	1,194
Transportation(1)		(336)		(236)			(618)		22
Corporate and Others(3)		(46)		(1,554)			(25)		(1,714)
		97		(1,696)			294		(498)
Reclassification(1)		336		236			618		(22)
	$	433	$	(1,460)		$	912	$	(520)

(2) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for a definition of this metric.

(3) Includes share of income from ACLP of $3 million for fiscal year ended December 31, 2020. ($57 million and $37 million for the fourth quarter and fiscal year ended December 31, 2019, respectively. The share of net gains from ACLP in the fourth quarter of 2019 includes certain provision reversals within ACLP amounting to approximately $60 million). On February 12, 2020, Bombardier transferred its remaining interest in ACLP to Airbus and the Government of Québec.

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 19

Analysis of consolidated results

Gross margin[(1) ]

Gross margin as a percentage of revenues for the fourth quarter and fiscal year ended December 31, 2020 decreased by 8.8% and 5.9%, respectively.

Since Transportation is classified as discontinued operations, the variance in gross margin as a percentage of revenues for the fourth quarter and the fiscal year can be principally explained by Aviation, refer to the EBIT variance explanations within the Aviation segment section for further details. The EBIT variance explanations provided in the Aviation section also explain gross margin variances except for the variance in amortization of aerospace program tooling which is recorded as R&D expense.

Detailed analyses of revenues and EBIT for Aviation and Transportation are provided in each reportable segment’s Analysis of results section.

(1) Related to continuing operations. Transportation was classified as discontinued operations as of December 31, 2020. As a result, the results of operations have been restated for comparative periods. Refer to Note 31 - Discontinued operations to our Consolidated financial statements for more details.

Special items[(1)]

Special items comprise items which do not reflect our core performance or where their separate presentation will assist users in understanding our results for the period. Such items include, among others, the impact of restructuring charges, impact of business disposals and significant impairment charges and reversals.

The special items recorded as losses (gains) were as follows:

		Fourth quarters	Fourth quarters	Fourth quarters	ended			Fiscal years	Fiscal years	ended
			December 31					December 31
	Ref		2020		2019	(1)		2020		2019	(1)
Gain on disposal of a business - aerostructure business	2	$	(678)	$	—		$	(678)	$	—
Gain on disposal of a business - CRJ Series business	3		8		—			(488)		—
Gain on exit of ACLP and related aerostructures activities	4		3		—			(120)		—
Restructuring charges	5		23		13			85		51
Transaction costs	6		20		—			56		—
Learjet program end of production and other	7		26		—			26		—
Reversal of_Learjet 85_aircraft program cancellation provisions	8		—		(3)			(7)		(18)
Disruption costs	9		—		—			3		—
Impairment on ACLP investments	10		—		1,578			—		1,578
Gain on disposal of a business - Training business	11		—		—			—		(516)
Gain on disposal of a business - Q Series business	12		—		9			—		(210)
Loss on repurchase of long-term debt	13		—		—			—		84
Pension adjustments	14		—		26			—		26
_Primove_impairment and other costs	15		—		1			—		5
Purchase of pension annuities	16		—		4			—		4
Income taxes	17		148		(26)			(32)		217
		$	(450)	$	1,602		$	(1,155)	$	1,221
Of which is presented in
Special items in EBIT		$	(598)	$	1,628		$	(1,123)	$	920
Financing expense - loss on repurchase of long-term debt	13		—		—			—		84
Income taxes			148		(26)			(32)		217
		$	(450)	$	1,602		$	(1,155)	$	1,221

Restated, refer to Note 31 - Discontinued operations for more details.

20 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

Represents the sale of the aerostructure business for gross proceeds of $275 million. The transaction resulted in a gain of $678 million. See Note 30 - Disposal of businesses for more details.
Represents the sale of the CRJ Series aircraft program assets for gross proceeds of $585 million, at closing, including certain closing adjustments. The transaction resulted in a pre-tax accounting gain of $488 million ($440 million after tax impact). See Note 30 - Disposal of businesses for more details.
The sale of the Corporation’s remaining interest in ACLP and its aerostructures activities supporting A220 and A330 resulted in a pre-tax accounting gain of $120 million for the fiscal year 2020. See Note 29 - Disposal of investment in associate for more details.
For fiscal year 2020, represents severance charges of $61 million following the announcement of Aviation for workforce adjustments in response to the COVID-19 pandemic, $38 million of impairment of right-of-use assets related to lease contracts as a consequence of previously-announced restructuring actions, and other related charges of $7 million, partially offset by curtailment gains of $21 million. For fiscal year 2019, represents severance charges of $25 million partially offset by curtailment gains of $2 million. Following the announcement that the CRJ production is expected to conclude in the second half of 2020, following the delivery of the current backlog of aircraft, the Corporation has recorded severance charges of $7 million partially offset by curtailment gains of $3 million, and has recorded $24 million of other related charges for fiscal year 2019. In addition, the Corporation has recorded a write down of deferred tax assets of $87 million to reflect the expected impact of the conclusion of the CRJ announcement.
Represents direct and incremental costs incurred in respect of transactions for the sale of the Transportation business to Alstom SA and for the sale of CRJ business to MHI.
Following the decision to end production of the Learjet aircraft in 2021 and the decision to consolidate the Global aircraft completion work in Montréal, the Corporation has recorded $12 million of inventory write-down, $4 million of impairment of PP&E and $10 million of other charges.
Based on the ongoing activities with respect to the cancellation of the Learjet 85 aircraft program, the Corporation reduced the related provisions by $7 million in fiscal year 2020 ($18 million for fiscal year 2019). The reduction in provisions is treated as a special item since the original provisions were also recorded as special items in 2014 and 2015.
Due to the COVID-19 pandemic, in the second half of March 2020, the Corporation temporarily suspended operations at various production facilities. As a result of the pandemic, $3 million were recorded as special items in fiscal year 2020. These costs do not represent the full impact of the COVID-19 pandemic on the results of operations since it does not reflect the impact of lost or deferred revenues and associated margins.
The Corporation performed an impairment test in the fourth quarter of 2019 on its investments in ACLP since there were indicators of impairment. The Corporation determined that the carrying amount of its investment in ACLP exceeded its recoverable amount, and accordingly recorded an impairment charge of $1,578 million.
The sale of Business Aircraft’s flight and technical training activities for a total net consideration of $532 million resulted in a pre-tax accounting gain of $516 million ($383 million after deferred tax impact of $133 million).
The sale of the Q Series Aircraft program assets for net proceeds of $285 million resulted in a pre-tax accounting gain of $210 million ($184 million after tax impact).
Represents the loss related to the redemption of the $850-million Senior Notes due 2020, and the partial redemption of the €780-million Senior Notes and $1,400-million Senior Notes due 2021. See Note 28 - Long-term debt.

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 21

On October 26, 2018, the High Court in the United Kingdom ruled that pension schemes must equalize for the effect of unequal Guaranteed Minimum Pensions between male and female for benefits earned during specified periods (“GMP equalization”). In fiscal year 2019, the Corporation adjusted the pension obligation related to equalization for an Aviation plan in the U.K. The adjustments of $26 million was recorded as a past service cost under IAS 19 - Employee Benefits.
Following a reassessment of the value of the Primove e-mobility technology and the status of existing contractual obligations, the Corporation recorded in fiscal year 2019 an additional contract provision of $5 million.
Represents the non-cash loss on the settlement of defined benefit pension plans resulting from the purchase of annuities with insurance companies in fiscal year 2019.
Following the announcement that the sale of the Transportation business to Alstom was expected to close in the first quarter of 2021, the Corporation revised its estimated future taxable profits and recorded deferred tax assets of $100 million based on the final proceeds of the sale. The impact of recognizing these deferred tax assets was non-cash. The transaction closed on January 29, 2021.

Net financing expense[(1)]

Net financing expense amounted to $212 million and $1,033 million, respectively, for the fourth quarter and fiscal year ended December 31, 2020, compared to $143 million[(1)] and $770 million[(1)] for the corresponding periods last fiscal year.

The $69-million increase for the fourth quarter is mainly due to:

net loss on certain financial instruments classified as FVTP&L ($51 million); and
higher interest on long-term debt, after the effect of hedges ($38 million).

The $263-million increase for the fiscal year is mainly due to:

net loss on certain financial instruments classified as FVTP&L ($301 million); and
higher interest on long-term debt, after the effect of hedges ($71 million).
Partially offset by:
Represents the loss related to the redemption of the $850-million Senior Notes due 2020, and the partial redemption of the €780-million Senior Notes and $1,400-million Senior Notes due 2021, which was recorded as a special item in 2019 ($84 million).
(1) Related to continuing operations. Transportation was classified as discontinued operations as of December 31, 2020. As a result, the results of operations have been restated for comparative periods. Refer to Note 31 - Discontinued operations to our Consolidated financial statements for more details.

Income taxes[(1)]

The effective income tax rates for the fourth quarter and fiscal year ended December 31, 2020 were 106.8% and (40.5)%, respectively, compared to the statutory income tax rate in Canada of 26.5%.

The higher effective income tax rate in the fourth quarter is mainly due to:

the negative impact of the write-down of deferred income tax assets including the impact of the conclusion of the sale of the Transportation business to Alstom ($149 million); and
the negative impact of the net non-recognition of tax benefits related to tax losses and temporary differences.
Partially offset by:
the positive impact of income tax rates differential of foreign subsidiaries; and
the positive impact of the permanent differences.
(1) Related to continuing operations. Transportation was classified as discontinued operations as of December 31, 2020. As a result, the results of operations have been restated for comparative periods. Refer to Noted 31 - Discontinued operations to our Consolidated financial statements for more details.

22 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

The effective income tax rate for the fiscal year ended December 31, 2020 is mainly due to:

the negative impact of the net non-recognition of tax benefits related to tax losses and temporary differences partially offset by the net impact of the conclusion of the sale of the Transportation business to Alstom ($100 million) reduced by the impact related to the closing of the CRJ business and Aerostructure deals ($74 million); and
the negative impact of the write-down of deferred income tax assets .

Partially offset by:

the positive impact of the permanent differences; and
the positive impact of income tax rates differential of foreign subsidiaries.

The effective income tax rates for the fourth quarter and fiscal year ended December 31, 2019 were 4.7% and (19.5)%, respectively, compared to the statutory income tax rate in Canada of 26.6%.

The lower effective income tax rate in the fourth quarter is mainly due to:

the negative impact of the non-recognition of tax benefits related to tax losses and temporary differences; and
the negative impact of of the permanent differences.

The effective income tax rate for the fiscal year ended December 31, 2019 is mainly due to:

the negative impact of the net non-recognition of tax benefits related to tax losses and temporary differences;
the negative impact of the net write-down of deferred income tax assets; and
the negative impact of the permanent differences .

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 23

CONSOLIDATED FINANCIAL POSITION

The total assets decreased by $1.9-billion in the fiscal year[(1)] , including a positive currency impact of $457 million related to foreign exchange. The $2.3-billion decrease excluding currency impacts is mainly explained by[(2)] :

a $1.2-billion net decrease in inventories in Aviation mainly due to deliveries of business aircraft, reset of production rates and disposal of businesses[(5)] ;
a $472-million decrease in investments in joint ventures and associates due to the sale of the Corporation’s remaining interest in ACLP(3);
a $447-million decrease in trade and other receivables;
a $432-million decrease in PP&E mainly due to disposal of businesses[(5)] and amortization;
a $259-million decrease in aerospace program tooling mainly due to amortization; and
a $141-million decrease in cash and cash equivalents. See the Free cash flow usage and the Variation in cash and cash equivalents tables for details.

Partially offset by:

a $736-million increase in contract assets mainly in Transportation.

The total liabilities and equity decreased by $1.9-billion in the fiscal year[(1)] , including a currency impact of $457 million. The $2.3-billion decrease excluding currency impacts is mainly explained by[(2)] :

a $1.1-billion decrease in contract liabilities;
a $651-million decrease in trade and other payables;
a $460-million decrease in provisions mainly due to disposal of businesses and reversal of onerous contract provision following the sale of the Corporation’s remaining interest in ACLP(3) and related aerostructures activities.
a $598-million decrease in equity mainly due to the remeasurement of defined benefits plans of $413-million;
a $137-million decrease in retirement benefit liability mainly due disposal of businesses[(5)] , offset by remeasurement of defined benefits plans;

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CONSOLIDATED ASSETS
(as at December 31; in millions of dollars)
Current assets Non-current assets
24,972
23,090
11,489 6,444
16,646
13,483
2019 2020
CONSOLIDATED LIABILITIES AND DEFICIT
(as at December 31; in millions of dollars)
Current liabilities
Non-current liabilities and deficit
24,972
23,090
9,657 6,263
16,827
15,315
2019 2020
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*The total assets and the total liabilities in the above graphs as at December 31, 2020 include $10.4-billion and $10.1-billion, respectively, related to Transportation, which are presented under Assets held for sale and Liabilities directly associated with assets held for sale. Refer to Note 31 - Discontinued operations in our Consolidated financial statements for further details.

Partially offset by:

a $697-million increase in long-term debt mainly due to the new secured term loan.(4)
(1) For the purpose of the Consolidated financial position explanations included in this section, assets and liabilities include assets and liabilities reclassified as Assets held for sale. See Note 31 - Discontinued operations in our Consolidated financial statements for further details.
(2) For the purpose of the Consolidated financial position explanations included in this section do not include the impact of the back-to-back agreements the Corporation has with ACLP related to certain government refundable advances and MHI related to certain assets and liabilities. Refer to Reshaping the Portfolio section in Aviation, Note 19 - Other financial assets.
(3) Refer to Note 29 - Disposal of investment in associate in our Consolidated financial statements for further details.
(4) Refer to Note 28 - Long-term debt in our Consolidated financial statements for further details.
(5) Refer to Note 30 - Disposal of businesses in our Consolidated financial statements for further details.

24 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

LIQUIDITY AND CAPITAL RESOURCES

Free cash flow [(1)]

Free cash flow usage[(1)]

		Fourth quarters	Fourth quarters	ended		Fiscal years	Fiscal years	ended
			December 31				December 31
		2020		2019		2020		2019
Net loss	$	(337)	$	(1,719)	$	(568)	$	(1,607)
Non-cash items
Amortization		166		129		510		422
Impairment charges on ACLP investments		—		1,578		—		1,578
Impairment charges (reversals) on PP&E and intangible
assets		17		—		42		(4)
Deferred income taxes		214		(173)		32		113
Gains on disposals of PP&E		(2)		(3)		(3)		(10)
Losses (gains) on disposal of investment in associate and
businesses		(667)		9		(1,286)		(730)
Share of income of joint ventures and associates		(18)		(81)		(110)		(128)
Share-based expense (income)		17		(4)		26		30
Loss on repurchase of long-term debt		—		—		—		84
Dividends received from joint ventures and associates		25		29		52		49
Net change in non-cash balances(2)		908		1,308		(1,516)		(477)
Cash flows from operating activities		323		1,073		(2,821)		(680)
Net additions to PP&E and intangible assets		(114)		(121)		(354)		(523)
Free cash flow(usage)(1)	$	209	$	952	$	(3,175)	$	(1,203)

(1) Non-GAAP financial measure. Refer to the Non-GAAP financial measures section for definitions of this metric.

(2) Refer to Note 35 - Net changes in non-cash balances, to our Consolidated financial statements for further details.

Cash flows from operating activities

The $750-million decrease in cash flows from operating activities for the fourth quarter is mainly due to:

lower net income before non-cash items ($346 million).
Partially offset by:
a negative period-over-period variation in net change in non-cash balances ($400 million) (see explanations below).

The $2,141-million decrease in cash flows from operating activities for the fiscal year is mainly due to:

lower net income before non-cash items ($1,105 million); and
a negative period-over-period variation in net change in non-cash balances ($1,039 million) (see explanations below).

Net change in non-cash balances

For the fourth quarter ended December 31, 2020, the $0.9-billion inflow is mainly due to:

a decrease in inventories in Aviation mainly due to deliveries of business aircraft in the fourth quarter;
a decrease in trade and other receivables; and
an increase in trade and other payables.
Partially offset by:
a decrease in contract liabilities in Aviation mainly driven by deliveries of business aircraft and lower order intake.

For the fourth quarter ended December 31, 2019, the $1.3-billion inflow was mainly due to:

a decrease in Transportation’s net contract assets due to deliveries and advances received on new and existing orders;
a decrease in inventories in Aviation mainly due to deliveries for business aircraft; and
an increase in trade and other payables in Aviation and Transportation.

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 25

For the fiscal year ended December 31, 2020, the $1.5-billion outflow is mainly due to:

a decrease in contract liabilities in Aviation and Transportation mainly driven by deliveries of business aircraft and lower order intake;
an increase in Transportation’s contract assets due to a ramp-up in production ahead of deliveries;
• a net decrease in trade and other payables; and
a decrease in other financial liabilities in Aviation and Transportation related to revised sales assumptions for forgivable loans and a decrease in embedded derivative liabilities.

Partially offset by:

a decrease in inventories in Aviation mainly due to deliveries of business aircraft; and
a decrease in trade and other receivables.

For the fiscal year ended December 31, 2019, the $477-million outflow was mainly due to:

an increase in inventories in Aviation mainly due to the ramp-up in production for business aircraft;
utilization of provisions in Transportation and Aviation;
an increase in trade and other receivables in Transportation and Aviation; and
a decrease in other liabilities mainly in Transportation.

Partially offset by:

an increase in contract liabilities in Aviation mainly related to advances received on new and existing orders for business aircraft;
an increase in trade and other payables in Aviation; and
a decrease in Transportation’s net contract assets.

Net additions to PP&E and intangible assets

		Fourth	Fourth	quarters			Fiscal	years
		ended December 31				ended December 31
		2020		2019		2020		2019
Additions to PP&E and intangible assets	$	(116)	$	(135)	$	(364)	$	(552)
Proceeds from disposals of PP&E
and intangible assets		2		14		10		29
	$	(114)	$	(121)	$	(354)	$	(523)

The $7-million decrease in net additions to PP&E and intangible assets for the fourth quarter is mainly due to lower investment in aerospace program tooling.

The $169-million decrease in net additions to PP&E and intangible assets for the fiscal year is mainly due to lower investment in aerospace program tooling.

26 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

Available short-term capital resources

We continuously monitor our level of liquidity, including available short-term capital resources and cash flows from operations, to meet expected requirements, including the support of product development initiatives and to ensure financial flexibility. In evaluating our liquidity requirements, we take into consideration historic volatility and seasonal needs, the maturity profile of long-term debt, the funding of product development programs, the level of customer advances, working capital requirements, the availability of working capital financing initiatives, the economic environment and access to capital markets. We use scenario analyses to stress-test cash flow projections.

Variation in cash and cash equivalents

		Fourth	quarters	quarters	ended		Fiscal	Fiscal	years	ended
			December 31					December 31
		2020			2019		2020			2019
Balance at the beginning of period/fiscal year	$	1,870	(1)	$	2,255	$	2,629	(1)	$	3,187
Cash flows from operating activities		323			1,073		(2,821)			(680)
Net additions to PP&E and intangible assets		(114)			(121)		(354)			(523)
Investments in non-voting units of ACLP		—			—		(100)			(350)
Net proceeds from disposal of investment in associate
and businesses		265			—		1,385			826
Capital injection in joint ventures and associates		—			(52)		—			(64)
Net proceeds from issuance of long-term debt		—			—		707			1,956
Repayments of long-term debt		(8)			—		(8)			(1,762)
Net change in short-term borrowings		11			(533)		742			—
Payment of lease liabilities		(16)			(31)		(93)			(112)
Dividends paid - preferred shares		(5)			(5)		(19)			(20)
Issuance of NCI		—			—		386			49
Dividends to NCI		—			—		(2)			(4)
Effect of exchange rates on cash and cash equivalents		96			47		(38)			130
Other		28			(4)		36			(4)
Balance at the end of period/fiscal year	$	2,450		$	2,629	$	2,450		$	2,629
Reclassified as assets held for sale(1)		(671)			(51)		(671)			(51)
Balance at the end ofperiod/fiscalyear	$	1,779		$	2,578	$	1,779		$	2,578

Available short-term capital resources

				As at
	December	31, 2020	December	31, 2019
Cash and cash equivalents excluding Transportation	$	1,779	$	2,089
Available senior secured term loan(2)		135		—
	$	1,914	$	2,089
Cash and cash equivalents from Transportation		671		540
Available Transportation revolvingcredit facilities(3)		618		1,296
	$	1,289	$	1,836
Available short-term capital resources	$	3,203	$	3,925

(1) Includes cash and cash equivalents from Transportation amounting to $671 million presented under Assets held for sale as of December 31, 2020, and $51 million from the aerostructures businesses presented under Assets held for sale as of December 31, 2019, respectively. Cash and cash equivalents from Transportation as of December 31, 2019 amounted to $540 million. Refer to Reshaping the portfolio section in Aviation section and Sale of Transportation Business section of this MD&A, Note 30 - Disposal of businesses and Note 31 - Discontinued operations to our Consolidated financial statements for more details on the transaction and the accounting treatments.

(2) Based on collateral available at December 31, 2020.

(3) Includes undrawn amount under Transportation’s €1,154 million unsecured revolving credit facility. This facility is no longer available for the Corporation following the sale of Transportation Business to Alstom on January 29, 2021. Refer to Note 36 - Credit facilities and Note 31 - Discontinued operations to our Consolidated financial statements for more details.

On January 29, 2021, Bombardier closed the sale of its Transportation Business to Alstom for net proceeds of approximately $3.6 billion, including approximately $600 million in Alstom shares.

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 27

On August 19, 2020, the Corporation closed the threeyear $1.0 billion senior secured term loan (the "Facility") with HPS Investment Partners, LLC, acting as administrative agent, collateral agent and the lead lender for a group that included investment funds and accounts managed by HPS Investment Partners LLC and Apollo Capital Management, L.P., or their respective affiliates, and Special Opportunities and Direct Lending Funds managed by Ares Management LLC. The Facility provides additional liquidity for working capital and general corporate purposes as the Corporation realigns production rates with current market conditions. The Facility has a minimum utilization of $750 million and a term of three years. The Corporation has the right to voluntarily prepay the outstanding amount of the Facility. In addition, the sale of Transportation requires the Corporation to make an offer to repay 50% of the then outstanding principal amount of the Facility. Drawings under the Facility bear interest at an agreed margin over the LIBOR references rate and are secured by a security interest in certain aviation inventory and related accounts receivable. There are no financial covenants under the Facility. $750 million was outstanding as at December 31, 2020 out of which $375 million was presented as current liabilities.

In response to the COVID-19 pandemic, we are taking several initiatives to manage liquidity. Refer to Impacts of COVID-19 pandemic section for more details.

==> picture [247 x 199] intentionally omitted <==

----- Start of picture text -----

AVAILABLE SHORT-TERM CAPITAL
RESOURCES
(as at December 31; in billions of dollars)
Cash and cash equivalents
Revolving credit facilities
Senior secured term loan
4.5 4.4
4.2
3.9
1.1 1.2 1.2 3.2
1.3
0.1
0.6
3.4 3.1 3.2
2.6 2.5
2016 2017 2018 2019 2020
----- End of picture text -----

Some totals do not agree due to rounding.

Transportation credit facilities

On January 29, 2021, the Corporation closed the sale of the Transportation Business to Alstom.

At December 31, 2020, Transportation had a revolving credit facility which was available for cash drawings for the general needs of Transportation. Under this facility, the same financial covenants were required to be met as for Transportation’s letter of credit facility. Transportation’s unsecured revolving credit facility amounted to €1,154 million ($1,416 million) as at December 31, 2020 and was available for cash drawings. The facility maturity was in May 2022 and bore interest at Euribor plus a margin. €650 million ($798 million) under Transportation’s facility was used as at December 31, 2020.

At December 31, 2020, Transportation also had a €75 million ($92 million) uncommitted Short Term credit facility. This facility was available to Transportation for cash drawings. This facility was unused as of December 31, 2020.

28 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

Letter of credit facilities

Letter of credit facilities are only available for the issuance of letters of credit. As these facilities are unfunded commitments from banks, they typically provide better pricing for the Corporation than credit facility that is available for cash drawings. Letters of credit are generally issued in support of performance obligations and advance payments received from customers.

At December 31, 2020, the Corporation’s letters of credit facilities were mainly in Transportation. Transportation was sold to Alstom on January 29, 2021. The details of these facilities at December 31, 2020 were as follows.

		Amount			Letters of	Amount
		committed		credit issued		available	Maturity
December 31, 2020
Transportation facility(1)	$	5,519	(2)	$	5,123 $	396	2023	(3)
Corporation excludingTransportation facility(4)		n/a			n/a	n/a	n/a
	$	5,519		$	5,123 $	396
December 31, 2019
Transportation facility(1)	$	5,052	(2)	$	4,846 $	206	2023
Corporation excludingTransportation facility(4)		n/a			n/a	n/a	n/a
	$	5,052		$	4,846 $	206

(1) Part of the disposal group in connection with the sale of Transportation business. Refer to Sale of Transportation business section of this MD&A and Note 31 - Discontinued operations to our Consolidated financial statements for more details on the transaction.

(2) €4,498 million as at December 31, 2020 (€4,498 million as at December 31, 2019).

(3) The facility has an initial three year availability period, when new letters of credit can be issued up to the maximum commitment amount of the facility, plus a one year amortization period during which new letters of credit cannot be issued. The final maturity date of the facility is 2023.

(4) The Corporation voluntarily cancelled the $361 million letter of credit facility in 2019 which was replaced by various bilateral agreements.

In addition to the outstanding letters of credit shown in the above table, letters of credit of $5,572 million were outstanding under various bilateral agreements as at December 31, 2020, out of which $5,471 million is related to Transportation ($4,395 million were outstanding as at December 31, 2019).

The Corporation also uses numerous bilateral bonding facilities with insurance companies to support Transportation’s operations. An amount of $3.0 billion was outstanding under such facilities as at December 31, 2020 ($3.8 billion as at December 31, 2019).

See Note 36 – Credit facilities, to the consolidated financial statements, for additional information.

Financial covenants

Transportation was sold to Alstom on January 29, 2021. As at December 31, 2020, Transportation was subject to various financial covenants under the Transportation letter of credit facility and its revolving credit facility, which were required to be met on a quarterly basis. Those facilities included financial covenants requiring minimum equity and a maximum debt to EBITDA ratio at the end of each quarter, all calculated based on Transportation stand-alone financial data. These terms and ratios are defined in the respective agreements and do not correspond to the Corporation’s global metrics as described in Note 37 – Capital management or to the specific terms used in the MD&A. In addition, Transportation was required to maintain a minimum liquidity varying between €500 million ($614 million) and €750 million ($920 million) at the end of each quarter, except for the quarter ending December 31, 2020. Minimum liquidity required is not defined as comprising only cash and cash equivalents as presented in the consolidated statement of financial position. For the quarter ending December 31, 2020, these financial covenants were amended prior to year-end in order to not apply for the fourth quarter. Transportation was in compliance with all covenants on a quarterly basis and as at December 31, 2020 and 2019 and January 1, 2019.

The Corporation regularly monitors these ratios to ensure it meets all financial covenants, and has controls in place to ensure that contractual covenants are met.

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 29

Future liquidity requirements

Our Aviation business requires capital to develop industry-leading products and to seize strategic opportunities to increase competitiveness and execute growth strategies. On an on-going basis, we manage our liabilities by taking into consideration expected free cash flow[(1)] , debt repayments and other material cash outlays expected to occur in the future. We take advantage of favorable capital market conditions when they materialize to extend debt maturity, reduce cost of funds and increase diversity of capital resources.

We continuously evaluate opportunities to strengthen our capital profile by improving leverage ratios, refinancing debt maturities, and reducing the overall cost of funds by diversifying sources of capital.

The weighted average long-term debt maturity was 3.4 years as at December 31, 2020. The $1,901 million of long-term debt due in 2021 is comprised of $375 million representing 50% of the outstanding principal amount of our three-year term loan to be repaid, at the discretion of the lenders, upon the sale of Transportation on January 29, 2021, €414 million ($508 million) due in May 2021, and $1,018 million due in December 2021. See Note 28 - Long-term debt, to the consolidated financial statements, for more details.

==> picture [262 x 180] intentionally omitted <==

----- Start of picture text -----

DEBT MATURITY PROFILE (NOTIONAL AMOUNT)
(as at December 31, 2020; in millions of dollars)
2,000
1,901
1,700 1,625
1,500
1,000
250
118
2021 2022 2023 2024 2025 2026 2027 2028- 2034
----- End of picture text -----*

Excludes other long-term debt amounting to $19 million as at December 31, 2020. See Note 28 - Long-term debt, to the Consolidated financial statements, for more details.

(1) Non-GAAP financial measures. Refer to the Non-GAAP financial measures section in Overview for definitions of these metrics and to the Analysis of results section and Liquidity and capital resources section for reconciliations to the most comparable IFRS measures.

Expected timing of future liquidity requirements[(1)]

								December	December	31, 2020
			Less than
		Total		1 year	1 to 3 years		3 to 5 years		Thereafter
Long-term debt(1)	$	10,111	$	1,901	$	3,325	$	2,500	$	2,385
Interest payments		2,730		699		1,010		616		405
Purchase obligations(2)(3)		3,518		2,773		730		15		—
Trade and other payables		1,611		1,611		—		—		—
Other financial liabilities(4)		1,347		184		334		163		666
Derivative financial liabilities		9		9		—		—		—
	$	19,326	$	7,177	$	5,399	$	3,294	$	3,456

(1) Includes principal repayments only; before the proceeds from the sale of Transportation.

(2) Purchase obligations represent contractual agreements to purchase goods or services in the normal course of business that are legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, variable or indexed price provisions; and the appropriate timing of the transaction. These agreements are generally cancellable with a substantial penalty. Purchase obligations are generally matched with revenues over the normal course of operations.

(3) Excludes Transportation.

(4) The carrying amount of other financial assets excludes derivative financial instruments, investments in financing structures, certain aircraft loans and the back to back agreement that the Corporation has with MHI related to lease subsidies. The carrying amount of other financial liabilities excludes derivative financial instruments, lease liabilities, lease subsidies and the back-to-back agreement that the corporation has with MHI related to the regional aircraft securitization program assets (RASPRO) and to certain aircraft loans.

30 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

The table above presents the expected timing of contractual liquidity requirements. Other financial assets include a back-to-back agreement that the Corporation has with ACLP related to certain government refundable advances. Other financial liabilities include government refundable advances. Under the respective agreements, the Corporation is required to pay amounts to governments at the time of the delivery of aircraft. Due to uncertainty about the number of aircraft to be delivered and the timing of delivery of aircraft, the amounts shown in the table above may vary. Required pension contributions have not been reflected in this table as such contributions depend on periodic actuarial valuations for funding purposes. See the Retirement benefits section of this MD&A for more details on contributions to retirement benefit plans. The amounts presented in the table represent the undiscounted payments and do not give effect to the related hedging instruments, if applicable.

The Corporation leases buildings and equipment. The maturity analysis of undiscounted lease liabilities, was as follows:

		As at December 31, 2020
Within 1 year	$	56
Between 1 to 5 years		132
More than 5years		311
	$	499

(1) Excludes Transportation.

Pro-forma net debt[(1)] is approximately $4.7 billion, which includes long-term debt of $10.1 billion, net of $1.8 billion cash on hand at Bombardier Inc. (excluding Transportation) as of December 31, 2020, and the approximately $3.6 billion proceeds from the Transportation sale. The Corporation intends to deploy available proceeds from the sale of Transportation towards debt pay down and continues to evaluate the most efficient debt reduction strategies.

(1) Non-GAAP financial measure. Pro-forma net debt is defined as long-term debt of $10.1 billion less cash and cash equivalents at Bombardier Inc. (excluding Transportation) of $1.8 billion as of December 31, 2020 less net proceeds of approximately $3.6 billion from the sale of Bombardier Transportation, which includes approximately $600 million of Alstom shares.

Creditworthiness

In the context of the COVID-19 pandemic, in March 2020, Standard & Poor’s Rating Services changed their issuer credit rating from B- to CCC+. In April 2020, also in the context of the COVID-19 pandemic, Moody’s Investors Service, Inc. changed their corporate family rating from B3 to Caa2. In January 2020, also in the context of the COVID-19 pandemic, Fitch Ratings changed their long-term issuer default rating from B- to CCC+ and in March they changed it to CCC from CCC+. On January 15, 2021, Fitch announced plans to withdraw its ratings of Bombardier Inc. on or about February 15, 2021. The reason for the withdrawal is purely commercial since Fitch had provided an unsolicited rating since 2016.

Credit Ratings

	Investment-grade rating	Bombardier Inc.’s issuer rating	Bombardier Inc.’s issuer rating
		February 10, 2021	December 31, 2020
Fitch Ratings Ltd.	BBB-	CCC	CCC
Moody’s Investors Service, Inc.	Baa3	Caa2	Caa2
Standard & Poor’s RatingServices	BBB-	CCC+	CCC+

BOMBARDIER INC. / 2020 FINANCIAL REPORT / OVERVIEW 31

CAPITAL STRUCTURE

Throughout 2020, the main focus of the Corporation’s capital management was the closing of sale of business transactions in order to allow deleveraging.

The sale of the Transportation business completed on January 29, 2021 is expected to have a significant impact on Bombardier’s capital management, since the Corporation intends to deploy available proceeds from the sale of Transportation towards debt pay down and continues to evaluate the most efficient debt reduction strategies. CDPQ’s convertible shares were eliminated since they were in Transportation.

While the COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant economic uncertainty and disruption of financial markets, the Corporation has responded with adjustments to its Aviation operations, production rates and workforce, and prudently managed liquidity in order to adapt to the current environment.

While the Corporation is currently reviewing its strategy for deleveraging and ongoing capital management, as the markets and business recover, the Corporation’s objective is to restore and grow earnings to achieve a lower net debt to EBITDA multiple. The Corporation’s objective is to achieve this by executing on its cost reduction plan to align its infrastructure to current market, by progressing on the Global 7500 learning curve and through continued growth of the service and support network. The Corporation expects to prioritize debt repayment ahead of major capital investments.

In addition, the Corporation separately monitors its net retirement benefit liability which amounted to $1.5 billion as at December 31, 2020 ($2.3 billion as at December 31, 2019). The measurement of this liability is dependent on numerous key long-term assumptions such as discount rates, future compensation increases, inflation rates and mortality rates. In recent years, this liability has been particularly volatile due to changes in discount rates. Such volatility is exacerbated by the long-term nature of the obligation. Furthermore, the net retirement benefit liability has decreased meaningfully as a result of the business sales, including Transportation. The Corporation closely monitors the impact of the net retirement benefit liability on its future cash flows and has introduced significant risk mitigation initiatives in recent years in this respect such as buying out annuities on behalf of pensioners. See the Retirement benefits section for further details.

In order to adjust its capital structure, the Corporation may issue or reduce long-term debt, make discretionary contributions to pension funds, repurchase or issue share capital, or vary the amount of dividends paid to shareholders.

32 BOMBARDIER INC. FINANCIAL REPORT - FISCAL YEAR ENDED DECEMBER 31, 2020

RETIREMENT BENEFITS

Bombardier sponsors several Canadian and foreign retirement benefit plans consisting of funded and unfunded defined benefit pension plans, as well as other unfunded defined benefit plans. Funded plans are plans for which segregated plan assets are invested in trusts. Unfunded plans are plans for which there are no segregated plan assets, as the establishment of segregated plan assets is generally not permitted or not in line with local practice. After the divestitures of businesses to Spirit on October 30, 2020 and to Alstom on January 29, 2021, the vast majority of Bombardier pension plans are now in Canada and the U.S.

Pension plans are categorized as Defined benefit (DB) or Defined contribution (DC). DB plans specify the amount of benefits an employee is to receive at retirement, while DC plans specify how contributions are determined. As a result, there is no deficit or surplus for DC plans. Hybrid plans are a combination of DB and DC plans.

In Canada and the U.S., since September 1, 2013, all new non-unionized employees join DC plans (joining DB or hybrid plans is no longer an option). Employees who are members of a DB or hybrid plan closed to new members continue to accrue service in their original plan.