Published: Sun, February 16, 2020
Markets | By Otis Pena

Bombardier exiting commercial plane business due to massive debt

Bombardier exiting commercial plane business due to massive debt

Struggling Bombardier has divested itself of its minority share of the Airbus A220 program, moving it another stop closer to leaving aviation altogether.

Under an agreement with Airbus and Canada's Quebec provincial government, Bombardier said it will transfer its shares to Airbus and the provincial government due to over 9 billion USA dollars in debt.

The deal increases Airbus's share in the A220 program to 75% from just over 50%, while Quebec's stake rises to 25% from 16%.

Bombardier sold its Belfast operation to U.S. company Spirit AeroSystems previous year and a spokesperson for the firm said the "Airbus A220 programme's new ownership structure has no impact on our Belfast site's wing manufacture and assembly for this aircraft".

The news comes as Bombardier reported a loss of US$1.61 billion for 2019 and rumours continue to swirl around the potential sale of one of its two main divisions - trains and business jets.

Bombardier, which reports its financial results in US dollars, saw revenue fall three per cent in 2019 when compared to a year ago, down to $15.8 billion.

Montreal-based Bombardier ceded control of the A220 program to Airbus in 2018 for a token C$1 as part of broader efforts to improve its finances. Ranging from 100 to 150 seats, the A220 is highly complementary to Airbus' existing single-aisle aircraft portfolio, which focuses on the higher end of the single-aisle business (150 to 240 seats).

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While high-margin jet deliveries continue to ramp up, analysts point to volatility in the luxury market of private planes compared to the relatively stable field of railcar construction, which is fuelled by government infrastructure projects. "The strategy was always to exit commercial aircraft while protecting jobs". It also allows Bombardier to avoid future capital investments of about $700 million.

"The CSeries was a cash drain, ' Bombardier chief executive Alain Bellemare said on February 13".

David Chartrand, Quebec co-ordinator for the International Association of Machinists and Aerospace Workers, deemed the deal "the best scenario under the circumstances".

Airbus and the government of Quebec now have sole ownership of the program. The effort left the company with a United States $9 billion long-term debt it has been struggling to pay off.

Quebec Economy Minister Pierre Fitzgibbon called the new deal a "win-win" for all partners.

The company is weighing a possible sale of its remaining business jet or rail divisions.

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