Bombardier Exits Commercial Aviation, Ending Bold Bet On Promising Jet
The Canadian plane and train maker sold its minority stake in the A220 jet, formerly known as the CSeries, to Airbus SE for $600 million, and said it would take a $1.6 billion charge on the programme.
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Bombardier exited commercial aviation on Thursday, selling a loss-making plane programme that ended its high-stakes gamble on a new jet that once drove it to the brink of bankruptcy.
The Canadian plane and train maker sold its minority stake in the A220 jet, formerly known as the CSeries, to Airbus SE for $600 million, and said it would take a $1.6 billion charge on the programme.
Bombardier once threatened to reshape global aviation with the first all-new narrow-body jet in 30 years, triggering a race by major rivals to develop their own new jets.
But the C$6 billion programme was beset with delays and cost overruns. Bombardier, which required government bailouts in recent years as it struggled to fund the programme, finally sold a majority stake to Airbus in 2017 for one Canadian dollar.
The latest deal gives Airbus a 75% stake in the A220 programme and the Canadian province of Quebec will own 25%. It also allows Bombardier to avoid future capital investments of about $700 million.
Quebec, which acquired half of the programme in 2015 for $1 billion, said it would not invest further in the joint venture.
"Yes, the aerospace sector has experienced some turbulence these past few years but I think this will soon be behind us," Quebec Economy Minister Pierre Fitzgibbon told reporters in Quebec City.
"I think this step was essential for the firm to continue its activities."
Bombardier has been shedding businesses to turn itself around. Chief Executive Alain Bellemare told analysts on Thursday that the "clean up over the past five years" would continue.
"We have options and we are going to continue looking at our options to see if there (are) ways that we can accelerate the deleveraging phase of the turnaround plan," he said on a conference call.
The company is weighing a possible sale of its remaining business jet or rail divisions.
Bombardier's shares were flat at midday after earlier dropping 9% on disappointment the company did not announce a deal to sell its rail unit to France's Alstom.
Bombardier has faced higher rail costs due to a few challenging contracts and has $9.7 billion in outstanding bonds according to Refinitiv data.
The company forecast a near-positive cash flow for 2020. Its cash flow was a negative $1.20 billion in 2019.
It forecast 2020 revenues of about $15 billion, compared to $13.7 billion in 2019, and below analyst forecasts for $18.18 billion in 2020, according to IBES data from Refinitiv.
The company sees 35-40 deliveries of its flagship Global 7500 business jet in 2020, which list for $73 million each.
(Reuters)