Bombardier is getting out of the commercial aviation business, as the company moves to pay down its massive debt.
The Quebec-based plane and train maker said late Wednesday that it has sold its remaining stake in the A220 program — formerly known as the C Series — to Airbus.
Bombardier has been reorganizing its business in an effort to pay off a multibillion-dollar debt. It released its financial results for 2019 on Thursday. Bombardier currently has more than $9 billion US worth of debt on its books, against annual revenues of just over $15 billion.
The company posted an annual loss of $1.6 billion for the fiscal year, which is why the company is moving to sell off assets to shore up its balance sheet.
“We are looking at our options,” CEO Alain Bellemare said. “As you can understand, it’s very sensitive.
“The reason why we’re looking at strategic options is to accelerate deleveraging of the business — the strategy was always to exit commercial aircraft,” said Bellemare, who has been CEO since 2015.
Under the deal, Airbus now owns 75 per cent of Bombardier’s commercial aviation business. The Quebec government, which is not injecting any new money into the program, owns 25 per cent.
Airbus will pay Bombardier $591 million US for the stake. The deal means Bombardier will no longer be required to make investments of approximately $700 million US into the program.
The deal also includes a three-year guarantee of the jobs belonging to 360 people who construct the plane’s cockpits at the plant in the Montreal borough of Ville Saint-Laurent. After that, they will be transferred to Mirabel, Que.
In all, Airbus said the deal secures a total of 3,300 jobs in Quebec.
Bombardier said in January that it was “reassessing its ongoing participation” in its partnership with Airbus to manufacture the A220.
Despite the Quebec government’s $1.3-billion investment in the C Series in 2016, sales of the planes were initially slow, leading Bombardier to sell a controlling stake of the C Series program to Airbus in 2018 for $1. In the year before that deal went through, Bombardier said the commercial aviation unit was burning through more than $1 billion a year, and posted a loss of more than $400 million.
At the time, the deal included a clause that allowed Airbus to buy the entire business at “fair market value” within the next seven years.
While A220 orders have since started rolling in, Bombardier would need to inject more money into the program to ramp up production.
Quebec Premier François Legault has ruled out investing more government money in the A220 program, but Economy Minister Pierre Fitzgibbon said that he wants to protect Quebec’s investment in the plane.
Refocusing core business
The company has made a slew of moves recently to refocus on its core business, the definition of which has become something of a moving target.
In 2018, the company sold its Q Series turboprop business to Longview Aviation.
Then about a year ago, Bombardier sold plane-making factories in Ireland and Morocco and streamlined its various private jet brands including Global, Challenger, Learjet and the CRJ into one company.
It later sold part of that business, CRJ, to Mitsubishi in the summer of 2019. The remaining private jet business appears to be the core of what’s left at the company.
On Wednesday, French media reported that Alstom was preparing to finalize an offer to acquire Bombardier Transportation, which includes the business of making rail and subway cars.
“They have cashed out of the C series,” analyst Alexander Robert Medd of Bucephalus Research said of the company on Thursday, “and now it appears the train business is up for sale. Alstom may be the only bidder.”
As recently as last week, the company was in talks with the Rhode Island-based Textron — which owns Cessna and Bell Helicopters — regarding the sale of its remaining business jet division.