Bombardier contemplates leaving A220 program

Avatar for Skies MagazineBy Skies Magazine | January 17, 2020

Estimated reading time 3 minutes, 19 seconds.

Bombardier has warned investors that it may exit its joint venture with Airbus to produce the A220 airliner (formerly the C Series).

Frederick K. Larkin Photo
Airbus has delivered 105 aircraft out of 600 total orders since taking over the A220 program. Frederick K. Larkin Photo

In a preliminary fourth-quarter earnings report, the Canadian OEM said it’s anticipating a US$130 million loss for the period, which may force it to sell off assets in order to pay down debt – one of which is its stake in the commercial aviation venture.

In the report, Bombardier remarked that while the A220 program “continues to win in the marketplace and demonstrate its value to airlines,” the Airbus Canada Limited Partnership (ACLP) – the name of its joint program with Airbus – had made the call for additional cash investments to support production ramp-up, in turn extending the timeline for the program to break even and potentially generating a lower profit-margin over the life of the partnership.

“With its exit from commercial aerospace, Bombardier is reassessing its ongoing participation in ACLP,” the company said in the statement.

The partnership began in 2017, when Airbus announced it would be acquiring a 50.01 per cent stake in Bombardier’s C Series commercial airline program, while Bombardier retained a 31 per cent stake and Investissement Quebec got the remaining 19 per cent. After the sale, Airbus changed the name of the aircraft to the A220, and opened up a second production facility in Mobile, Ala.

Originally, Bombardier agreed to fund up to $925 million to the A220 program over a three-and-a-half year span. Airbus Photo

In the original deal, Bombardier agreed to fund the program with up to $925 million over a three-and-a-half-year span. Since Airbus’s acquisition of the program, the company has delivered 105 aircraft out of 600 total orders.

Now, Bombardier is contemplating extricating itself from the program entirely, even though it’s invested $6 billion into the A220 venture, in a effort to shed further costs – an announcement that sunk the company’s stock by nearly 32 per cent on the Toronto Stock Exchange Jan. 16. As a result, Moody’s Investors Services — an American credit rating agency — changed Bombardier’s rating outlook from stable to negative.

Even more surprisingly, the statement is coming at the same time as Air Canada celebrates the entry into service of its first A220-300.

All of this comes after a four-year stretch that saw the Canadian OEM sell off most of its aviation assets in a turnaround plan aimed at leveling off costs, leaving the company with only its rail and business aviation divisions.

In its preliminary fourth-quarter financial report, the company also said it will be providing additional information when it reports its 2019 financial results on Feb. 13.

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1 Comment

  1. Hope Bombardier can partner up with an American or North American (Mexican, S. American), European, Asian, or perhaps another continental manufacturer I’m not aware of? (aeronautical middleweight) and maintain leverage in either the passenger or commercial aviation sector. Better than completely divest itself from Industry, after 30+ years. Canada should have both the economic, strategic and political (even against US/European interest), and solid base leadership, stake-oldership labour force to keep it in the game, even as a periphery player, or secondary, to the Big 3

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