Feds lend Bombardier $372.5 million

By Ken Pole | February 8, 2017

More than a year after Bombardier Inc. asked the federal government to support its aerospace division, a four-year loan package worth $372.5 million was announced Feb. 7.

Most of the money is evidently earmarked for continued development of the Global 7000 long-range “four suite” business jet, first announced in 2010 and scheduled for entry into service in the second half of 2018.

The remainder will support continued development of the narrow-body C Series passenger jets, which entered service last year. Swiss International Air Lines was the launch customer for the CS100 last July and airBaltic inaugurated the larger CS300 into commercial service in December.

Bombardier has received at least 360 firm C Series orders, including from Air Canada and Delta Air Lines, and few delivery slots are now available in the early production run. C Series production will ramp up to more than 100 aircraft annually by the end of this decade.

“Bombardier plays a vital role, both as an anchor employer and an innovation leader,” said Innovation, Science and Economic Development Minister Navdeep Bains during a news conference inside a Bombardier hangar in Dorval, Que. “The government . . . is proud to invest in research and development activities that secure Canadian jobs, while enabling Bombardier to grow as a globally competitive company.”

Bains is already on record as saying that in return for federal support, Bombardier would have to keep its head office and key operations in Canada.

“We want good-quality jobs,” he said on Feb. 7. “We want to focus on research and development and we want to set up the company for long-term success.”

While the federal loan falls well short of the $1 billion investment the company had sought–after the Quebec government kicked in two US$500-million payments in return for a 49.5 per cent stake in the C Series program–Bombardier CEO Alain Bellemare said it “gives us the additional flexibility we were looking for to weather any near-term market challenges and the flexibility to look at future programs . . . which are focused on developing the most efficient, reliable and environmentally-friendly aircraft in the world.”

Brazil–with the support of its native aircraft manufacturer, Embraer–has requested consultations with the Canadian government at the World Trade Organization (WTO) to discuss government subsidies to the C Series program.

“The subsidies that the Canadian company has already obtained and continues receiving from the Canadian government have not only been fundamental in the development and survival of the C Series program, but have also allowed Bombardier to offer its aircraft at artificially low prices,” said Paulo Cesar Silva, Embraer’s CEO. “It is essential to restore a level playing field to the commercial aircraft market and ensure that competition is between companies, not governments.”

Back in Ottawa on Feb. 8, Bains said he was not worried about the prospect of a WTO challenge. “The investment that we made came out of the Strategic Aerospace Defence Initiative,” he told reporters outside the House of Commons. “This is a program that we’ve had for many years; and so therefore, this is consistent with government program funding.”

Brazil’s request for WTO consultations is the first stage of the proceeding and will allow access to additional details concerning the financial support provided to Bombardier.