Big order fails to halt CRJ rate cut

 - December 29, 2009, 10:12 AM

Conversion of a letter of intent into a firm order for 22 CRJ700s by American Airlines this month failed to save the jobs of more than 600 employees at Bombardier Aerospace last month, as the company moved ahead with plans to cut CRJ production rates for its 2010 fiscal year.

Although during the company’s third-quarter conference call last month Bombardier Aerospace president and CEO Pierre Beaudoin and COO Guy Hachey declined to offer precise production rate guidance, delivery trends for 2009 already appeared to show a distinct deceleration due to delays in customer financing. Bombardier delivered 42 airplanes during the first three fiscal quarters of this year, but just 12 during its third fiscal quarter, equating to four per month. By contrast, it delivered seven CRJs in January 2009 alone.

Nevertheless, “The rate reduction hasn’t happened yet,” said Hachey. “There are other factors right now with our customers obtaining financing that are…the aircraft are actually built in some cases…We don’t give guidance for the following year until the end of the year, so on the CRJs we’ll give you some visibility on that here at the end of Q4.”

The layoffs, scheduled to start this month and last through the first two quarters of the year, raise the total number of job cuts during the 2009 fiscal year, which ends January 31, to nearly 5,000. Bombardier estimates that severance payments will approach $10 million.

“There are not enough projected CRJ aircraft sales to maintain the current production plans,” said Hachey. “Although we are in discussions with several airlines, we had to finalize our aircraft delivery schedule for next year.”

Originally planning to lay off 715 people, Bombardier agreed with unionized workers in Mirabel to reduce work weeks to four days, saving some 110 jobs. A federal employment insurance program will pay employees for the fifth day at a slightly lower pay rate, pending approval by the central government in Ottawa. Hachey said the deal affects all production employees in Mirabel, while certain engineering support personnel will continue to work five days.