Bombardier Mulls Exit from A220 Program

 - January 16, 2020, 12:37 PM
Airbus delivered Air Canada's first A220-300 in December. (Photo: Airbus)

Bombardier on Thursday signaled a possible complete retreat from the commercial aircraft business in a preliminary fourth-quarter earnings report that anticipates a $130 million EBIT loss during the period. The potential exit from the Airbus A220 program, in which the company still holds a minority stake, would follow the company’s decision last year to sell its CRJ regional jet program to Mitsubishi and its aerostructures manufacturing business in Belfast to Spirit Aerosystems. The Canadian company said it expected both transactions to close by mid-year and generate $1.1 billion in cash.

“While the A220 program continues to win in the marketplace and demonstrate its value to airlines, the latest indications of the financial plan from [Airbus Canada Limited Partnership] calls for additional cash investments to support production ramp-up, pushes out the break-even timeline, and generates a lower return over the life of the program,” Bombardier said in the report. “This may significantly impact the joint venture value. Bombardier will disclose the amount of any write-down when we complete our analysis and report our final fourth quarter and 2019 financial results.” 

In a statement to AIN, Bombardier said the joint venture remains under review by the partners and that it would release more information on February 13.

Bombardier has invested a total of $6 billion in the former C Series program since its launch in 2008. After several delays, the narrowbody airliner won Transport Canada certification in December 2015, not long after a first round of talks with Airbus over a possible combination fizzled when Airbus’s due diligence failed to find a compelling case for it. Finally, in October 2017, Bombardier agreed to hand over 51 percent of the loss-making program to the European airframer for no cash consideration while retaining a 31-percent stake in what would become the C Series Aircraft Limited Partnership (CSALP). The Quebec provincial government took the remaining 19 percent.

Under the deal, which closed in July 2018, Bombardier agreed to fund cash shortfalls of up to $925 million over the course of three and a half years, and the partners' Class A shareholders would share the cost of any excess shortfall. The deal also allowed for Bombardier to force Airbus to take its entire stake in the program in 2026 or Airbus could oblige Bombardier to sell the stake.

Since the sale of the program, Airbus changed the name of the airplane to the A220 and decided to move some production to its U.S. plant in Mobile, Alabama. Assembly of A220s began in Mobile last August, while primary production remained in Mirabel, Quebec. In a statement issued Thursday, Airbus said it remains committed to the A220 and would continue to fund the program “on its way to break even.”