Bombardier Workers Ratify New Contract

 - June 28, 2022, 12:18 PM

Bombardier announced that it would pay down more debt after workers in Dorval and Saint-Laurent, Québec ratified a new five-year collective bargaining agreement, following a job action earlier this month. Members of the International Association of Machinists and Aerospace Workers (IAMAW) Local 712 employed on the company’s Challenger business jet programs rejected a prior offer, with about 1,800 walking off the job in Montreal for a “study day” on June 13.

More than 75 percent of Local 712 members voted against the old offer, which called for a general increase of $1.85 per hour first-year pay increase with 3 percent in the second and third years, a 0.5 percent bump above the consumer price index “within a salary progressions of 1.5 percent to 2.5 percent” in the out years. The offer also called for the end of certain subcontract activities, placed limits on outsourcing, and increased job protections.

The newly accepted offer features an 18.5 percent pay raise over five years. Bombardier said the company “is pleased with the results of the vote and is committed to working closely with IAMAW Local 712 member employees and their union leadership to maintain its position as an industry leader.” 

Subsequently, Bombardier announced that it would pay down another $350 million in debt via repurchase of a portion of senior notes due in 2024, 2025, and 2027 that carried interest rates of between 7.5 to 7.875 percent. 

“As of the Early Settlement Date [June 29, 2022], Bombardier will have repaid over $750 million of debt, resulting in almost $60 million of incremental interest savings on a per annum basis since the start of 2022. This puts our progress to date ahead of where we thought we would be after 18 months as a standalone business jet company,” said Bombardier executive v-p and CFO Bart Demosky.

Bombardier, once a diversified transportation conglomerate, has significantly consolidated in recent years. It disposed of its commercial jet and turboprop aircraft programs, shuttered its Learjet business jet line, and sold its aerostructures, commercial commuter jet, turboprop, and rail car divisions over the last several years in an effort to reduce a total debt approaching $10 billion and stave off bankruptcy.

The company’s debt ballooned since 2008 as it spent more than $6 billion attempting to bring its CSeries airliner to market. That program was acquired by Airbus between 2017 and 2020 for $591 million. Despite those moves, Bombardier’s long-term debt remained above $6.6 billion at the end of this year’s first quarter.

Earlier this month, the company initiated a 25 to 1 reverse stock split to reduce its number of shares outstanding, boost its share price, and prevent delisting from the Toronto Stock Exchange (TSX), which requires a stock to maintain a price of at least $1. The stock was trading this morning at $19.