Bombardier said it may end its partnership with Airbus in the A220 airliner and hinted it could even sell its business jet division to pay off debt and prop up its sagging train business. The company cut its earnings projections for 2019 for the second time prompting a stock sell-off that reduced share prices by 32 percent in one day and raised concerns about its long-term viability. In that announcement, the company said revised estimates extend the break-even point of the A220 and lower its overall profitability. At the same time, Airbus, the majority partner with 50.1 percent, wants to ramp up production as the new airliner attracts orders and that would require proportional investment from Bombardier, which holds about 31 percent of the program. The Quebec government also has 19 percent.
“We are actively pursuing alternatives that would allow us to accelerate our debt paydown. The objective is to position the business for long-term success with greater operating and financial flexibility,” it said in a news release. According to analysts and the market, that means it will be selling off assets to get out from under the $9 billion in debt that it had accumulated by the end of last year. The train business is considered its core so that leaves the business jet division, the last of several aviation enterprises remaining after it sold off its waterbomber, regional turboprop and regional jet divisions in the last two years. In 2017, Airbus essentially rescued the former CSeries program, which had depleted Bombardier’s resources through delays and overruns. The efficient and customer-friendly airliner, since renamed the A220, has gained some market traction, necessitating more production.
Even if it ditches the A220, analysts fear the savings won’t be enough and the next step would be selling off the business jet division. The company recently certified its latest generation of large-cabin bizjets, the Global 5500, 6500 and 7500 models, and they have a healthy order book. It recently announced it would build a massive production facility at Toronto’s Pearson International Airport to build the Globals and its legacy Challenge line after selling its private airport and factories in midtown Toronto for residential and commercial development. Business jet analyst Brian Foley wrote in Forbes that it might be hard to find a buyer for the bizjet business. Gulfstream and Dassault don’t need it, Embraer could use it but is in the middle of forming an alliance with Boeing and that leaves Textron, which he said prefers to buy companies that are distressed.
Textron cancelled the Columbia development program. They have no product at the top end. Might be a good match. Might not.
Uh OH !!! Doesn’t Bombardier own Rotax ??
C Series to Airbus, Q Series to Viking, Training to CAE, Downsview Airport to property developers, CRJ to MHI, Structures to Spirit and EWIS to Latécoèr. This fire-sale has generated $Bns for Bombardier Inc. They’ve bought a part of Triumph structures and supposedly are building a new purpose built factory at Pearson Airport, Toronto (in doubt now?) which combined is a fraction of the revenues from the fire-sale.
Bombardier Business Aircraft needs to be bought by an entity not constrained by a parochial family that owns 50.1% of the business. Rumour has it that recently staff who were deemed essential to the business were given unsolicited pay rises without the knowledge of their peers………meanwhile no doubt the latest financial reporting will result in a 0% bonus (which is used to bolster lower than industry standard salaries) for the non-unionized staff below management level, be interesting to see how manager’s level up get rewarded for this……..staff are rumored to be leaving at a pace to MHI, De Havilland etc for much better terms and conditions.
“The efficient and customer-friendly airliner, since renamed the A220, has gained some market traction, necessitating more production. The company recently certified its latest generation of large-cabin bizjets, the Global 5500, 6500 and 7500 models, and they have a healthy order book.”
“We are actively pursuing alternatives that would allow us to accelerate our debt paydown. The objective is to position the business for long-term success with greater operating and financial flexibility,”
Makes perfect business sense to get rid of well selling airplane divisions to prop up (no pun intended) the ailing train business “to position the business for long-term success”. Trains and electric VTOLS are the mass transportation solution for the future not airliners and biz/jets. Looks like the Canadians are following the money flow charts from Amtrak and Joby Aviation.
If you have healthy sales backlogs use the profits to reduce debt over time. Selling your grandmother may get you the car paid off but Grandma was a key to your success. Hunker down, pay of debt with profits and learn how to deal with the 21st century business climate. Cutting and running is a short term solution that will leave you with an empty bag sooner or later.