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Airbus Buys Bombardier Out Of Commercial Aviation For $591 Million

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Airbus and the government of Québec have become the sole owners of the A220 program with the exit of Bombardier, which developed the plane but was driven to the brink of bankruptcy by the spiraling costs of the ambitious program. The deal marks Bombardier’s exit from commercial aviation, with more divestitures expected as the Canadian manufacturer tries to reduce its crushing debt load of $9.7 billion.

Bombardier will receive $591 million, net of adjustments, for its stake in the A220 program, of which $531 million was paid at closing with $60 million to be paid in installments through 2021. Bombardier also said the deal will allow it avoid paying roughly $700 million it would have been on the hook for to fund an expansion of production of the 100- to 150-seat single aisle plane.

Bombardier gave Airbus a 50.01% share in the program, formerly known as the CSeries, in 2017, to stem the financial bleeding. The cost of developing the plane had almost doubled to $6 billion and sales had been disappointing amid a fierce competitive response by Airbus and Boeing.

Through this transaction, which had immediate effect, Airbus holds 75% of Airbus Canada. The Government of Québec has increased its holding to 25% without further cash investment. Airbus can redeem the remaining government stake by 2026.

Airbus has also acquired Bombardier’s work packages for the A220 and A330 which will be transferred to Airbus subsidiary Stelia Aerospace in Québec, securing employment for 360 people. In all, Airbus will employ over 3,300 people in Québec.

Bombardier also announced a $1.7 billion loss for the fourth quarter and a $1.6 billion loss for the full year due to problems in its rail division.

Following the sale of its Q400 turboprop line to Viking Air and of its CRJ regional jets to Mitsubishi Heavy Industries, the deal marks Bombardier’s exit from commercial aviation. “We are incredibly proud of the many achievements and tremendous impact Bombardier had on the commercial aviation industry,” said Bombardier CEO Alain Bellemare. “We are equally proud of the responsible way in which we have exited commercial aerospace, preserving jobs and reinforcing the aerospace cluster in Québec and Canada.”

François Legault, the Premier of Québec, said: “We have succeeded in protecting paying jobs and the exceptional expertise developed in Québec, despite the major challenges we faced in this regard when we took office. ... By opting to strengthen its presence here, Airbus has chosen to focus on our talents and our creativity.”

Airbus expects the single-aisle market to continue growing, up to 70% of projected global future demand for aircraft. At 100 to 150 seat capacity, the A220 complements Airbus’ single aisle aircraft with capacity from 150-240 passengers.

The A220 program has proven successful for Airbus so far. Airbus reports total cumulative net orders for the aircraft have increased by 64% from when the European airframe manufacturer first acquired the program in July 1, 2018, resulting in net orders of 658 units as of the end of January. A total of 107 A220 aircraft are currently in service with seven airlines on four continents. In 2019, Airbus delivered 48 A220s and plans further ramp-up of production.

At the Singapore Air Show, Airbus announced that it had signed an Memorandum of Understanding with Green Africa Airways, Nigeria’s Lagos-based airline for 50 A220s.

Boeing’s planned acquisition of a majority stake in Embraer’s commercial aviation unit, which would help the U.S. manufacturer compete in the regional space with Airbus’ broader narrow-body catalog, has gained approval in Brazil but is still facing anti-trust scrutiny in the EU.

Bombardier is also reported to be in talks to sell its rail division to Alstom and its business jet division to Textron.

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