SOURCES: Bombardier to Leave A220 Partnership

On Friday February 7th, reports started the surface that Canadian aerospace giant Bombardier would be selling their shares in the A220 partnership to Airbus, the majority shareholder in the partnership. In addition, Bombardier plans on selling the divisions of their company that supply parts to the A220 plane. These moves would continue a line of divestitures in the aerospace industry buy Bombardier due to heavy debt loads caused by the development of the C-Series jet, which is now the A220.

C-Series

Bombardier spent billions of dollars developing the C-series family of Jets for the regional 100 to 150 seat plane market. It struggled to gain market share right out of the gate but seems to be finding its way in the market when Delta Airlines ordered 75 of the Jets as the American launch customer for the airliner.

That is when Boeing got involved. They launched a trade dispute with the US government claiming that Bombardier had received illegal subsidies from the Quebec government and was dumping their plane at a loss on the American market therefore harming Boeing and their market share. After the US government agreed with Boeing’s argument initially and Levy day 300% tariff on the plane, Bombardier, facing certain death of the jetliner program, sold a majority stake in the plane to Airbus, who in exchange committed it’s vast network of suppliers, manufacturing expertise, and sales experience and network to the plane. Airbus also committed to building The A220 bound for US Airlines in Mobile Alabama, and it’s currently finishing a final assembly line in Mobile to accommodate that production.

CRJ program

Because the partnership with Airbus on the A220 did not include the assumption of any of the previous debt associated with the development of the jetliner, and a commitment by Bombardier to defray the operating expenses of the partnership for the first three years up to a billion dollars plus sharing the operating losses of the partnership on top of that, Bombardier was facing a mounting debt obligation that would be difficult for them to pay back considering they had other divisions that were also losing money.

Also because Bombardier was facing the daunting and expensive challenge of revamping their other regional jet program, the CRJ, which competes in the 50 to 75 seat plane market, Bombardier decided to sell that program in its entirety to Mitsubishi who needed a maintenance repair and overhaul and parts and distribution networks for their new regional j et the MRJ or SpaceJet as it has since been named. Mitsubishi decided that it would be cheaper and more efficient for them to purchase the these Networks from Bombardier related to the CRJ program then build their own network.

Belfast wing factory

As a continued effort to raise cash for debt obligations and shed unprofitable divisions, bombardier put up their wing factory for sale in Belfast Northern Ireland that builds wings for the A220 program. This opportunity came at a good time for kansas-based Spirit Aerosystems, who was looking to diversify their portfolio of aviation business to offset production slowdowns and loss of revenue from the grounding of the Boeing 737 Max after two deadly plane crashes. Spirit Aerosystems bought this factory for around a billion dollars and will now become the supplier for the wings of the A220 as well as the Global 7500 that Bombardier still makes.

A220

It is unclear at what valuation the A220 partnership shares will be sold at, as negotiations are still being finalized. According to Canadian Aviation website FliegerFaust.com the sale will include all of Bombardier’s shares in the A220 partnership as well as the remaining divisions of Bombardier that are suppliers for the 220 program. This includes The construction of the cockpit and the pressurized bulkhead. The agreement will not however include The 17% of shares owned by the government of Quebec and their retirement system. The government of Quebec invested a billion dollars when the program was financially strapped and still wholly owned by Bombardier. Disclosure of the agreement could come as soon as this week when both Airbus and Bombardier report their financial performance for 2019.

FliegerFaust also reports that Bombardier has no plans at this time to sell their business jet division, which they report is reaching peak profitability. but should instead let go it’s Transportation division worth approximately $7 billions, still according to Sylvain Faust of FliegerFaust.

2 thoughts on “SOURCES: Bombardier to Leave A220 Partnership

  1. Sad day for this iconic Canadian company.
    Thanks Boeing and the U/S government for helping to kill the industry. Looks like you’re getting what you deserve, however.

  2. If Boeing had been in the Spacejet size market they would have tried to kill that as well, but there again the company making that are doing a damn fine job killing it on their own.

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