Chronicles of Bombardier’s jet programs: signs were there
What was to be a regular quarterly earnings report, turned into a stunning announcement for the global aviation industry, when on November 8, 2018, Bombardier revealed it would sell two of its businesses, including the aging Q400 aircraft program, and cut 5,000 jobs across the board. With the CSeries and the QSeries now out of the manufacturer’s portfolio, only the CRJ regional jets remain. Will Bombardier end up being exclusively a business-jet and rail manufacturer?
Let us break down Bombardier’s announcement. With its third quarter 2018 earnings results, the Canadian aircraft and train manufacturer said it will sell its Q Series turboprop aircraft program as well as de Havilland trademark to a subsidiary of home-based Longview Aviation Capital, Viking Air, for $300 million. The sale package includes Bombardier’s Q400 turboprop line as well as assets and intellectual property for other Dash 8 models, the -100, -200 and -300.
Bombardier said it also reached an agreement to sell its business aircraft flight and technical training unit, which is run out of Montréal, Québec City (Canada) and Dallas (U.S.), to Canadian training solutions company CAE, for $645 million. The transactions with CAE will total $800 million in revenue for Bombardier.
Overall, the manufacturer said it expects to get around $900 million in net proceeds out of the two all-Canadian deals, which should be finalized by mid-2019. By that time, the company’s large scale cost reduction and restructuring measures will have begun to erase around 5,000 jobs (which translates into over 7% of its global workforce), helping the manufacturer to generate $250 million in annual savings at full run rate by 2021, as it stated. The company defends itself by saying the cuts and sales are necessary, and that it would continue to "streamline" its operations.
The Bombardier saga
The offloading of the slow-selling QSeries turboprop business comes months after the Canadian plane maker handed over another of its commercial jet programs: its signature CSeries to Airbus. Under the deal, the European aircraft manufacturer acquired a majority stake (50.01%) in the CSeries aircraft line effective July 1, 2018. It has since renamed the two models (CS100 and CS300) to the A220-100 and A220-300, pledging to boost sales of the rebranded plane.
Heavy investments into the loss-making CSeries a few years back had led Bombardier to a similar situation it has found itself with the QSeries today. In October 2016, the company announced plans to cut a total of 7,500 jobs (over 10% of its global workforce) through the end of 2018. It was, in fact, the second wave of job cuts to hit Bombardier’s employees in less than a year, Canadian Global News reported at the time.
The company hoped the measures would save it $300 million a year. All the while, since 2015, it had been asking the Québec government for a $1 billion investment in the CSeries. In February 2017, the manufacturer’s pleas were finally answered: the federal government pledged to provide $372.5 million in interest-free loans to Bombardier over a four year period, according to Canadian news site CBC.
Most of the loans were to go to the Global 7500 business jet program (originally named the Global 7000) and the remaining third – to the CSeries program. The CSeries passenger jet was plagued by delays and cost overruns prior to entering commercial service with SWISS airlines in July 2016. And Bombardier’s Global business jet program was not exempt from those problems either.
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