SINGAPORE – Airbus and the government of Quebec have taken over the remaining Bombardier stake in the A220 program as the Canadian manufacturer completed its exit from the commercial aircraft business.
The agreement, which is effective immediately, sees Airbus increase its stake from 50.1% to 75% while Quebec now holds 25% of Airbus Canada Limited Partnership (Airbus Canada). Bombardier received $591 million from the transaction. Quebec’s increase from the previous 16% stake comes with “no cash consideration.”
With Bombardier under huge financial pressure and burdened by high debt, the company is searching for radical measures that will be able to stabilize it. Bombardier has already agreed to sell the CRJ program to Mitsubishi and the Q400 turboprop to De Havilland Canada, a Longview Aviation Capital subsidiary. In late 2019, Spirit AeroSystems agreed to buy parts of Bombardier’s aerostructures business, including facilities in Northern Ireland, Morocco and the U.S.
The company is also in talks to divest either its train activities in Bombardier transportation or the business aircraft unit.
“We are committed to this fantastic aircraft program and we are aligned with the government of Québec in our ambition to bring long-term visibility to the Québec and Canadian aerospace industry,” Airbus CEO Guillaume Faury said.
“I am proud that our government was able to reach this agreement,” Francois Legault, the Premier of Quebec, 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. We have consolidated the government’s position in the partnership, while respecting our commitment not to reinvest in the program.”
“This transaction supports our efforts to address our capital structure and completes our strategic exit from commercial aerospace,” Bombardier president and CEO Alain Bellemare said. “We are incredibly proud of the many achievements and tremendous impact Bombardier had on the commercial aviation industry. 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. We are confident that the A220 program will enjoy a long and successful run under Airbus’ and the Government of Québec’s stewardship.”
Airbus now not only has access to a massive strategic asset in the single-aisle business, but it also no longer is held back by Bombardier’s financial constraints. Airbus has collected 658 orders for the A220-100 and -300 and is in the process of ramping up production. In addition to the original final assembly facility in Mirabel, Quebec, Airbus is also in the process of setting up another A220 line in Mobile, Alabama which is to deliver the first aircraft to Delta Air Lines later this year. Mobile is to produce four aircraft per month when it is in full swing.
Importantly, Airbus is now also free to consider investing further in the A220. Among others, Airbus is in talks with Breeze Air CEO David Neeleman about a substantial increase in range for the aircraft to more than 4,000 nm, which would make U.S. transcontinental and transatlantic missions possible. What is more, airlines such as Air France-KLM have been lobbying Airbus to build an A220-500 - a stretched version of the -300 which would compete with the Boeing 737-8 and its own A320neo. It would offer, as analysts believe, substantially lower unit costs.
Airbus chief commercial officer Christian Scherer said recently that such an aircraft was “not a question of if, but when.”
The A220 is hugely important for Airbus because it enables it to position an A320neo family replacement upmarket, beginning at 180-200 seats while still being able to offer an up-to-date product at the lower end of the narrowbody market.
As part of the deal, Quebec will stick to its shareholding in Airbus Canada for three years longer than initially planned and remain a part-owner until at least 2026. Its shares are then “redeemable by Airbus” – giving it the option for full control. Details and conditions of that arrangement are confidential.
Also, Bombardier is selling its A220 and A330 work package production to Airbus subsidiary Stelia Aerospace which includes the A220 cockpit and rear fuselage.
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