Where there is smoke, there is usually fire. Bombardier’s shelving of the Learjet 85 midsize business jet last month is symptomatic of two much larger issues that new CEO Alain Bellemare must confront in the near future: one is financial, the other is strategic.

The financial issue is liquidity. Bombardier has roughly $2.5 billion in cash and cash equivalents on hand, and it has an estimated $100 million-per-month burn rate to support development of the oft-delayed CSeries narrowbody airliner, the high-end Global 7000/8000 business jets and until recently the Learjet 85. The CSeries looks to be at least a year away from entry into service (EIS), and Bombardier must cover a $750 million bond payment due next year. Given the $1.5-2 billion in working capital that it needs to run the business and meet debt covenants, it looks like Bombardier risks running out of cash in 2016. 

Now Bombardier’s strategic issue: In contrast to its Commercial Aircraft business, Business Aircraft has a great product portfolio—particularly in large cabin aircraft—but it is being starved of development funds as Bombardier circles the wagons around the CSeries. Case-in-point is Bombardier’s late response to Gulfstream’s G650, which entered service at the end of 2012. 

A fast response was needed, but lacking development funds, Bombardier’s competing Global 7000/8000 will not enter service until 2016-17. This has left Gulfstream with a generous four or five years alone in business aviation’s most profitable segment. Not surprisingly, Bombardier ceded its No. 1 market position to Gulfstream last year. And last month, Bombardier halted the Learjet 85, citing “weak market demand” at a time when interest in smaller business jets is poised for growth. Business Aircraft’s problem—lack of development funds—is growing worse. 

Its credibility is also suffering, which may have contributed to poor 0.6 book-to-bill ratio in 2014 when rival Gulfstream experienced robust unit sales.

What should Bombardier do? The company appears to have two major options short of a government bailout: issue high-yield debt or fundamentally restructure. 

Issuing debt would rattle financial markets, but would allow Bombardier to bring the CSeries to market and possibly fund the $1 billion-plus Global 7000/8000 development program. That would buy time but not address the financial implications of running a CSeries production line at suboptimal rates. My firm, ICF International, forecasts the CSeries to be a niche aircraft with 40-60 deliveries per year, when 100 or more is the likely breakeven threshold. Additionally, Boeing and Airbus are using marginal pricing to sell their “last off the line” 737s and A320s before they are reengined later in this decade. 

Then there is the issue of scale. Last year, Bombardier delivered less than $2 billion worth of airliners; Boeing and Airbus combined for more than $100 billion. Bombardier portrays the CSeries EIS as the end of its challenges; in reality, it could be just the beginning. How in the long run can the company remain in the same league as these giants while simultaneously competing in business aircraft? This means Commercial Aircraft likely will bleed cash for the foreseeable future and continue to drag down other parts of the business. 

This leaves fundamental restructuring as the best long-term option for the survival of Bombardier. I believe it could survive and thrive by pursuing a three-point restructuring. 

First, sell the aerostructures business. Aerostructures is not a core competency and does not provide a competitive advantage in Bombardier’s core aircraft business. Shedding this business would sharpen management’s focus and provide much-needed capital. 

Second and most controversial: Sell or pursue a joint venture for the money-losing Commercial Aircraft business. As discussed in my June 23, 2014, column, China’s Comac appears to be the best option. To be successful, Comac needs Western certification expertise, a global customer support function, and systems engineering and supply chain capabilities. Bombardier can provide all four. Bombardier needs capital and customers; Comac can supply both. I call this the “Combardier” scenario. Combardier could then market the CSeries in China and the Comac C919 to customers outside of China. On paper, the two are a hand-in-glove fit. The real world is far messier, and politics could block such a tie-up. If Combardier is not in the cards, then Bombardier must find another partner quickly. 

The third element of restructuring is to double-down on the profitable, $6 billion-plus Business Aircraft unit. Freed of the distractions and financial drain of the CSeries, Bombardier could accelerate development of the Global 7000/8000 and restart the Learjet 85. With a broad product portfolio and strong brand, Bombardier would have a real shot at regaining its No. 1 position. 

Fundamental restructuring is never easy, but Bombardier’s current course is potentially unsustainable. The new Bombardier would be a focused, highly profitable Canadian business aircraft leader. And Combardier might just have the scale and resources to break the Boeing-Airbus duopoly. 

Kevin Michaels is a vice president with ICF International’s Aerospace & MRO consulting practice in Ann Arbor, Michigan.