Airbus Now Holds 75% Of The A220 Program As Bombardier Backs Out

Airbus now holds 75% of the A220 program. As a result of Bombardier backing out of the program, the European manufacturing giant now owns the A220 program alongside the Government of Quebec.

Airbus, Bombardier, A220
Airbus now owns a 25 stake in the A220 program. Photo: Airbus

The Airbus A220 was initially known as the Bombardier C-Series. However, when Airbus took a 51% stake in the program in July 2018, it was renamed as the Airbus A220. Last month Simple Flying reported that Bombardier was looking to reassess its A220 deal with Airbus. Then, last week we reported that Airbus could take Bombardier’s stake in the A220. It seems as though the rumors were true, as today the news was confirmed.

What changes?

The largest change is that Bombardier will no longer be involved in the Airbus A220 program. According to Airbus, the company has transferred its remaining interest in Airbus Canada to both Airbus and the Quebec Government.

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As a result, Airbus Canada is now wholly owned by Airbus and the Government of Quebec. While the government holds 25% of the entity, Airbus’ share has increased to 75%. The manufacturer has said that this will secure 3,300 jobs at Airbus Canada in Quebec. Bombardier will receive a consideration payment of $591 million with regards to the transaction.

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Airbus, Bombardier, A220
In December the 100th Airbus A220 was delivered. Photo: Airbus

What has changed under Airbus?

It seems as though adding the Airbus name to the aircraft has seriously increased interest in it. According to the manufacturer, orders have increased by 64 percent in the past year and a half. They now stand at 658 aircraft across both the A220-100 and A220-300. Additionally, just this morning startup Green Africa announced a memorandum of understanding for 50 Airbus A220-300 aircraft.

While carriers such as airBaltic are looking to exclusively move to the A220, other major carriers such as Air France are also placing serious orders for the type. However, there are also a number of American carriers with A220 orders including David Neeleman’s Breeze. Airbus has, as such, begun manufacturing the Airbus A220 at its Mobile plant too.

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A220 300 Green Africa Airways
Green Africa Airways signed an MoU for 50 A220-300s at Singapore Airshow. Photo: Airbus

Speaking of the new agreement, Airbus CEO Guillaume Faury said: “This agreement with Bombardier and the Government of Québec demonstrates our support and commitment to the A220 and Airbus in Canada. Furthermore, it extends our trustful partnership with the Government of Québec. This is good news for our customers and employees as well as for the Québec and Canadian aerospace industry,”

While the Government of Quebec still maintains a 25% stake in Airbus Canada, one day Airbus could purchase this share. However, this is not possible until 2026, a date three years later than had been originally planned.

What do you make of this latest transaction? Was it the right thing to do? Let us know your thoughts in the comments!

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Rturit

Typo alert: 350

kornel

?

Sam Rittler

And thus cometh the A220-500.

Antoine F.

The plane in the second picture, the 100th A220 to have been delivered, is the one which had the engine issue yesterday and diverted to BOD.
https://simpleflying.com/airbaltic-airbus-a220-engine-shutdown/

WordsMatter

This development eliminates much of whatever nagging uncertainties there might have been left around the A220 programme and it should also make the Quebec government’s stake in the programme at least a lot more stable (MHO). The A220 programme was already on a good wicket and now its future looks even brighter. It’s a pity Bombardier, being the original developer of the plane, could not properly capitalise on this programme in the end. Bombardier’s management approach and style have been under severe scrutiny in some quarters in recent times and it obviously leaves a lot to be desired. The Quebec… Read more »

David C.

Sadly, the transaction only valued the 33.5% owned by Bombardier at 591Million USD. that means that in its current form, the now 25% ownership stake retained by the Quebec Government is worth less than that. That is significantly less than what the government initially invested. But the good news is that by holding a 25% stake in the company, the government is in a decent position to retain jobs. (Just as Airbus is in a decent position to leverage the government for ongoing tax incentives). The short term is that the work force and manufacturing will be retained in its… Read more »

Pingy

It is not just retaining jobs. I expect that A220 program will be very profitable in time – and Quebec will get 25% of those profits. It is a smart, long time investment.

David C.

Sadly, the transaction only valued the 33.5% owned by Bombardier at 591Million USD. that means that in its current form, the now 25% ownership stake retained by the Quebec Government is worth less than that. That is significantly less than what the government initially invested. But the good news is that by holding a 25% stake in the company, the government is in a decent position to retain jobs. (Just as Airbus is in a decent position to leverage the government for ongoing tax incentives). The short term is that the work force and manufacturing will be retained in its… Read more »

WordsMatter

I fully agree. I’m just wondering if the Quebec government is going to be able to sit back and wait for this programme to fully pay back its original $1 billion investment over time or whether it will be forced to to keep pace with new investments in order to ramp up production which is required to keep up with orders. If the government eventually finds that the A220 programme has more than recovered it’s original investment, it may not want to sell its stake in 2026. I don’t know if the new agreement means that it will have no… Read more »

WordsMatter

I’m not too sure that Airbus will enjoy more leverage over tax just because the Quebec government owns a 25% stake in the A220 programme. On the contrary, Airbus is now even more committed which means the government has perhaps more leverage in a new avenue to recover its investment. I hope the Quebec government doesn’t kill the goose!

What might be the case is that Bombardier enjoyed certain tax privileges in Quebec that Airbus might have inherited now. Who knows?

WordsMatter

The 75% to 25% stake arrangement is perhaps in general a very nice balance between business and government?

john

I wonder what Boeing’s ratio is?

WordsMatter

… you mean Boeing to US government? I just assumed it was 100% to 0%, but if this MAX debacle isn’t sorted out soon, it might look quite different in the future.

Moaz Abid

2 months later, an article from simple flying.
“Airbus buys all the a220 program from Bombardier”

David C.

they just did buy all of Bombardier’s holdings in the program including the outside Bombardier programs. Bombardier owns nothing of the C Series now. However, the government of Quebec owns 25%…

Gregg Derrett

Wonder what the odds are that Canadian tax payers will ever get their investment back in full?

WordsMatter

The odds are in any case much better now than they were just a few days ago. It looks like the A220 programme is just at the beginning of its ascent and if that’s correct, I think the tax payer will get all of the investment paid back.

What’s more though, it seems Airbus is about to become a lot more prominent and permanent on the Canadian landscape (Mirabel for one) which in itself could be invaluable (MHO).

David C.

Agreed. Something to take into consideration. Nominal corporate tax rate for Quebec is 26.6% including federal tax. Nominal tax rate in France is 31%. In addition, the Airbus facilities in France are mature and developed. Employment is stable there. But if Airbus was to develop new lines in Canada or expand to a second FAL, they would be able to claim federal and provincial tax credits for job creation. Bombardier was/is circling the bowl with their insane amount of debt. Airbus is cash positive and can invest in the program to expand and exploit the airframe. Its next generation technology… Read more »

WordsMatter

I’m not so clued up with the tax exactly and am quite happy with insight given. Also, couldn’t agree more with the bottom half!

john

Damn shame. Just like we lost the Avro Arrow to politics, so goes this wonderful plane. So sad.

David C.

The Avro Arrow was torpedoed. Due to financial issues, Bombardier was circling the bowl. Airbus has literally thrown this airframe a lifeline! This is a much better outcome than Bombardier giving up because it had run out of credit and cash… IF anything, “This Wonderful Plane” will now thrive.. (It’s certainly doing a lot better since it got the backing of Airbus, that’s for sure)