Bombardier, Airbus‘ minor partner in the A220 program, is coming to regret the choice of selling 51% of its small jetliner program to Airbus.
The history of the C-Series/A220 program
Bombardier originally set out to open up a new market for themselves with the A220/C-Series. They were quite successful in the small aircraft range with their turboprop Q-series, their lucrative train division, and their CRJ jet program. They thought they could combine all three for a new product.
By utilizing their ability to build large-capacity transport and aircraft, Bombardier set out to fill a gap in the market. An aircraft that could carry 100-200 passengers, smaller than the very popular Boeing 737 and Airbus A320, but using new technology that had been developed since they were first designed. This would make their new concept more efficient than the competition with a much lower fuel burn.
But this program would be a bigger beast than they could tackle. Facing job losses in 2016, Bombardier had to be bailed out by $1bn USD by the Quebec government just to get the A220 to market.
The following few months saw the A220 blocked to customers in the United States by a trade embargo by Boeing. Bombardier looked like they were out of luck.
In stepped Airbus. They offered to take over 51% of the program for zero cost but would help instead by building the aircraft in the United States (and thus negate the Boeing block). They would also fund the rest of the A220 development.
The A220 got built, delivered and now has 600 orders. The rest is history… or is it?
What has happened now?
Bombardier has yet again found itself struggling to pay off debts as the A220 program looks like it will take a little longer to break even. With very little to sell off (all they have left is trains and private jets, with the airframe builder selling off their CRJ program to Mitsubishi), this has made them regret giving up 51% of their A220 program
“The final step in our turnaround is to de-lever and solve our capital structure,” Chief Executive Officer Alain Bellemare said in the statement to Bloomberg. “We are actively pursuing alternatives that would allow us to accelerate our debt paydown.”
Airbus has kept to its promise to keep helping Bombardier make the A220 program break even, suppling funding, technical expertise, and a new production line. This is very simple for them, as they haven’t actually spent a cent acquiring the A220 line and anything they build now will be almost pure profit.
With the airframe soon to start production in Airbus’ Mobile plant in Alabama, Airbus is going to get the A220 to that goal sooner rather than later. But was the deal with Airbus too much for Bombardier? Are they going to find enough cash in the short term to pay off their $10 billion dollar debt load? We will have to wait and see.
What do you think? Did Bombardier make a mistake selling off its A220 program? Let us know in the comments.