Back in 2016, the Canadian province of Quebec invested US$1 billion in Bombardier’s C Series program. Many saw this as a way to protect Quebec jobs and business as the program struggled with progress. Much has happened since then, including a majority acquisition of the program by Airbus. The program now needs more funds, but Quebec’s current premier is ruling out pouring more cash into the joint venture.
The need for more cash
In Bombardier’s fourth-quarter earnings report it outlined the need for additional cash investments that will be used for activities such as aircraft production:
“While the A220 program continues to win in the marketplace and demonstrate its value to airlines, the latest indications of the financial plan from [Airbus Canada Limited Partnership] calls for additional cash investments to support production ramp-up, pushes out the break-even timeline, and generates a lower return over the life of the program.”
According to AIN, Bombardier has invested a total of $6 billion in the former CSeries program since 2008. In October 2017, Bombardier agreed to hand over 51% of the program to Airbus while keeping a 31% stake in the newly formed “C Series Aircraft Limited Partnership (CSALP)”. The Provincial government of Quebec took the remaining 19%. CTV News has slightly different numbers, with 50.06% owned by Airbus, 33.58% for Bombardier and 16.36% for the Quebec government.
When we contacted Airbus, this is what they had to say:
“Airbus is fully committed to the success of the A220, to Quebec and Canadian aerospace and will continue to fund the programme on its way to breakeven.
“The partnership (Airbus Canada Limited Partnership) is working hard to make a huge success of the A220 (-100 & -300), to sell the aircraft, ramp-up production and reduce costs to make the A220 a commercial and economic success.
“We cannot comment on our partners’ (Bombardier and Investissement Quebec) financial matters.”
How Quebec is involved
Quebec struck a deal with Canadian aerospace company, Bombardier, to invest US$1 billion in the plane maker’s CSeries program. For the Canadian province of Quebec, the decision was a straightforward move to protect its homegrown business and local jobs, which represented 2% of the province’s GDP, according to the Globe and Mail.
According to BBD True North, Bombardier employed as many as 16,000 people in Quebec in 2018. However, 2,500 Quebec workers were laid off later in the year, putting the number closer to 13,500. However, the number is still significant enough to be an important political issue.Bombardier’s CSeries program was put into jeopardy when the U.S. Government accused it of unfair trade practices, selling the aircraft to Delta below cost. Photo: Delta Air Lines
Despite Bombardier’s significant presence in Quebec, Premier Francois Legault is ruling out handing over more money to the joint venture, saying the following to reporters:
“They should have invested in Bombardier, in the whole company. Now we find ourselves in a situation where Airbus has the majority of shares, so it’s very difficult to make sure that cost sharing in that unit is done correctly.”
According to CTV News, in 10 days Quebec will specify its intentions regarding its participation in the Airbus Canada Limited Partnership (SCAC). On Tuesday, Quebec provincial Economy Minister Pierre Fitzgibbon said he was working closely with Bombardier and Airbus to find solutions.
Under the agreement struck with Bombardier, Airbus will be able to buy Quebec’s share of the A220 program at the end of June 2023. It will then be able to purchase Bombardier’s stake in the limited partnership in 2026. Of course, if all three parties agree to changes in the contract, it would seem plausible that the timeline could change, as well as the balance in ownership.
The A220 has become a favorite amongst travelers and seems to have gained some momentum last year as it secures notable orders from airlines like Air France. Some airlines have even indicated an interest in a stretched version of the aircraft. Unfortunately, the program needs more money in the short-term to cover production costs.
Do you think Quebec should further its investment? Or try to exit the program completely? Let us know in the comments.