Bombardier says it has no plans to kill CSeries after approaching Airbus

 

MONTREAL – Bombardier says it has no plans to pull the plug on the CSeries even though its efforts to secure a rescue deal from Airbus stoked fears about the future of the aircraft program and the transportation company itself.

“Bombardier is fully committed to the CSeries and we have the financial resources in place to support the program,” said spokeswoman Marianella de la Barrera.

The company said the CSeries is on the cusp of gaining certification and it remains in advanced discussions with potential customers.

Analyst Richard Aboulafia, a CSeries critic at consultant the Teal Group, said Bombardier’s effort to sell a majority stake in the aircraft to its European rival — and its rejection — weakened the market’s view about the viability of the CSeries program and marked “the beginning of the end for the very troubled program.”

With its financial resources lacking and a partner appearing unlikely, Aboulafia said Bombardier should scrap the 110- to 160-seat aircraft.

“If they are smart they will end it quickly,” he said in an interview.

“If they’re not so smart, they will make the losses that much worse and jeopardize the company that much more.”

By devoting more money to the CSeries, Aboulafia said Bombardier is siphoning badly needed funds from development of its more important business jets and commercial aircraft.

He added that the share structure that gives the founding Beaudoin family voting control and insulates the company from making the best decisions in the interests of shareholders.

Karl Moore, professor at McGill University’s Desautels Faculty of Management, said Bombardier may sell a majority stake in its transportation division to raise funds but he’d be “astonished” if Bombardier’s new CEO Alain Bellemare bailed on the CSeries that is two years late and $2 billion over budget

Moore said Bombardier is clearly in trouble, with unforeseen low fuel prices making it harder to sell the CSeries, with its more fuel-efficient engines. But he said the approach to Airbus makes some sense and shows the company is being creative and open to different approaches.

Even though Airbus and Bombardier said discussions between the two have ended, Bombardier could reportedly rekindle talks.

Cameron Doerksen of National Bank Financial said the company is entering a critical period and needs to “restore investor and customer confidence.”

The analyst expects Bombardier could take a substantial non-cash writedown on its CSeries investment in the coming months.

Bombardier has reportedly tried to address its cash flow needs by talking to the Caisse pension fund manager about an equity investment. Quebec’s government has also said it is open to providing Bombardier with financial aid to preserve jobs and the company’s headquarters in Montreal.

Fred Cromer, president of commercial aircraft, told employees in a memo that while the approach to Airbus may have come as a surprise to them, Bellemare has long said it “would explore opportunities to participate in industry consolidation for both its business segments aerospace and transportation.”

Asked whether the federal Liberals support investment in the CSeries by foreigners, including the Chinese, party leader Justin Trudeau said the focus must be to keep jobs and create opportunities along with economic growth.

Thomas Mulcair said the government needs to assess whether a sale is a net benefit to Canada.

“The government has to also make sure that key sectors of our economy like aerospace, like the auto sector, are not sold off, (or) are not imperilled to the point that they have to be sold off,” he said from Toronto.

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