Bombardier Shelves Plans for Russian-built Q400s

Bombardier has decided to set aside plans to collaborate with Russian industrial conglomerate Rostec to establish an assembly line near Moscow for the Q400 turboprop, the Canadian company’s CEO, Pierre Beaudoin, confirmed during its third-quarter earnings briefing on Thursday. Beaudoin attributed the decision to shelve the plans to the “political situation” stemming from Western sanctions leveled against the Kremlin for its involvement in Crimea and alleged support of Ukrainian separatists. Although he insisted that talks between Bombardier and Rostec continue, any agreement to establish a Q400 assembly line in Russia will have to wait until “conditions” improve.

“Given the political situation and the economy in Russia right now we’re setting this project aside for the time being and we’ll see what happens over the next number of months,” said Beaudoin. “Right now the conditions are not right to move ahead with that project.”

Although the latest round of economic sanctions imposed against Russia by the U.S. and European Union (EU) did not directly target the civil aerospace and air transport sectors, the now delayed deal between Rostec and Bombardier demonstrates their potential for inflicting collateral damage on those industries.

Last month a Bombardier spokeswoman told AIN that Rostec does not appear on the list of Russian companies covered by existing Canadian government sanctions. However, she acknowledged that the company recognizes the implications of the increasingly chilled political atmosphere between Russia and Western countries over the military crisis in Ukraine. “We [continue to meet]with [Rostec], and we remain optimistic that we’ll be able to conclude [negotiations] in 2014,” she told AIN at the time. “However, considering all of the developments of late, we’re now being realistic in that the timeline could shift.” So despite the immediate absence of Canadian sanctions targeting Rostec, Bombardier must contend with what the spokeswoman referred to as “other barriers in the way” and continuing “sensitivities we need to be mindful of.”

Those other barriers undoubtedly include the sanctions’ effect on the ability of leading Russian banks to raise new capital in U.S. and EU markets, fueling grave concern within Russian industry, including the aerospace sector. At the same time, Russia’s rouble has collapsed in value on currency markets, weakening the buying power of Russia’s aerospace industry for importing Western equipment. Meanwhile, the domestic economy has clearly suffered, potentially resulting in weakened demand for air transport.

Still, said Beaudoin, Bombardier considers Russia an important market, and other avenues for penetrating it haven’t closed. “I’m not saying we’re not talking with Rostec,” said Beaudoin. “We’re looking at other ways to penetrate that market. They need an aircraft such as the Q400 so we’re still talking about selling that airplane to Russia.”