Russia's Ilyushin Finance Company (IFC) claims that a politically-motivated decision by Export Development Canada (EDC) to refuse low-interest financing played a key role in its decision to reduce a significant order for Bombardier's new C Series CS300 airliner. The restructuring of a 2013 firm purchase agreement saw IFC cut its C Series order from 32 to 20 and add an order for a single Q400 twin turboprop.
Acknowledging the order reduction in an August 5 statement on its 2016 financial results, Bombardier had attributed the order revision solely to a need to “align with [IFC’s] current market needs.” However, a Bombardier spokesperson on Tuesday added that “financial conditions” in the region also played a part, and that "the financing challenges [associated with the EDC decision] could speak to those financial conditions.”
An IFC spokesman offered a more direct explanation. “The adjustment is related to the fact that EDC didn’t cooperate with the Russian side and also didn’t participate in the transaction,” the spokesman told AIN. The refusal by EDC reflects the stance of the Canadian government to funding sales to Russian companies since the Kremlin’s annexation of Crimea in early 2014, he added.
Notwithstanding IFC’s assertions, Russia’s economic woes lend credence to Bombardier’s original statement about the country’s changing market needs. Since the companies first signed an agreement that included a provision for smaller CS100s in 2011, the landscape of the Russian air transportation system has indeed changed, as the country grapples with a period of low oil and gas prices, the falling value of the ruble and economic stagnation. Many airlines have cut their foreign fleets because they sell tickets in rubles while paying lease installments in dollars, making most domestic services unprofitable.
Bombardier and IFC, which previously specialized in indigenous Il-96, Tu-204 and An-148/158 jets, signed an initial agreement at the 2011 Moscow Airshow, establishing major terms and conditions on procurement of up to thirty CS100s and CS300s. They signed the firm order in 2013, under which the manufacturer took obligation to start deliveries in late 2015 in return for prepayments worth dozens of millions of U.S. dollars.
At the 2014 Farnborough Airshow, amid rapidly worsening relations between Moscow and the West, Bombardier and IFC made “adjustments” to their deal, including converting some of the options on the CS300s into a firm order for 32 aircraft and eliminating the CS100 model from further consideration. At the time the sides rescheduled first delivery for the second half of 2016. The latest revision now calls for first deliveries some two year later.