Bombardier To Sell Q400 Program to Viking Air

Bombardier is selling business aircraft training unit to CAE for $645 million and its Q400 turboprop program to Canadian airframe maker Viking Air for $300 million as part of a streamlining exercise expected to include the elimination of some 5,000 jobs over the next 12 to 18 months, the company announced November 8. The company expects both transactions to close by the second half of 2019 and generate net proceeds after assumption of certain liabilities, fees, and closing adjustments of $900 million.

Under Bombardier's training divestiture, CAE will expand its access to the training market for customers operating the more than 4,800 in-service Bombardier business jets. The acquisition, which is “highly complementary“ to CAE’s existing business, will provide the training provider with a pool of skilled employees and a portfolio of customers, in addition to 12 full-flight simulators (FFSs) and several training devices covering the Learjet, Challenger, and Global lines. This would bring CAE’s total business aircraft FFSs to 29 worldwide.

“This transaction represents a win-win for both companies, resulting in enhanced core focus,” said CAE president and CEO Marc Parent. “Market fundamentals in business aviation are strong and the business we are acquiring is well supported by a large installed base.”

CAE will also pay Bombardier $155 million to monetize its existing future royalty obligations under the current authorized training provider agreement with the business jet manufacturer. This provision also extends CAE’s authorized training agreement with Bombardier to 2038.

Meanwhile, the sale of the Q Series turboprop line leaves the CRJ regional jet as the sole remaining commercial aircraft program for Bombardier Aerospace, which sold a controlling stake in its most ambitious project ever—the C Series narrowbody airliner—to Airbus in July. 

Soon after Bombardier completed negotiations over the C Series sale, it predicted a bright future for the Q400, and during a June 21 briefing with reporters in Mirabel, Quebec, Bombardier Commercial Aircraft president Fred Cromer endeavored to erase any lingering notion that the company’s recent sale of its turboprop assembly site in Downsview, Ontario, could signal a waning commitment by the company to the Toronto area.  

At the time, the Q400 appeared to have begun to recover some sales momentum after several years of dominance in the turboprop market by rival ATR. A firm order for 10 airplanes in an 82-seat layout from Ethiopian Airlines in April raised hope that an earlier order for 50 ninety-seaters in September 2018 from India’s SpiceJet amounted to more than a temporary reprieve for the big propjet. 

Now it appears that Cromer’s talk about lowering program costs to improve the Q400’s market competitiveness signaled more than a possible effort to outsource the manufacture of certain subassemblies.

Further initiatives announced Thursday include an effort to “right-size” and redeploy its central aerospace engineering team. Bombardier plans to send key engineering team members to other business segments, the largest group moving to its business aircraft division. It will also establish a new Advanced Technologies Office (ATO) led by François Caza, who the company has named chief technology officer. The ATO will focus on systems design and engineering, including applying experience from Bombardier’s aerospace programs to its rail transportation business.

Bombardier estimates the resulting reduction of some 5,000 positions across the organization will lead to an annual savings of $250 million at full run rate, which it expects to occur by 2021.

Bizav Unit Sees Modest Rise

Bombardier also announced its third-quarter financial results on November 8, which were mostly flat for its business jet division. In fact, quarterly revenues at Bombardier Business Aircraft climbed just $9 million year-over-year, to $1.083 billion, while profits slid $7 million, to $80 million, Revenues are up modestly in the first nine months, to $3.5 billion, while profits are up $20 million, to $285 million.

Net business jet order intake was strong during the quarter, with book-to-bill above 1:1 and “increased interest in the Global family, including the new Global 5500 and 6500,” the company said. Thus the segment backlog jumped to $14.3 billion as of September 30, up $600 million from a year ago.

The division delivered 31 business jets in the quarter, one more than it did in the year-ago period. It handed over four Learjet 70/75s, 20 Challengers (fourteen 350s and six 650s), and seven Global 5000/6000s during the quarter; this compares with four Learjets, 17 Challengers (thirteen 350s, three 650s, and one 850), and nine Globals in third-quarter 2017.

In the first nine months, Bombardier Business Aircraft has shipped 96 aircraft—one more than it did in the same period last year. This represents more than 70 percent of its 135 planned business jet deliveries for this year, which will include handover of the first Global 7500 this month.

For Commercial Aircraft, Bombardier’s revenues during the quarter decreased by $259 million mainly due to the division’s de-consolidation of the C Series Aircraft Limited Partnership (CSALP) from its results and replacing it by CSALP’s net loss following the closure of the new partnership that gave Airbus a 50.01 percent share in the C Series program. Earnings before interest and taxes (EBIT) rose to near breakeven, a result characterized by Bombardier as a significant improvement as it de-consolidated CSALP results and recognized its share of CSALP’s net loss, resulting in an equity pickup of $13 million.

CRJ Series and Q400 deliveries for the quarter totaled five aircraft, while net orders totaled 11 aircraft.