Bombardier leaves commercial aviation, selling regional jets business to Mitsubishi for $550m

Canadian plane maker will focus on business aircraft and passenger rail cars

Bombardier's logo is seen on the building of the company's service centre at Biggin Hill, Britain March 5, 2018. REUTERS/Peter Nicholls/File Photo
Bombardier's logo is seen on the building of the company's service centre at Biggin Hill, Britain March 5, 2018. REUTERS/Peter Nicholls/File Photo

Bombardier said on Tuesday that it would sell its unprofitable regional jet business to Japan’s Mitsubishi Heavy Industries for $550 million in cash, as the Canadian plane and train maker leaves commercial aviation.

Bombardier combined its aviation units to focus more on profitable business jets and passenger rail cars, after a shortage of cash in 2015 while bringing its flagship commercial jet to market.

News of the deal sent its shares up as much as 5 per cent in morning trade.

As part of the deal, which is expected to be completed in the first half of next year, the Japanese company will also take over a $200m (Dh734.6m) debt.

“We see the transaction as positive as it generates a return better than we had anticipated and ends the company’s exposure in a programme that we believe was a drag on earnings,” AltaCorp analyst Chris Murray said in a note.

Citi analyst Stephen Trent wrote: “In addition to Bombardier focusing on its core business jet and rolling stock-transport businesses, the potential leverage reduction associated with this spin-off could be greater than we had anticipated."

Bombardier will continue to assemble commercial regional jets but will stop in the second half of 2020, after it finishes delivering its remaining orders.

The business's profitable aftermarket sales, engineering expertise and heavy maintenance centres in the US would be useful for Mitsubishi, which is trying to develop and certify its delayed regional jet programme.

“It’s an important step for us as a whole,” said Dan Lochmann, a spokesman for the programme.

About 1,600 people work on the Bombardier programme, including production employees and those who provide aftermarket services.

About 40 per cent of employees are in Canada.

Mitsubishi is “committed” to Bombardier’s workforce, including engineers and customer support workers, Mr Lochmann said in Japan.

But he could not comment on production workers.

The deal would be a boost for Japan’s civil aviation ambitions, as Canada leaves the market for commercial jetliners with fewer than 100 seats.

Bombardier and Mitsubishi had said they were holding talks over the regional jet programme.

Mitsubishi's regional jet programme has been rebranded as SpaceJet.

The Japanese company is trying to certify the plane, which has been delayed by several years. Its first customer, ANA Holdings, expects delivery in 2020, rather than 2013 as originally planned.

Shares in Bombardier have risen 7.9 per cent this year, compared with a 15.4 per cent increase in the main Toronto Stock Exchange index.

Updated: June 25, 2019 11:43 PM


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