Government of Québec invests US$1B in Bombardier CSeries

Montréal – Bombardier has entered into a memorandum of understanding which contemplates a US$1.0 billion investment by the Ministère de l’Économie, de l’Innovation et des Exportations du Québec for a 49.5% equity stake in a newly-created limited partnership to which would be transferred the assets, liabilities, and obligations of the CSeries aircraft program. This newly created limited partnership will be owned 50.5% by Bombardier and, as a subsidiary of Bombardier, will carry on the operations related to the corporation’s CSeries aircraft program. 

 

After the investment, the newly created limited partnership will continue to be consolidated in Bombardier's financial results. The investment has been approved by the board of directors of Bombardier and the cabinet of the Government of Québec, and remains conditional upon the completion of definitive agreements and required regulatory approvals, which are expected by Jan. 1, 2016.

 

The investment also includes the issuance of stock warrants to the government. If all warrants are exercised, the amount would be slightly less than 9% of Bombardier’s aggregate issued and outstanding Class A and Class B shares. The disbursement of the investment and issuance of the warrants will occur over two equal installments, expected to take place in April and June 2016, subject to the conditions to closing. The proceeds of the investment will be used entirely for cash flow purposes of the CSeries program.

 

Alain Bellemare, president and CEO, Bombardier Inc. said, “This partnership comes at a pivotal time, with the CSeries on the verge of certification. The market is there, our leadership is in place, we have the best product, and with the support of the government, we are ready to make this aircraft a commercial success.”

 

According to Bombardier figures, the CSeries program has more than 2,000 employees in Canada, including 1,700 in Québec, and generates 12,500 direct, indirect, and induced jobs in Canada at peak production.

 

“Bombardier is the flagship company for the aerospace industry in Québec and Canada. Supporting it is necessary to maintain quality jobs in Québec,” said Suzanne Benoît, president and CEO of aero cluster trade association AéroMontreal. “The government's investment comes at a strategic time in the development of the CSeries program and will reassure all stakeholders in Québec's aerospace supply chain.”

 

The investment requires Bombardier to remain in Québec for 20 years. The newly-created limited partnership’s operational, financial, and strategic headquarters; manufacturing and engineering activities; shared services; policies, practices, and investment plans for research and development of the design, manufacture, and marketing of CS100 and CS300 aircraft and after-sales services will be based at facilities located in Mirabel, Québec.

 

Following an in-depth review of the CSeries aircraft program, a charge of US$3.2 billion was recorded in special items in the third quarter of 2015, mainly related to aerospace tooling. 

 

More than 2,800 flight-test hours have been accumulated on the CS100 aircraft, representing 97% of the flight test program, with more than 90% of the CS100 certification program complete. The certification configuration has now been frozen. 

 

Type certification for the CS100 aircraft is targeted for completion by the end of 2015. The CS100 and CS300 aircraft have more than 95% parts commonality and the same type rating. The CS300 aircraft’s certification is more than 60% complete and type certification is expected to follow approximately six months after that of the CS100 aircraft. 

 

Entry into service (EIS) of the CS100 aircraft is expected to occur in the first half of 2016 with Swiss International Air Lines (SWISS) as the first operator. SWISS is currently working with Bombardier’s Customer Services training crews and readying its operations for the EIS of the CS100 aircraft.

 

The first CS300 flight test vehicle (FTV) has been performing planned tests, and assembly of the second CS300 FTV is ongoing at the CSeries aircraft assembly facility in Mirabel. It is expected to come off the production line later this year.

 

On Oct. 28, 2015, due to the lack of sales following the prolonged market weakness, Bombardier cancelled the Learjet 85 aircraft program. As a result, a $1.2-billion charge was recorded in special items in the third quarter of fiscal year 2015, mainly related to the remaining Learjet 85 development costs as well as to an increase in other provisions. Bombardier remains committed to the Learjet family of aircraft.

 

Work continues on four Global 7000 flight test vehicles. The aircraft is expected to enter into service in the second half of 2018.

 

The Challenger 650 certification program is currently 95% complete and is progressing towards entry into service in the fourth quarter of 2015. 

 

Bombardier reported its financial results for the third quarter ended Sept. 30, 2015. Revenues totaled US$4.1 billion for the quarter, compared to US$4.9 billion for the same period last fiscal year. For the 3Q2015, the company had a loss of $4.6 billion, compared to earnings of $171 million for the same period last fiscal year.

 

Net loss totaled $4.9 billion, due to special items mainly related to impairment charges on CSeries and Learjet 85 program tooling, compared to net income of $74 million for the same period the previous year. On an adjusted basis, net income amounted to $2 million for 3Q2015, compared to $222 million for the same period the previous year.

 

Bombardier officials also announced the company is pursuing placement of a minority stake in its transportation (railway equipment) business segment. The corporation has been in preliminary conversations with potential investors and officials expect to make an announcement soon, according to a press release.