Bombardier not for sale

Canadian aerospace giant denies report about partial sale of aerospace division to Chinese.

Comments Off on Bombardier not for sale February 7, 2012
by Canadian Press

Montreal — Bombardier has denied a published report in Germany that the Canadian transportation giant is planning a partial sale of its aerospace division to the Chinese.

Spokeswoman Haley Dunne categorically denied on Tuesday that a sale is part of the negotiations with the Chinese following its framework agreement signed last March.

German business newspaper Handelsblatt suggested that Montreal-based Bombardier is evaluating a potential sale to Commercial Aircraft Corp. of China (COMAC), which plans to build a plane with 168 to 190 seats.

Dunne said discussions are limited to commonalities between its 110- to 149-seat CSeries and the C919 in terms of suppliers, marketing and sales potential.

“The discussions are progressing well. We’re getting close but I don’t have a timeline on that,” she said in an interview. “We have to make sure that whatever we agree upon are the conditions for both of our companies.”

Airlines prefer to have a fleet of aircraft that share common parts and features to enhance economies of scale by reducing repair, training and operating costs. It’s one of the leading arguments made by Boeing and Airbus — the world’s biggest makers of commercial jets — to persuade existing customers to stick with their planes.

Michael Willemse of CIBC World Markets said the idea of a partial sale has been circulating since Bombardier established the strategic relationship with COMAC.

“Overall, we believe the chances of a sale ultimately occurring are low; however, a partial sale to COMAC (i.e. 50 per cent) could represent an attempt by Bombardier to secure a significant portion of the potential Chinese aerospace market,” he wrote in a report.

Bombardier has said that strengthening its customer relationships in China would improve its chances of winning sales in the world’s most populated and important developing economy.

So far, none of the 133 CSeries orders has come from that part of the world that is expected to fuel sales over the next 20 to 30 years.

Willemse said Bombardier’s commercial aerospace unit holds strategic value even though its profits are currently nominal.

Sales will be around US$1.5 billion in 2012, suggesting a value of US$1.6 billion to US$2.4 billion (or 90 cents to $1.40 per share.) The CSeries adds another $1 per share. Bombardier Inc.’s enterprise value is likely around US$9.8 billion.
© 2012 The Canadian Press