Airbus Bombardier C Series deal with Airbus to close on July 1
The Canadian PressGeneral Aerospace Aerospace airbus Bombardier
A finalized agreement will see the European aircraft manufacturer acquire a majority 50.01 per cent stake in the C Series commercial jet program.
Bombardier and Airbus have finalized a partnership agreement that will see the European aircraft manufacturer acquire a majority 50.01 per cent stake in the C Series commercial jet program effective July 1, the companies announced Friday.
Bombardier Inc. will work with Airbus to ramp up production on the C Series passenger jets, which were designed with improved fuel efficiency and less seating capacity than most passenger jets offered by Airbus or its rival Boeing.
The C Series partnership’s head office and main assembly line will be located in Mirabel, Que., and a second line—yet to be built—will be based in Mobile, Alabama, to service the U.S. market.
Bombardier said that, as of July 1 when its second quarter begins, the C Series will not be included in its consolidated results – meaning, among other things, that revenue from the plane’s sales won’t be included in financial statements.
However, Bombardier and the Quebec government will remain minority shareholders in the C Series program under previous agreements between the province and the company.
Under the final agreement with Airbus, Bombardier has also committed to fund cash short-falls for the C Series, to agreed maximums, in the second half of 2018, and following years as the partners ramp up production and sales of the C Series.
Bombardier expects to double its C Series deliveries this year from the 17 aircraft in 2017 and is positioned to capture a large chunk of the estimated 6,000 aircraft needed in this market segment over the next 20 years.
“It is clear that in the early phase of the ramp up there is still lot of investment to do…But looking forward, I am very confident that the C Series is going to contribute positively to the cash generation of Airbus in the future,” Harald Wilhelm, Airbus chief financial officer, said in a media conference call Friday.
“We will give further financial information later this year.”
Bombardier issued revised financial estimates for 2018 to reflect the finalized Airbus agreement, which was achieved several weeks earlier than anticipated after the companies received all necessary approvals.
Under terms of the deal with Airbus, Bombardier will fund any cash shortfalls during the second half of 2018 to a maximum of US$225 million, then up to a maximum of US$350 million in 2019 and to a maximum of US$350 million over the following two years.
Any excess shortfall during these periods will be borne by the partnership’s class A shareholders. The companies said further financial information on the transaction will be provided later this year.
Innovation Minister Navdeep Bains issued a statement Friday morning calling the Bombardier-Airbus announcement “a good day for Canada’s aerospace sector.”
Investment Canada reviewed the deal and Bains said he is satisfied it will “benefit Canadians by growing our aerospace sector and creating good jobs.”
Bains also called the decision to maintain Mirabel, as the primary site for the C Series program is “fantastic news for the talented women and men working in that important aerospace hub.”