Bombardier won’t get break despite early CSeries closing

MONTREAL • Bombardier Inc. will contribute up to $225 million to the CSeries partnership with Airbus even though the agreement giving the European aircraft manufacturer majority control is closing earlier than originally planned.

When the agreement was announced last October, the Montreal-based company was required to fund the CSeries until closing — forecast sometime in the second half of 2018 — and up to US$700 million in cash shortfalls over the next two years as it ramps up production.

Under the final agreement with Airbus announced Friday, Bombardier has also committed to fund the program until the July 1 closing and contribute up to US$925 million in cash shortfalls through 2021.

Total spending on the program remains in line with the company’s original guidance and protects it from paying cost overruns, said Bombardier spokesman Olivier Marcil.

Asked why Bombardier isn’t getting some relief because of the early closing, Marcil said it was part of the negotiated general conditions.

“We had already planned to spend it in the context of ramping up production,” he said in an interview.

Bombardier will receive non-voting shares of the CSeries partnership through a cumulative annual dividend of two per cent.

Any excess shortfall during these periods will be borne by the partnership’s shareholders.

Bombardier’s share will be about 33.76 per cent. The Quebec government, which injected US$1 billion in 2015, will own the remaining 16.24 per cent. Airbus will hold 50.01 per cent.

“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 CSeries 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 on Friday.

Bombardier will work with Airbus to ramp up production on the CSeries passenger jets, which were designed with improved fuel efficiency and less seating capacity than most passenger jets offered by Airbus or its rival Boeing.