15-year payback for federal loan
Bombardier also given two-year grace period for $372.5 million owed
MONTREAL — It will take 15 years for Bombardier to repay the $372.5-million loan it is receiving from the federal government, says its chief financial officer.
During a quarterly earnings conference call Thursday, John Di Bert shed light on the terms of the federal assistance package announced last week for the Montreal-based aerospace giant, including how long it has to repay the money.
“It will be over a significant amount of time, the program length about 15 years, including a bit of a grace period the first two years, so no repayments the first two years,” Di Bert said.
The company expects to receive the money in instalments over four years, with anywhere between $70 million and $100 million flowing to Bombardier annually.
The interest-free loan is to support Bombardier’s Global 7000 business jet and CSeries passenger aircraft projects. Under the arrangement, Bombardier will repay Ottawa based on royalties for the number of CSeries sold and revenues generated from the Global 7000. About two-thirds of the loan is set aside for the Global 7000s, with the rest devoted to the CSeries.
The aid to Bombardier has been the subject of public criticism, but the federal government and the company have both defended its merits, saying it’s needed to preserve jobs and compete globally.
Brazil has filed a complaint before the World Trade Organization, accusing Canada of unfairly subsidizing Bombardier, an allegation both the company and the federal government reject.
Bombardier expects to begin paying royalties in April from a $350-million federal loan it received in 2008 to develop the CSeries. The initial payments are based on seven CSeries planes delivered last year.
The company expects to deliver 30 to 35 CSeries aircraft this year. Most of the deliveries will come toward the end of the year as Pratt & Whitney resolves problems building engines that reduced CSeries deliveries last year.
Bombardier is in the midst of a five-year turnaround plan that has involved mass layoffs. Earlier Thursday, it reported 2016 yearend losses of $981 million US, down from $5.34 billion US in 2015. Full-year revenue — reported in U.S. currency — fell by $1.8 billion from 2015 to $16.34 billion last year.
CEO Alain Bellemare said lessons learned from developing the 100- to 160-seat CSeries, which incurred delays and cost overruns, are being taken into account as Bombardier builds the Global 7000, its largest business jet, scheduled to enter service late next year. “Like any new program, we will have some hiccups and some issues along the way,” he said on the conference call. “But right now we’re not seeing anything that is abnormal.”