Bombardier slashes profit forecast, rethinks Airbus joint venture
TORONTO Bombardier Inc. warned it may ditch its joint venture building the A220 aircraft with Airbus and will consider selling more assets to pay down debt, renewing investor worries about the Montreal-based manufacturer’s ability to stay afloat as the clock runs down on its fiveyear turnaround strategy.
The beleaguered plane and train maker’s stock price tanked more than 30 per cent on Thursday after it slashed its 2019 financial forecast for the second time in less than a year, largely due to missed milestones, delayed deliveries and extra production costs for several challenging rail projects. By close, Bombardier stock had fallen nearly 32 per cent to $1.22 on the Toronto Stock Exchange.
Analyst were caught by surprise by the “hugely disappointing” announcement, given executives’ previous insistence that the company had turned a corner.
“This is a significant setback following management’s announcement following the third quarter that the worst for Bombardier Transportation may be behind,” BMO analyst Fadi Chamoun noted to clients.
Bombardier has already shed most of its commercial aviation assets since chief executive Alain Bellemare began his turnaround plan in 2015, focusing instead on the more profitable rail and business jet divisions in a bid to build a leaner, more financially stable company. Now it’s mulling whether it should go one step further and abandon its partnership with Airbus, even though Bombardier has sunk about $6 billion into the program and committed to it for about five more years.
It expects to take a significant writedown on the Airbus venture after a business plan review indicated the A220 program will take longer to break even, make less money over its lifespan and require more upfront investments from cash-strapped Bombardier.
In 2017, Bombardier ceded control of its cash-guzzling C-series program to Airbus, which renamed the jet the A220 under a joint venture owned 50.01 per cent by Airbus, 31 per cent by Bombardier and 19 per cent by the province under Investissement Québec.
The announcement comes days after Bellemare celebrated the maiden commercial flight of the A220 in Canada.
For its part, Airbus Canada Ltd. said it cannot comment on Bombardier’s financial situation but that its position remains unchanged. “Airbus remains committed to the success of the A220 programme ...,” spokeswoman Marcella Cortellazzi said in an email.