Jet deals torn up amid cash crunch
Bombardier voids orders, drops Mideast partner
Bombardier Inc. said on Wednesday it was ending a decades- long business jets sales tie- up with a partner in the Middle East and separately canceling two- dozen firm orders for its larger Global business jets, as it moves to improve long-term profitability.
The Montreal-based company’s move to cancel 24 firm orders, along with an additional cancellation of 30 optional orders for its larger Global jets comes as a bit of a surprise given the company’s recent woes.
The embattled plane- and train- maker said, however, that it is confident that it could resell those business jet order slots at improved margins.
The company has seen its share price tumble more than 72 per cent in the last two years, as its long-delayed and billions of dollars overbudget CSeries jet program has left the company shuddering under a massive debt load.
The initial variant of the CSeries narrow- body commercial jet just won certification from Canadian regulators last month, shortly after the government in Bombardier’s home province of Quebec vowed to make a $ 1 billion cash infusion in return for a nearly 50 per cent stake in the CSeries program.
In November, Bombardier also agreed to sell a 30 per cent stake in its rail business to Quebec’s public pension fund manager for $ 1.5 billion, in a bid to bolster its balance sheet.
Bombardier said on Wednesday it would start selling directly to customers in the Middle East and North Africa and that it has ended a tie-up with TAG Aeronautics, the long-time exclusive sales representative for its Challenger and Global business jets in the region.
Bombardier will record charges of US$ 278 million in the fourth quarter on the move and separate cancellation of the business- jet purchase orders, the company said.
“Longer- term, this announcement s hould be positive,” noted Desjardins analyst Benoit Poirier, adding that it would help the segment reach an eight- percent to 10- per- cent EBIT ( earnings before interest and taxes) margin range by 2020.
The c ompany said it plans to focus on interacting directly with its customers as part of a change in its strategic business planning f or the Middle East and Africa.
“Bombardier is firmly committed to the Middle East and Africa, and our in- region sales team is well equipped to ensure all customers find the ideal business jet for their needs,” Bombardier’s business jet head David Coleal said in a statement.