26 October 2016
Bombardier CEO Alain Bellemare (left) and his counterpart at Air Canada, Calin Rovinescu, announce the deal at a news conference in Montreal on Wednesday. Photo: Reuters
Bombardier CEO Alain Bellemare (left) and his counterpart at Air Canada, Calin Rovinescu, announce the deal at a news conference in Montreal on Wednesday. Photo: Reuters

Bombardier wins US$3.8 bln Air Canada order, to cut 7,000 jobs

Bombardier Inc. received an order for its CSeries aircraft, sending its shares up as much as 30 percent and overshadowing news of the planemaker’s lower-than-expected quarterly results and plan to cut 7,000 jobs.

The company said on Wednesday it signed a letter of intent to sell Air Canada 45 CSeries jets, with an option for 30 more, Reuters reported.

The order, worth as much as US$3.8 billion based on the list price, is the first for the CSeries since September 2014, the news agency said.

The Quebec government, which gave Bombardier a US$1 billion lifeline last year, said it would drop a lawsuit against Air Canada. In return, the airline agreed to conduct maintenance on CSeries jets in the province.

Bombardier chief executive Alain Bellemare said the company still wanted federal assistance for the CSeries, which has been plagued by delays and cost overruns.

“Despite the non-firm agreement, we believe this order could represent a strong commitment for the long-term viability of the C Series,” Desjardins analyst Benoit Poirier said in a note to clients.

On a call with analysts, Bellemare said Air Canada’s order was a strong endorsement for the line of jets, which faces fierce competition from Boeing Co.’s 737 and Airbus Group’s A320 series.

Bombardier now has 678 total orders and commitments for the CSeries, including 243 firm orders.

Despite the boost from the Air Canada order, the company said it was continuing with its restructuring and planned to slash its workforce by about 7,000 over the next two years.

Bombardier, which has about 64,000 employees, expects to record US$250 million to US$300 million in restructuring charges in 2016 for the layoffs.

The job cuts will be mainly in the company’s aerostructures and engineering services and transportation divisions in Canada and Europe.

At the same time, Bombardier will ramp up hiring to support production of the CSeries and its new Global 7000 business jets.

The company forecast 2016 revenue of US$16.5 billion to US$17.5 billion, below analysts’ expectations of US$18.07 billion, according to Thomson Reuters I/B/E/S.

Bombardier’s net loss narrowed to US$677 million, or 31 cents per share, in the fourth quarter from US$1.6 billion, or 92 cents per share, a year earlier.

Excluding special items, Bombardier broke even, but analysts were expecting a profit of 2 cents per share.

Meanwhile, Airbus secured an order from Philippine Airlines Inc. valued at US$1.8 billion as the Southeast Asian carrier seeks to fly to New York and the US West coast, Bloomberg reported.

Philippine Airlines will take delivery of the A350-900s in two years and the aircraft are meant to replace older A340 models, company president Jaime Bautista said at the Singapore Airshow Wednesday.

The agreement with Airbus includes an option to purchase six more of Airbus’s latest widebody jet.

Airbus, Boeing, Mitsubishi Aircraft Corp. and ATR have announced orders totaling US$4.2 billion this week at the Singapore Airshow amid concern that a two-year, multibillion-dollar order spree by Asian carriers is losing steam.

Chicago-based Boeing Wednesday announced a $1.3 billion order with China’s Okay Air.

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