TORONTO (Reuters) - Bombardier Inc announced another round of job cuts at its aerospace division on Thursday, slashing 715 jobs in the Montreal area due to a lack of new orders for its CRJ regional jets.
Bombardier, the world’s No. 3 planemaker and No. 1 trainmaker, has seen the market for its narrow-body regional airliners and business jets freeze up because of the soft global economy.
Many airlines canceled or deferred aircraft orders as travel demand dropped and they slashed costs, which led Bombardier to cut about 4,360 jobs in two rounds of layoffs earlier this year.
The new job cuts are likely enough to adjust for the lower production rates, said Chris Sears, an analyst at MacDougall, MacDougall & MacTier in Montreal.
“With the cuts they’ve made, I think they’ve been pretty aggressive,” he said.
He added that there appears to be strong interest in the 70- to 100-seat CRJ jets, but most airlines will need to see a rebound in the economy before they have enough confidence to place new orders.
“I think demand will come back, but certainly not in the next couple of quarters,” said Sears.
Benoit Poirier, an analyst Desjardins Securities, said that the cuts were not a surprise, as Bombardier only received one tentative order for CRJ aircraft in the latest quarter, which was a letter of intent from American Airlines for 22 CRJ700s.
We “believe the company had to revise downward its production rate to match the lower demand,” he said in a note to clients. “We also understand that the availability of the CRJ in the pre-owned market is impeding new sales of regional jets.”
Montreal-based Bombardier said the latest job cuts would take effect in January and through the first two quarters of next year as it scales back production of its CRJ line. The company did not give any details on the planned production schedule for next year.
“There are not enough projected CRJ aircraft sales to maintain the current production plans,” Guy Hachey, president and chief operating officer of Bombardier Aerospace, said in a statement.
“Although we are in discussions with several airlines, we had to finalize our aircraft delivery schedule for the next fiscal year.”
The cuts also includes some layoffs related to a decrease in production of the Bombardier 415 amphibious aircraft, a turboprop water bomber used around the world to fight wildfires.
The company estimates severance costs associated with the latest cuts to be about $10 million.
Bombardier releases its results for its third fiscal quarter next Thursday.
Shares of the company were down 16 Canadian cents, or 3.4 percent, at C$4.62 on the Toronto Stock Exchange on Thursday morning.
Additional reporting by Scott Anderson; editing by Rob Wilson