August 28, 2013 / 1:40 PM / in 5 years

Bombardier, Rostec in tentative turboprop assembly line deal

TORONTO (Reuters) - Bombardier Inc signed a preliminary deal on Wednesday to sell 50 of its Q400 NextGen aircraft to Russian industrial and defense conglomerate Rostec as part of a broader agreement that will lead to a final assembly line for the planes in Russia.

The letter of intent signed with Rostec’s aircraft leasing subsidiary Avia Capital Services includes a marketing agreement that is expected to result in orders for at least 50 additional Q400 NextGen turboprop aircraft in and around Russia.

Montreal-based Bombardier (BBDb.TO)(BDRBF.PK) said if it winds up selling 100 of the Q400s, the orders could be worth about $3.39 billion, based on the list price.

The Q400 seats 70 to 80 passengers and is designed to operate in extreme low temperatures.

The sales are contingent on establishing a final assembly line for the aircraft in Russia, which would be a joint venture between the two companies. They hope to conclude a definitive deal in 2014, subject to various approvals.

Bombardier said if they complete a final deal, the Q400 assembly line in Russia would produce aircraft for Russian customers and would be incremental to Bombardier’s current Q400 NextGen production operations in Toronto, Canada.

The two sides, which have been in talks since early this year, signed the preliminary agreements at Moscow’s MAKS air show that began earlier this week.

Reporting by Euan Rocha; Editing by Jeffrey Benkoe

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