LAS VEGAS (Reuters) - Bombardier Inc is in talks with the new Canadian government about a further cash infusion into its struggling CSeries jet program, which the planemaker expects to turn a profit by around 2020, according to Chief Executive Alain Bellemare.
The long-delayed single-aisle passenger jet program is already billions of dollars over budget and has left Quebec-based Bombardier saddled with over $9 billion in debt. The 2020 profitability date is broadly in line with analyst expectations.
“We’ve been in discussion with them regarding some sort of participation on some form of financing investment,” Bellemare told Reuters at an aviation industry conference in Las Vegas on Monday, referring to Canada’s new federal government. “It is still in the early stage so I wouldn’t want to speculate more than that.”
Bellemare said it is tough to forecast precisely when the CSeries will be profitable, as much depends on the ramp-up in production volumes and the company’s ability to trim costs.
“There are many pieces to this puzzle so 2020 is a good time frame,” said Bellemare. He declined to comment on when Bombardier would have any new orders for the CSeries or name potential buyers.
The financing talks come after the Quebec government said last month it would invest $1 billion in the CSeries program in return for a near 50-percent stake in the project.
Canadian Prime Minister Justin Trudeau said on Nov. 10 any Bombardier aid would be based on a strong business case and not on “emotion, politics or symbols.”
Bombardier has received 243 firm orders for the CSeries, but it is still short of its target of 300 firm orders by the time the jet enters service in 2016. Last month, Bombardier said it was in “advanced discussions” to sell the CSeries jet to airlines in North America, but it did not identify potential buyers.
Bellemare, who became chief executive in February, has been focused on reducing debt on Bombardier’s balance sheet through asset sales. The company plans to raise $1 billion or more through the sale of a minority stake in its rail division, Bombardier Transportation (BT).
Bellemare, who has stated that a decision on the rail stake sale will be made before the end of the year, said he favors a minority stake sale via a ‘private placement.’
“We want to do a minority stake in BT because we want to preserve the bulk of that train business. Its earnings, its cash, its margins and we see significant potential in that business over the next five years,” he said, while declining to comment on the size of the stake the company plans to sell.
The company, which plans to host an investor day in New York on Nov. 24, will be focusing more on its operating and financial performance, now that its liquidity issues have largely been alleviated, said Bellemare.
“I feel comfortable with what we have and once we do an IPO or private placement of the train business we’ll be on very solid footing for the years to come,” he said. “So that will give us the ability to complete all of our new development programs.”
Writing and additional reporting by Euan Rocha; Editing by Bill Rigby