* To slash workforce by about 7,000 over next two years
* Forecasts 2016 revenue below analysts' estimates
* Proposes reverse stock split
* Quebec government drops lawsuit against Air Canada (Adds details on order, share price move, analyst, CEO comment)
By Allison Lampert
MONTREAL, Feb 17 (Reuters) - Bombardier Inc said it received the first order in 16 months 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 that it signed a letter of intent to sell Air Canada 45 CSeries jets, with an option for 30 more. The order, worth as much as $3.8 billion based on the list price, is the first for the CSeries since September 2014.
The Quebec government, which gave Bombardier a $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.
The Canadian government said it was still in talks with Bombardier on its request for federal aid. The country's transport minister said Ottawa had put no pressure on Air Canada to buy jets from the planemaker.
Bombardier Chief Executive Officer Alain Bellemare said the company still wanted federal assistance for the CSeries, which has been plagued by delays and cost overruns.
"We are hoping the federal government would come very close to what Quebec did," Bellemare said on a conference call. "Quebec came with a very good structure where they have equity ownership, and we've been benefiting significantly from that."
Shares of Bombardier, which also benefited from news of a planned reverse stock split, were up 19 percent at C$1.07 in midday trading after rising as high as C$1.17.
"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 $250 million to $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 $16.5 billion to $17.5 billion, below analysts' expectations of $18.07 billion, according to Thomson Reuters I/B/E/S.
Bombardier's net loss narrowed to $677 million, or 31 cents per share, in the fourth quarter from $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.
Bombardier, which received recent cash infusions from pension fund Caisse de dépôt et placement du Québec as well as the Quebec government, said it expected free cash flow usage of $1.0 billion to $1.3 billion this year.
The company also confirmed Reuters' report of a reverse stock split to prop up its sagging share price, which had been below C$1 since late January, its lowest in 25 years.
Bombardier will determine the ratio for the reverse stock split later, but it said it was targeting an initial post-consolidation price of C$10 to C$20 per class A or Class B subordinate voting share.
Addition report by Euan Rocha in Toronto and Amrutha Gayathri in Bengaluru; Editing by Lisa Von Ahn