MONTREAL/OTTAWA (Reuters) - Bombardier BBDb.TO exited commercial aviation on Thursday, selling a loss-making plane program that ended its high-stakes gamble on a new jet that once drove it to the brink of bankruptcy.
The Canadian plane and train maker sold its minority stake in the A220 jet, formerly known as the CSeries, to Airbus SE AIR.PA for $600 million, and said it would take a $1.6 billion charge on the program.
Bombardier once threatened to reshape global aviation with the first all-new narrow-body jet in 30 years, triggering a race by major rivals to develop their own new planes.
But the $6 billion program was beset with delays and cost overruns. Bombardier, which required government bailouts in recent years as it struggled to fund the program, finally sold a majority stake to Airbus in 2017 for one Canadian dollar, partly to avert a potentially devastating trade challenge from U.S. planemaker Boeing Co BA.N.
The latest deal gives Airbus a 75% stake in the A220 program and the Canadian province of Quebec will own 25%. It also allows Bombardier to avoid future capital investments of about $700 million.
Quebec, which agreed to invest $1 billion in the program in 2015, said it would not spend further on the venture.
Airbus will buy back Quebec’s entire stake on Jan. 1, 2026, said provincial Economy Minister Pierre Fitzgibbon.
“Yes, the aerospace sector has experienced some turbulence these past few years but I think this will soon be behind us,” Fitzgibbon told reporters in Quebec City. “I think this step was essential for the firm to continue its activities.”
The Canadian government, meanwhile, was confident that a C$372 million ($280.59 million) loan it gave Bombardier in 2017 will be repaid and Ottawa will not write it off, a government source said.
The source added it wasn’t yet clear whether Bombardier or Airbus would be responsible for paying the rest of the loan.
Bombardier has been shedding businesses to turn itself around. Chief Executive Alain Bellemare told analysts on Thursday that the “clean up over the past five years” would continue.
“We have options and we are going to continue looking at our options to see if there (are) ways that we can accelerate the deleveraging phase of the turnaround plan,” he said on a conference call.
The company forecast a near-positive cash flow, a closely-watched metric, for 2020. Its cash flow was a negative $1.20 billion in 2019.
The company is weighing a possible sale of its remaining business jet or rail divisions.
Bombardier's shares were down 1% in afternoon trading after earlier dropping 9% on disappointment the company did not announce a deal to sell its rail unit to France's Alstom ALSO.PA.
Bombardier has faced higher rail costs due to a few challenging contracts and has $9.7 billion in outstanding bonds according to Refinitiv data.
The company sees 35-40 deliveries of its flagship Global 7500 business jet in 2020, which list for $73 million each.
Reporting by Allison Lampert in Montreal and David Ljunggren in Ottawa. Additional reporting by Ankit Ajmera and Rachit Vats in Bengaluru; Editing by Bernadette Baum
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