Bombardier Inc. sells its Q400 turboprop business to Viking Air, the largest aerospace manufacturer in Canada, unloads non-essential assets and creates a future that is becoming more and more prone to luxury airplanes and trains.
Montreal-based Bombardier announced the deal Thursday, coupled with third-quarter earnings, part of a series of measures including the sale of private aircraft training activities to CAE Inc. and cutting 5,000 jobs in the next 12 to 18 months. The net revenue from the two deals is expected to be about $ 900 million, said Bombardier.
Bombardier said most cuts would come to its aerospace business. About 2,500 jobs will be lost in Quebec and 500 in Ontario. The rest of the cuts will come to other businesses worldwide.
"With today's announcements, we have launched the next round of actions that are needed to expand the full potential of the Bombardier portfolio," said Bombardier chief Alain Bellemare. "We will continue to be proactive in focusing and rationalizing the organization."
Mr Bellemare has returned Bombardier from the brink of bankruptcy as growth costs have risen to the C-series commercial aircraft program. He has already cut off thousands of jobs and reorganized the railway company in an attempt to restore profitability and eventually reduce a debt which is about $ 8 billion. The sale of turbine and education companies increases the company's financial flexibility as it begins de-mining, said Bellemare.
The agreement with Viking marks the second major sale for Bombardier this year, after the sale of the controlling shareholding in the C Series at Airbus SE in July. Bombardier came to the conclusion that it could not go alone against the manufacturers of narrow skeleton aircraft in the industry and that the huge resources of Airbus could make the C series more successful. Since then, Airbus has repaired the A220.
Bellemare recently said in May that the company has committed to the two remaining commercial aircraft, the Q400 and the Canadair CRJ regional aircraft. "I do not think of going out of business," he said. "We're thinking about growing up."
Why the management of Bombardier changed her mind was not immediately clear. Despite all this, there were hallucinations behind the scenes that the Bombardier and Viking officials were back over and over again for several months. The parent company, Viking Longview Aviation Capital, is making the acquisition. The agreement also includes rights for the de Havilland brand.
Waiting for the Q400 amounted to 56 airplanes as of July 1st.
The Q400, while being technologically sound, surpasses ATR's competitive ATR world-wide. Bombardier had explored ways to reduce production costs to increase profitability, but concluded that selling was a better option. It also looks at options for CRJ.
This is a big deal for Viking. Historically, the company was willing to accept the unwanted assets of Bombardier, which recently bought the Bombardier CL-415 waterbomber. The Victoria-based company based in the UK has developed a fantasy for renewing alms programs. But control of the Q400 is on a scale, unlike what he has done before.
Bombardier said it has achieved the best quarterly return in years in the third quarter ended September 30, earning $ 149 million or 4 cents a share in revenue of $ 3.6 billion. Earnings before taxes and interest, excluding special items, rose 48% to US $ 271 million. Free cash usage for the quarter was $ 370 million. The company still expects to report the free cash flow for the full year, plus or minus $ 150 million.
The company has embarked on a restructuring effort across the company, which includes "reducing management" and further reducing costs. It expects to save US $ 250 million with the moves until all will be implemented in 2021. Expects to record a restructuring fee of the same amount.
Rationalization efforts also include two key actions concerning the engineering department. First, Bombardier intends to distribute its core aeronautical engineering team and move key personnel to other parts of the company, with the largest group moving to private aircraft to work on future aircraft development projects. Secondly, the company said it would create a new office of advanced technologies that will focus on system design and engineering.
The company has confirmed its economic targets for 2020.
Bombardier's shares fell about 40 percent from its 52-week maximum in July, as investors are worried about the company's ability to handle future debt payments, among others. Today's actions could reassure the market that the administration is still taking dramatic steps to make the company a more cost-effective factor, even if hard work is done.