Nick614
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Thu Feb 13, 2020 10:24 pm

So why oh why we only hear about the A220-500 on A.net? Why has Airbus already not jumped on the bandwagon and started offering the extension?


Don't think that is a realistic option, A220-300 is already a lot longer than the 737-700 for same seating capacity since the A220 is only 5 abreast. Add in the likely need for a new wing, it would make it a similar situation to the MC-21-400.
 
Nick614
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Thu Feb 13, 2020 10:27 pm

Amiga500 wrote:
Nick614 wrote:
frmrCapCadet wrote:
The 220 is a good plane, we all know that. Whether or not it will be a great seller is still, excuse the phrase, up in the air.


They should do whatever it takes to get Southwest to make an order for 500x -300s assembled in Alabama. Southwest seems comfortable with the smaller seat counts compared to other LCC.


Why cut Southwest a deal? That might be the sale that recoups it all for Airbus.


If the A223 keeps delivering and P&W get a PIP or two on it, when Moxy and Delta get them established, it just needs someone to look at expanding into Southest's market for them to have to react in some shape or form.

At which point Airbus are sitting very pretty as there is nothing directly suitable.

The 737-7 isn't good enough on a recurring costs basis. The 737-8 is too big, either load factors would plummet or yield would plummet. There are no easy (non A220) solutions for Southwest.

All predicated on **if** someone starts to encroach on their market.


The 737-700 Max is absolutely good enough on a cost basis, I heard it is cheaper than the A220 and the maintenance costs will be lower. Plus you dont have to deal with switching everything over, that is why a deal would have to be made.

A220 is a good plane, but its success is not in stone just yet. Airbus needs to focus on ramping up US production asap. It doesnt matter how good something is, if it isnt readily available.
 
oosnowrat
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 14, 2020 12:23 am

VV wrote:
ExMilitaryEng wrote:
VV wrote:
I really DO NOT understand you stuff with "broken clocks".
Would you please elaborate?

Une interprétation "possible" est qu'une horloge "figée" / en panne (à 10h10 par exemple) donnera toujours l'heure juste deux fois par jour... (à 10h10 le matin, et à 10h10 le soir par exemple).

But hey, you definitely understood very well that interpretation, didn't you? :D


Sorry, I do not understand it in the context of this thread.

I said Bombardier would get only 500 million from the sale of its stake and my estimate is damn close to the reality.
This event happens only once, so what the hell is the fuss about "a broken clock is right twice a day"???

This sale is one off event, so there will never be any other $ 500 million of Bombardier stake bought by Airbus. What the heck is this story about a clock being right twice a day???


The poster was calling you the broken clock, not the event this thread is supposed to be about. This is what passes for civil dialogue on a.net.
 
9252fly
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 14, 2020 12:41 am

oosnowrat wrote:
VV wrote:
ExMilitaryEng wrote:
Une interprétation "possible" est qu'une horloge "figée" / en panne (à 10h10 par exemple) donnera toujours l'heure juste deux fois par jour... (à 10h10 le matin, et à 10h10 le soir par exemple).

But hey, you definitely understood very well that interpretation, didn't you? :D


Sorry, I do not understand it in the context of this thread.

I said Bombardier would get only 500 million from the sale of its stake and my estimate is damn close to the reality.
This event happens only once, so what the hell is the fuss about "a broken clock is right twice a day"???

This sale is one off event, so there will never be any other $ 500 million of Bombardier stake bought by Airbus. What the heck is this story about a clock being right twice a day???


The poster was calling you the broken clock, not the event this thread is supposed to be about. This is what passes for civil dialogue on a.net.


My curiosity got the better of me...so an internet search was in order. Answer; A normally unreliable person or instrument can occasionally provide correct information, even if only by accident.
 
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Revelation
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Fri Feb 14, 2020 4:28 am

Canuck600 wrote:
If Quebec can't get back what they spent on the program.they will face a huge backlash from the Quebec taxpayers. The government of Canada is in the same situation.

I might be reading it wrong but I think a lot of people are not grasping that Bombardier's need for guaranteed cash now far outweighs any potential profit they would get in the future.

Huge backlash?

Is it really top of mind for lots of QC citizens?

IQ has a lot of ways to explain away any financial loss, like we saved jobs, we helped save the program, we helped make it possible for a global vendor of Airbus's stature to set up shop in Canada, etc.

Their real problem would be there was a massive loss in jobs like if Airbus moved the program elsewhere, but there's no evidence that Airbus has any plans to do so.
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ExMilitaryEng
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 14, 2020 5:14 am

VV wrote:
And how do you call people who are just saying random stuff and are never right?
A "good clock"?


I don't know, like this sarcastic response you mean? (About how much Airbus would pay BBD for the remaining stake):

VV wrote:
Will it be another dollar?
 
VV
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 14, 2020 6:37 am

ExMilitaryEng wrote:
VV wrote:
And how do you call people who are just saying random stuff and are never right?
A "good clock"?


I don't know, like this sarcastic response you mean? (About how much Airbus would pay BBD for the remaining stake):

VV wrote:
Will it be another dollar?


It was a genuine question.
Since the first 50% or so was obtained with one dollar, logically the remainder would be one dollar too.

This said I made a more reasonable estimation at $ 500 million and it was not too bad compared to four billion or so mentioned by some "good clocks".
 
Kiwirob
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 14, 2020 7:39 am

Nick614 wrote:
So why oh why we only hear about the A220-500 on A.net? Why has Airbus already not jumped on the bandwagon and started offering the extension?


Don't think that is a realistic option, A220-300 is already a lot longer than the 737-700 for same seating capacity since the A220 is only 5 abreast. Add in the likely need for a new wing, it would make it a similar situation to the MC-21-400.


What is the situation with the MC-21-400?
 
Virtual737
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Fri Feb 14, 2020 9:19 am

A few pages back the US and EU laws were debated. "Unethical" was how one poster described breaking the US law and there was an assumption that EU law was very similar, although it only applies to dominant suppliers.

For anyone that thinks that such laws and / or tariffs are a good thing, I would implore you to view one of Dr Neil deGrasse Tyson's speeches here:

https://www.youtube.com/watch?v=joARXZagTuM

Start at 52 minutes in.

The speech is with regard to NASA but has some (IMHO) very close ties to the airliner industry. In addition, if a fully established company that is part of a global duopoly does not think that market conditions are already hugely in their favour then they should take a very long, hard look at themselves. If they do anything other than innovate to improve their position, the customer will not benefit and, longer term, neither will they are their employees and supplier.
 
mjoelnir
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 14, 2020 9:47 am

VV wrote:
ExMilitaryEng wrote:
VV wrote:
And how do you call people who are just saying random stuff and are never right?
A "good clock"?


I don't know, like this sarcastic response you mean? (About how much Airbus would pay BBD for the remaining stake):

VV wrote:
Will it be another dollar?


It was a genuine question.
Since the first 50% or so was obtained with one dollar, logically the remainder would be one dollar too.

This said I made a more reasonable estimation at $ 500 million and it was not too bad compared to four billion or so mentioned by some "good clocks".


This one dollar narrative is about the worst hype I can think off. The point is not what Airbus paid, but what responsibilities Airbus took over. Both in regards to dept and in regards to future commitments.

Bombardier rid themselves of huge amounts of dept, that they were not able to keep financing.
 
SteelChair
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Fri Feb 14, 2020 1:47 pm

The one dollar narrative is a red herring. The reality is that the shaky CSeries program now has a secure future as the A220. It has survived against enormous odds and all kinds of legal shenanigans.
 
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Fri Feb 14, 2020 1:55 pm

Discuss the topic, not other users. This is your warning.
IM messages to mods on warnings and bans will be ignored and nasty ones will result in a ban.
 
YULobserver
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Re: Official: Bombardier sells remaining stake in A220 program

Fri Feb 14, 2020 2:29 pm

Revelation wrote:
Revelation wrote:
https://www.theglobeandmail.com/busines ... remaining/ gives a good summation:

Airbus will pay Bombardier about US$600-million to increase its share in the venture to 75 per cent from just over 50 per cent and relieve Bombardier of further capital commitments in the program worth US$700-million, the companies said in a statement Thursday. The Quebec government will boost its share in the venture to 25 per cent from about 16 per cent for no cash consideration.

One could look at this and say Airbus gave $600m cash and $700m concessions to gain 25% of the program.

This values 1/4th of the program at $1.1B or the whole program at $4.4B at this point in time.

Oops, pre-coffee math!

$600m + $700m = $1.3B; $1.3B * 4 = $5.2B

$5.2B should be a ball park figure for the program's valuation at this point in time.

It would be interesting if Airbus chose to float it as a stand alone entity on the stock market.




The Quebec government took a 600M$ CAD impareiment charge. Their investment is now worth 700M$ CAD for 25%. That would value the A220 program at around 2.8B$ CAD currently.
The amount BBD received includes as well the now Stelia owned stake making sub components for the A220 Prgram (cockpit, press bulkhead, etc)
 
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Re: Official: Bombardier sells remaining stake in A220 program

Fri Feb 14, 2020 5:02 pm

YULobserver wrote:
Revelation wrote:
$600m + $700m = $1.3B; $1.3B * 4 = $5.2B

$5.2B should be a ball park figure for the program's valuation at this point in time.

It would be interesting if Airbus chose to float it as a stand alone entity on the stock market.

The Quebec government took a 600M$ CAD impareiment charge. Their investment is now worth 700M$ CAD for 25%. That would value the A220 program at around 2.8B$ CAD currently.
The amount BBD received includes as well the now Stelia owned stake making sub components for the A220 Prgram (cockpit, press bulkhead, etc)

I guess now would be the time for a political outcry if IQ just took a $600m hit, no?
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Jungleneer
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Fri Feb 14, 2020 5:23 pm

Seems like some customers are not that happy by this deal:

https://mobile-reuters-com.cdn.ampproje ... SKBN2081T6

"Now you have got the heavyweight boxer in the ring with someone who is about seven divisions lighter – there is only one outcome," said Aengus Kelly, chief executive of leasing giant AerCap (AER.N), the world's largest buyer of commercial planes.

Kelly urged the European Commission to back the deal.

"I think it's a must: if Embraer don't do it, it's likely that Airbus will corner part of the narrowbody market which will be poor for the consumer," he said in a telephone interview.
 
Amiga500
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Fri Feb 14, 2020 6:09 pm

Yeah, unfortunately its hard to see a future for a standalone EMB (who just may be the best run of all four big OEMs - Airbus, Boeing & Bombardier).

If they had a runaway success in E2, then it'd be a different matter - but for whatever reason, its not gaining much market traction.
 
MIflyer12
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Re: Official: Bombardier sells remaining stake in A220 program

Fri Feb 14, 2020 6:37 pm

Revelation wrote:
YULobserver wrote:
Revelation wrote:
$600m + $700m = $1.3B; $1.3B * 4 = $5.2B

$5.2B should be a ball park figure for the program's valuation at this point in time.

It would be interesting if Airbus chose to float it as a stand alone entity on the stock market.

The Quebec government took a 600M$ CAD impareiment charge. Their investment is now worth 700M$ CAD for 25%. That would value the A220 program at around 2.8B$ CAD currently.
The amount BBD received includes as well the now Stelia owned stake making sub components for the A220 Prgram (cockpit, press bulkhead, etc)

I guess now would be the time for a political outcry if IQ just took a $600m hit, no?


You can't complain about the individual losses without acknowledging the wins. People (Quebec's citizens, anyway) can complain against the principle of Provincial investment (you're subsidizing the politically-connected; those who have already failed in the markets...) But you don't have to look far beyond the U.S. and U.K. to see this is a pretty common model.

Beyond Investissement Quebec, the Caisse de dépôt et placement du Québec (manager of provincial pension funds) is very active in equity support of Quebec businesses and has a lot of money in play - like $300 Billion, the same scale as CalPERS.
 
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Fri Feb 14, 2020 7:01 pm

Amiga500 wrote:
Yeah, unfortunately its hard to see a future for a standalone EMB (who just may be the best run of all four big OEMs - Airbus, Boeing & Bombardier).

If they had a runaway success in E2, then it'd be a different matter - but for whatever reason, its not gaining much market traction.

It will be interesting to see how business schools look back at the key decision, what cross section to build to.

Image

Ref: https://twitter.com/bouroux/status/981300749886947330
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Re: Official: Bombardier sells remaining stake in A220 program

Fri Feb 14, 2020 7:14 pm

MIflyer12 wrote:
You can't complain about the individual losses without acknowledging the wins. People (Quebec's citizens, anyway) can complain against the principle of Provincial investment (you're subsidizing the politically-connected; those who have already failed in the markets...) But you don't have to look far beyond the U.S. and U.K. to see this is a pretty common model.

Beyond Investissement Quebec, the Caisse de dépôt et placement du Québec (manager of provincial pension funds) is very active in equity support of Quebec businesses and has a lot of money in play - like $300 Billion, the same scale as CalPERS.

I largely agree with the idea that people won't care much about IQ losing money if the jobs stay.

My comment was in reply about a public outcry in to what appears to be a now deleted post.
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YULobserver
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Re: Official: Bombardier sells remaining stake in A220 program

Fri Feb 14, 2020 8:42 pm

Revelation wrote:
YULobserver wrote:
Revelation wrote:
$600m + $700m = $1.3B; $1.3B * 4 = $5.2B

$5.2B should be a ball park figure for the program's valuation at this point in time.

It would be interesting if Airbus chose to float it as a stand alone entity on the stock market.

The Quebec government took a 600M$ CAD impareiment charge. Their investment is now worth 700M$ CAD for 25%. That would value the A220 program at around 2.8B$ CAD currently.
The amount BBD received includes as well the now Stelia owned stake making sub components for the A220 Prgram (cockpit, press bulkhead, etc)

I guess now would be the time for a political outcry if IQ just took a $600m hit, no?



They actually have spun it favorably. The financial instrument changed, therefore they had to do a fair value assesment according to Quebec financial rules. They used that as leverage to move the Airbus buyback date to 2026. The strategy here is since Airbus projects program to be cashflow positive in 2025 once 150 per year rate is obtained, the value should therefore be a lot better, and IQ should recoup the "on paper" loss.

Since it went down already by 46%, what else is there to loose? Program is more secure with Bombardier out of the picture right now anyways.


At this point, people are more angry at BBD management than at IQ.
 
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reidar76
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Fri Feb 14, 2020 9:11 pm

As I understand it, Airbus will continue to invest in the A220 (Airbus Canada), while Quebec investment fund will not. The current share of 75/25% to Airbus and Quebec investment fund respectively, will change before 2026, with Airbus gradually increasing its share by investing in the A220 programme. (?)
 
9252fly
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Re: Official: Bombardier sells remaining stake in A220 program

Fri Feb 14, 2020 9:13 pm

YULobserver wrote:
Revelation wrote:
YULobserver wrote:
The Quebec government took a 600M$ CAD impareiment charge. Their investment is now worth 700M$ CAD for 25%. That would value the A220 program at around 2.8B$ CAD currently.
The amount BBD received includes as well the now Stelia owned stake making sub components for the A220 Prgram (cockpit, press bulkhead, etc)

I guess now would be the time for a political outcry if IQ just took a $600m hit, no?



They actually have spun it favorably. The financial instrument changed, therefore they had to do a fair value assesment according to Quebec financial rules. They used that as leverage to move the Airbus buyback date to 2026. The strategy here is since Airbus projects program to be cashflow positive in 2025 once 150 per year rate is obtained, the value should therefore be a lot better, and IQ should recoup the "on paper" loss.

Since it went down already by 46%, what else is there to loose? Program is more secure with Bombardier out of the picture right now anyways.


At this point, people are more angry at BBD management than at IQ.


In layman's terms to summarize, Airbus initially paid $1 for 51% of the program and has now paid about $600 million to increase that to to 75%. IQ's valuation of its now 25% having being written down is valued at $700 million with the put on its shares deferred to 2026. If I'm understanding this correctly, the overall value of the program as it stands today is $2.8 billion? This essentially means Airbus has paid 25% of the value of the program for 75% control, not a bad investment.
 
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Re: Official: Bombardier sells remaining stake in A220 program

Fri Feb 14, 2020 9:50 pm

YULobserver wrote:
They actually have spun it favorably. The financial instrument changed, therefore they had to do a fair value assesment according to Quebec financial rules. They used that as leverage to move the Airbus buyback date to 2026. The strategy here is since Airbus projects program to be cashflow positive in 2025 once 150 per year rate is obtained, the value should therefore be a lot better, and IQ should recoup the "on paper" loss.

I'm having a hard time seeing what leverage a passive investor in an overvalued asset would have.

It's kind of interesting how these lower levels of valuation support the controversial points BBD was making when this thread was started, that the program will require more investment than planned, will take longer to break even than planned, and will have overall lower ROI than planned.

People seem to reflexively deflect negative news when it comes to A220.

Given Airbus's recent run ins with compliance issues I doubt they are going to be party to playing fast and loose with the truth so I think the valuations are solid.

YULobserver wrote:
Since it went down already by 46%, what else is there to loose?

54%? Doubling down on a bad bet is always a risky proposition. The program has to triple its current production rate while lowering costs to get to the projected 2025 break even point. A lot can happen between then and now, and it won't be in Airbus's best interest to have the program be hugely valued in 2026 when the buy out clauses kick in.

YULobserver wrote:
Program is more secure with Bombardier out of the picture right now anyways.

Yes, BBD was way over committed, but again they were on the hook to provide $700M in funding that Airbus now has to provide.

YULobserver wrote:
At this point, people are more angry at BBD management than at IQ.

The time for that was several years ago when they were trying to do three new airplanes at once.

9252fly wrote:
In layman's terms to summarize, Airbus initially paid $1 for 51% of the program and has now paid about $600 million to increase that to 75%. IQ's valuation of its now 25% having being written down is valued at $700 million with the put on its shares deferred to 2026. If I'm understanding this correctly, the overall value of the program as it stands today is $2.8 billion? This essentially means Airbus has paid 25% of the value of the program for 75% control, not a bad investment.

I think the 50.01% for $1 is hard to evaluate since it included so many other things such as use of Airbus's brand which is a strong but intangible value, access to its marketing, supply chain and support organizations, the Mobile strategy and infrastructure, etc. I think the value of goods and services would exceed the $700M mark by a lot so I don't think we can say Airbus only provided 25% of the valuation.

I agree with the CAD 2.8B valuation based on QI's requirement to report fair value to the markets.

I still don't see why IQ was bumped up to 25% ownership for free and was given a more advantageous buy out date, unless it was a concession needed to make the politics work.

It makes me wonder if Airbus might harbor lingering resentment over giving up so much additional value for nothing in return.
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CFRPwingALbody
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Sun Feb 16, 2020 7:24 am

For optimizing the cross section, what would be required for offering 6AB?
More on topic. A part of the Airbus press releases: link
As part of the agreement, Airbus has acquired the Airbus A220 and A330 work package production capability from Bombardier in Saint-Laurent, Québec. These production activities will be operated in the Saint Laurent site by Stelia Aéronautique Saint Laurent Inc., a newly created subsidiary of Stelia Aerospace, which is a 100 percent Airbus subsidiary.

Stelia Aéronautique Saint-Laurent will continue the production of the A220 cockpit and aft fuselage production, as well as A330 workpackages, for a transition period of approximately three years at the Saint-Laurent facility. A220 workpackages will then be transferred to the Stelia Aerospace site in Mirabel to optimize the logistical flow to the A220 Final Assembly Line also located in Mirabel. Airbus plans to offer all current Bombardier employees working on the A220 and A330 work packages at Saint-Laurent opportunities around the A220 programme’s ramp-up, ensuring know-how retention as well as business continuity and growth in Québec.

Quebac wants the Saint-Laurent facility to close because it's located on very high value ground in the city center. For this to happen, the production assets need to be relocated to Mirabel. AFAIK Stelia Aerospace Mirabel site hasn't enough room for this. Thus a new factory needs to be build at Mirabel. This requires a lot of investments (1-3billion) from Airbus/Stella Aerospace and for the required permits a cooperating government of Quebec.
I hope the 14/month break even point by 2025 is the lower boundary of the goal for the A220 program. Possibly some R&D projects that run to ~2023 are also involved.

A side question; does the aviation market require another 50-100 seat aircraft family?
Last edited by CFRPwingALbody on Sun Feb 16, 2020 7:39 am, edited 1 time in total.
 
JayinKitsap
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Sun Feb 16, 2020 7:37 am

I wish it is otherwise but BBD is probably fried. It's debt load appears to exceed the sale price of all of its businesses. Suddenly, the last $2B of debt will be there with no ongoing businesses. They owed like $9B, getting about 3/4B (payments and not required investment) for the A220, even if the train part comes in at $7B, it is not enough to pay off everything.
 
CFRPwingALbody
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Sun Feb 16, 2020 7:51 am

I looked a little into Bombardier 2019 results, also published February 13th. AFAIK their prospects with the transportation and business jet revisions aren't bad.
I expect the Alstom takeover of transportation will be prohibited just like the deal with Siemens.

Is engine production the bottleneck on A220 production rate long term?
 
VV
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Sun Feb 16, 2020 9:11 am

JayinKitsap wrote:
I wish it is otherwise but BBD is probably fried. It's debt load appears to exceed the sale price of all of its businesses. Suddenly, the last $2B of debt will be there with no ongoing businesses. They owed like $9B, getting about 3/4B (payments and not required investment) for the A220, even if the train part comes in at $7B, it is not enough to pay off everything.


If Bombardier manages to reduce its debts down to about US$ 3.5 billion after the sale of their businesses excepted the Business Aircraft, I believe it is manageable.

The cost of servicing the remaining debt would be down to around US$ 180 million per year.

The only condition to make it manageable is to reduce the size of the Business Aircraft activity, removing at least 75% of their management, remove unnecessary engineering organization (by reducing layers of unnecessary management) as well as removing all kind of unnecessary overhead like HR and supply chain management. However, they have to beef up the customer service at working level, not by adding overhead like managers.
They can also focus on some high margin products and special mission aircraft.

I believe with about 130 deliveries per year the Business Aircraft unit could slowly reduce the remaining debt. It will need a lot of discipline, obviously.
 
PHLCVGAMTK
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sun Feb 16, 2020 11:36 am

JonesNL wrote:
Revelation wrote:
Actually we have a better source, Airbus itself:

PepeTheFrog wrote:


That’s what I would say after I just got the steal of the century. Downplay the future outlook while you know that you will be cashing much sooner. Underpromise and overdeliver. They have nothing to gain by touting that they got an steal and are expecting massive profits. They have much more to lose by showing all their cards.

Or it’s just Occam’s razor and I am overthinking things...


I don't think Airbus is sandbagging expectations here, so much as realigning expectations for a new strategy.

When they bought the first 50.01% of Airbus Canada LP, the MAX and the NEO were both growing orders and production with an eye to an eventual rate 70, leaving only a small niche for the A220. Two weeks later, JT610 crashes into the Java Sea. Fast forward a year and a half, and it's clear that the MAX has lost about a year's worth of production to the groundings and production suspension, and the introduction A321XLR -- and the global near-moratorium on MAX orders -- has stretched Airbus's order book for the NEO. Narrowbody production slots are now more valuable than gold, and Airbus can no longer wait around for A220 production rate to grow slowly and organically to rate 10. Airbus needs a ramp-up ASAP, and they can only get that by plowing a lot of money into capitalizing the production lines in Mirabel and Mobile. Under the old terms, BBD would have had to have paid for its share of that investment, with money it didn't have. Now, that's no longer a problem, and the new stated goal is rate 14. I wouldn't be at all surprised if that rate goes higher in the next six years.

The extension of IQ's put option to 2026 also reflects this shift. ACLP is going to be recording a lot of expenses over the next few years, and the profits from that are either going to be farther out in the future, or showing up elsewhere on Airbus's books. Delaying the put until 2023 will not only give a more accurate valuation of the company, but it will also separate Airbus's payments for more equipment and its potential payoff to IQ by a couple of fiscal years.

I can't help but think of the CSA Czech deal from a few months ago, where they converted an existing order for 7 A320neo, to one for 4 A223 and 3 A321XLR. If Airbus can keep replicating that deal, even in the aggregate across many airlines, it can rake in large profits from the increased margins on XLRs, even if it only breaks even on the A220 side. That's Airbus's real upside, and I'll be shocked if we ever know with certainty how much more profitable the A320 is going to be thanks to the A220.
 
leghorn
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Sun Feb 16, 2020 6:55 pm

Not Aviation news but Bombardier are now out of Rail too as of this evening.
https://www.bloomberg.com/news/articles ... sj-reports

They are the Cautionary Tale that if you ever want to develop a Commercial Airliner you'd had better have a world superpower behind you or you could potentially loose almost everything.
Just private jets left now.
 
MIflyer12
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Sun Feb 16, 2020 7:32 pm

reidar76 wrote:
As I understand it, Airbus will continue to invest in the A220 (Airbus Canada), while Quebec investment fund will not. The current share of 75/25% to Airbus and Quebec investment fund respectively, will change before 2026, with Airbus gradually increasing its share by investing in the A220 programme. (?)


I don't believe further investment by Airbus (taking over BBD's obligations from the 2017 agreement) buys a bigger equity stake. I haven't seen that outlined anywhere. IQ can be a passive investor without further investment obligations.
 
MIflyer12
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Re: Official: Bombardier sells remaining stake in A220 program

Sun Feb 16, 2020 7:45 pm

Revelation wrote:
YULobserver wrote:
They actually have spun it favorably. The financial instrument changed, therefore they had to do a fair value assesment according to Quebec financial rules. They used that as leverage to move the Airbus buyback date to 2026. The strategy here is since Airbus projects program to be cashflow positive in 2025 once 150 per year rate is obtained, the value should therefore be a lot better, and IQ should recoup the "on paper" loss.

I'm having a hard time seeing what leverage a passive investor in an overvalued asset would have.

It's kind of interesting how these lower levels of valuation support the controversial points BBD was making when this thread was started, that the program will require more investment than planned, will take longer to break even than planned, and will have overall lower ROI than planned.

People seem to reflexively deflect negative news when it comes to A220.

Given Airbus's recent run ins with compliance issues I doubt they are going to be party to playing fast and loose with the truth so I think the valuations are solid.


It's common - in the U.S. anyway - for the buyer's advising bank to present multiple valuation models for the purchase of assets that don't have market prices. It's part of making sure that the buyer is upholding responsibilities to its own shareholders to pay a 'fair' price (and not a lot more). There can be a big price spread between models. What happens to models that don't produce the desired answer... You can also find quick and heavy buyer's remorse: See HP's purchase of Autonomy for $11 Billion. https://www.morningbrew.com/daily/stori ... s-go-wrong

IQ would have had its own investment advisers on this deal, independent from Airbus'. Airbus may have had leverage over BBD (BBD's poor financial leverage) but it doesn't have much on IQ, especially after IQ was willing to take a big write-down. The only way Airbus got the deal of the century is if IQ messed up big. We may need to be a few years past 2026 to see how this plays out.

With IQ's valuation - even after 2+ years of Airbus marketing and arm-twisting over supplier costs - it's clear this program is worth a lot less than BBD put into it. There's too much accounting trail of losses and write-offs to deny it.
 
Amiga500
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Mon Feb 17, 2020 8:46 am

Revelation wrote:
Amiga500 wrote:
Yeah, unfortunately its hard to see a future for a standalone EMB (who just may be the best run of all four big OEMs - Airbus, Boeing & Bombardier).

If they had a runaway success in E2, then it'd be a different matter - but for whatever reason, its not gaining much market traction.

It will be interesting to see how business schools look back at the key decision, what cross section to build to.

https://pbs.twimg.com/media/DZ5H0eEVMAE ... me=900x900

Ref: https://twitter.com/bouroux/status/981300749886947330


Ah, I dunno. Is that really fair?

The Ejet is a brilliant 2+2 solution. But that is what it is, 2+2.

There is a better argument to be made over the CSeries being badly sized, being a bit bigger than a 2+3 needs to be - but I suppose if passengers start looking for that added comfort, we'll see it vindicated*.


Maybe the better lesson is that if you are keeping the fuselage relatively fixed, trying to upgrade an aircraft beyond its comfort zone is a non-sensible investment in resources. For instance, does the E2 really need the range it has? What if they kept the range constant with E1 and reduced the wing size (you might get another 5% on fuel performance by resizing)? Then the 777X would be another one - its OEW compared to the A350 is alarming - can Boeing find that performance back in aerodynamics?

It'd be a much more complex decision making process than just that of course - performance vs. alternatives (not necessarily direct competitors - i.e. an airline may use an A320 instead of an E195-E2 on a longer ranged mission and sacrifice frequency) vs. market demand

But maybe the bean counters need to be better able to recognise "an upgrade too far"...


*which would be quite the turnaround given tendency of folks to travel more and more often with ULCCs.
 
Amiga500
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Mon Feb 17, 2020 8:52 am

VV wrote:
I believe with about 130 deliveries per year the Business Aircraft unit could slowly reduce the remaining debt. It will need a lot of discipline, obviously.


I partially agree with the premise.

But where does the money for investment in mid-life upgrades or in the next product come from?

That is an awful lot of burden on the Global.


What if someone does decide to build a SSBJ?
 
GalaxyFlyer
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Mon Feb 17, 2020 3:33 pm

The Global and CL350 make up most of the deliveries, the 650 is a steady 25 per year rate. The 350 upgrade is probably well along. The challenge is a replacement for the 600 design and where to go with the G5500/6500. Buyers are becoming accustomed to FBW and making decisions with that in mind. When the “focus groups” were formed establishing the Global design, few wanted FBW, very conservative industry. Twenty-five years later, it’s FBW and probably very difficult to certify a M.92 design without it. The Global 6000 size, performance is still competitive but for FBW.
 
ExMilitaryEng
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Mon Feb 17, 2020 5:28 pm

Just a side note here; now comfirmed that Alstom intends to acquire BBD's rail business - which would be valued at US$8.2B in this transaction.

That should considerably lower BBD's debt, and secure the future of its business jet division as a result. Excellent news!

http://www.globenewswire.com/news-relea ... lstom.html
 
TObound
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Mon Feb 17, 2020 5:45 pm

Revelation wrote:
Canuck600 wrote:
If Quebec can't get back what they spent on the program.they will face a huge backlash from the Quebec taxpayers. The government of Canada is in the same situation.

I might be reading it wrong but I think a lot of people are not grasping that Bombardier's need for guaranteed cash now far outweighs any potential profit they would get in the future.

Huge backlash?

Is it really top of mind for lots of QC citizens?

IQ has a lot of ways to explain away any financial loss, like we saved jobs, we helped save the program, we helped make it possible for a global vendor of Airbus's stature to set up shop in Canada, etc.

Their real problem would be there was a massive loss in jobs like if Airbus moved the program elsewhere, but there's no evidence that Airbus has any plans to do so.


I don't think you get Canadian, and particularly Quebec, politics.

The current government in that province got in railing against corruption and cronyism. Losing money would be a bad look for IQ and would absolutely confirm a lot of negative stereotypes on the Quebec model of interventionist capitalism. IQ is motivated not to do that. If only because their survival as an agency could possibly be on the line.....
 
TObound
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Mon Feb 17, 2020 5:59 pm

PHLCVGAMTK wrote:
JonesNL wrote:
Revelation wrote:
Actually we have a better source, Airbus itself:



That’s what I would say after I just got the steal of the century. Downplay the future outlook while you know that you will be cashing much sooner. Underpromise and overdeliver. They have nothing to gain by touting that they got an steal and are expecting massive profits. They have much more to lose by showing all their cards.

Or it’s just Occam’s razor and I am overthinking things...


I don't think Airbus is sandbagging expectations here, so much as realigning expectations for a new strategy.

When they bought the first 50.01% of Airbus Canada LP, the MAX and the NEO were both growing orders and production with an eye to an eventual rate 70, leaving only a small niche for the A220. Two weeks later, JT610 crashes into the Java Sea. Fast forward a year and a half, and it's clear that the MAX has lost about a year's worth of production to the groundings and production suspension, and the introduction A321XLR -- and the global near-moratorium on MAX orders -- has stretched Airbus's order book for the NEO. Narrowbody production slots are now more valuable than gold, and Airbus can no longer wait around for A220 production rate to grow slowly and organically to rate 10. Airbus needs a ramp-up ASAP, and they can only get that by plowing a lot of money into capitalizing the production lines in Mirabel and Mobile. Under the old terms, BBD would have had to have paid for its share of that investment, with money it didn't have. Now, that's no longer a problem, and the new stated goal is rate 14. I wouldn't be at all surprised if that rate goes higher in the next six years.

The extension of IQ's put option to 2026 also reflects this shift. ACLP is going to be recording a lot of expenses over the next few years, and the profits from that are either going to be farther out in the future, or showing up elsewhere on Airbus's books. Delaying the put until 2023 will not only give a more accurate valuation of the company, but it will also separate Airbus's payments for more equipment and its potential payoff to IQ by a couple of fiscal years.

I can't help but think of the CSA Czech deal from a few months ago, where they converted an existing order for 7 A320neo, to one for 4 A223 and 3 A321XLR. If Airbus can keep replicating that deal, even in the aggregate across many airlines, it can rake in large profits from the increased margins on XLRs, even if it only breaks even on the A220 side. That's Airbus's real upside, and I'll be shocked if we ever know with certainty how much more profitable the A320 is going to be thanks to the A220.


Bingo. I am constantly amazed that people don't see what's happening here and remain fixated on look at the A220 individually as a program and not as one program in the broader Airbus portfolio. Airbus has everything to gain by bolstering the A220 now.

75% of profit on every A220 sold now belongs to them. And 100% of the profit on every A320 sold as well. Moving some 320 customers to the 223 while using freed up slots to sell 321N/LR/XLR is a net gain to Airbus.

This is also why I am still saying the 225 is probably being advanced internally.
 
TObound
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Mon Feb 17, 2020 6:01 pm

ExMilitaryEng wrote:
Just a side note here; now comfirmed that Alstom intends to acquire BBD's rail business - which would be valued at US$8.2B in this transaction.

That should considerably lower BBD's debt, and secure the future of its business jet division as a result. Excellent news!

http://www.globenewswire.com/news-relea ... lstom.html


Getting out of rail should have been priority one. The Chinese are wreaking havoc and killing margins. Long term, BBD would suffer staying in this sector. Best to get out while they can still get something for that division.
 
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Revelation
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Mon Feb 17, 2020 7:44 pm

TObound wrote:
I don't think you get Canadian, and particularly Quebec, politics.

The current government in that province got in railing against corruption and cronyism. Losing money would be a bad look for IQ and would absolutely confirm a lot of negative stereotypes on the Quebec model of interventionist capitalism. IQ is motivated not to do that. If only because their survival as an agency could possibly be on the line.....

Yet they just took a huge write down of their investment, so where's the huge outcry?
Wake up to find out that you are the eyes of the world
The heart has its beaches, its homeland and thoughts of its own
Wake now, discover that you are the song that the morning brings
The heart has its seasons, its evenings and songs of its own
 
MIflyer12
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Mon Feb 17, 2020 10:00 pm

ExMilitaryEng wrote:
Just a side note here; now comfirmed that Alstom intends to acquire BBD's rail business - which would be valued at US$8.2B in this transaction.

That should considerably lower BBD's debt, and secure the future of its business jet division as a result. Excellent news!

http://www.globenewswire.com/news-relea ... lstom.html


Odd that BBD uses $US in its press release!

That headline number is enterprise value, the investment banker's favorite way of making deals look bigger. It includes debt.

Following adjustments for liabilities, net of BT cash, and la Caisse’s interest, expected net proceeds between $4.2 and 4.5 billion will reshape capital structure

What's left is the biz jet business. Here's what BBD has to say on the new balance sheet:

“Including expected proceeds from previously announced transactions, Bombardier would have between $6.5 and $7.0 billion of pro forma1 cash on hand, putting the Company on a brand-new footing to address its $9.3 billion of debt.”

Wonder how that leaves them debt:equity?
 
ExMilitaryEng
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Mon Feb 17, 2020 10:13 pm

BBD only owned 67.5% of BBD Transport. Caisse de dépôt et placement du Québec owned the remaining 32.5% (Quebecers made a killing profit here). So including some liabilities that translated into a net $4.2B to $4.5B to BBD.

So that leaves about a net debt of US$5B? I was reading the business jet division was valued at about US$10B. There you have your ratio..
 
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Phosphorus
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Tue Feb 18, 2020 7:33 am

ExMilitaryEng wrote:
BBD only owned 67.5% of BBD Transport. Caisse de dépôt et placement du Québec owned the remaining 32.5% (Quebecers made a killing profit here). So including some liabilities that translated into a net $4.2B to $4.5B to BBD.

So that leaves about a net debt of US$5B? I was reading the business jet division was valued at about US$10B. There you have your ratio..


I wonder, if Textron DOES make an interesting offer for Bombardier business jet division, is BBD board under obligation to seriously entertain it?
Because on the one hand, it leaves BBD with pretty much no business left (except managing pensions, other legacy obligations, and possibly some real estate), on the other hand, they are left with a cash pile to buy back debt, distribute money to (long-suffering) shareholders, etc.

Or would they be forced to steer Textron towards tender offer of all BBD stock?
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leghorn
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Tue Feb 18, 2020 9:28 am

...and I'm out. Sold my shareholding of about €55k.
Should have sold when they were higher just after the positive judgement regarding C-Series. I cleared about €4k for all that time I was holding and would have been nursing a net loss if I hadn't bought in to the uptick in recent weeks when trains and planes were being spun-off.
I have zero interest in the playthings of Plutocrats be they shareholdings of rich connected Canadian families or private CO2 emitting planes that bring them to exclusive resorts.
I liked cho-cho trains and Q400s and passenger planes that looked pencils with wings or planes made out of carbon..

I could be wrong but they're not in the business of paying dividends to us, the great unwashed shareholders, and private jets I'd guess are disproportionately affected by global downturns when they happen and are now in the view of climate activists so I just don't want the risk. I might regret this.
I think I might just buy Airbus shares instead. Diverting A320/A319 production to A220-300 and 500 will free up production space for profitable A321s of various flavours and Airbus do generally pay dividends.
 
GalaxyFlyer
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Tue Feb 18, 2020 2:23 pm

Those hated jets make employment for thousands of working people, world-wide.the business has just give thru a downturn and BBD and GLF did just fine. Probably 90% of the flying is business, not pleasure, oriented.
 
leghorn
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Tue Feb 18, 2020 2:42 pm

Well if you want to invest then dive in as I'm not sitting on the shares now but just don't expect dividends or a say in the running of the company.
I'm sure the products are much nicer to fly than the experience of owning shares in the company which builds them.

I was trying to sell yesterday but having problems placing my orders. It would be a hard company in which to bolt for the door if you needed to as it is listed in Toronto.
 
YULobserver
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Tue Feb 18, 2020 2:52 pm

Revelation wrote:
TObound wrote:
I don't think you get Canadian, and particularly Quebec, politics.

The current government in that province got in railing against corruption and cronyism. Losing money would be a bad look for IQ and would absolutely confirm a lot of negative stereotypes on the Quebec model of interventionist capitalism. IQ is motivated not to do that. If only because their survival as an agency could possibly be on the line.....

Yet they just took a huge write down of their investment, so where's the huge outcry?


IQ has made money with the Bombardier Transport transaction with Alstom, to the magnitude of USD 700 to 800 millions. So with the package the government made in the last 3 years, they are slightly in the black, on paper.

Again, people are more angry, locally, at BBD's management, mainly because right after asking for a handout/bailout, they approved indecent salaries to higher executives, as well as an questionable option liquidation scheme that almost looked like privileged information infringement. They were indeed investigated, and IIRC the outcome was, it's morally questionable, although it was legal.

People are more disappointed that what was once Quebec's pride and an example in local entrepreneurship is now in foreign hands.
 
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spinotter
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Tue Feb 18, 2020 3:34 pm

YULobserver wrote:
Revelation wrote:
TObound wrote:
I don't think you get Canadian, and particularly Quebec, politics.

The current government in that province got in railing against corruption and cronyism. Losing money would be a bad look for IQ and would absolutely confirm a lot of negative s tereotypes on the Quebec model of interventionist capitalism. IQ is motivated not to do that. If only because their survival as an agency could possibly be on the line.....

Yet they just took a huge write down of their investment, so where's the huge outcry?


IQ has made money with the Bombardier Transport transaction with Alstom, to the magnitude of USD 700 to 800 millions. So with the package the government made in the last 3 years, they are slightly in the black, on paper.

Again, people are more angry, locally, at BBD's management, mainly because right after asking for a handout/bailout, they approved indecent salaries to higher executives, as well as an questionable option liquidation scheme that almost looked like privileged information infringement. They were indeed investigated, and IIRC the outcome was, it's morally questionable, although it was legal.

People are more disappointed that what was once Quebec's pride and an example in local entrepreneurship is now in foreign hands.


As we say in recovery seminars, "BBD, you did it to yourself." I always admired Bombardier, especially for their transport division. They seemed able to trump Alstom and even Siemers for ingenuity at the right price. How did it happen that they went so far off track financially?
 
GalaxyFlyer
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Tue Feb 18, 2020 4:05 pm

Pierre tried to outdo his father by starting 3 Part 25 programs simultaneously and running transport business. With the crash of 2009, the bizjet division had to support the whole enterprise amid falling orders for the CRJs. He might have gotten away with one Part 25 program, maybe two in the best of times, but not three.


GF
 
Amiga500
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Tue Feb 18, 2020 4:22 pm

GalaxyFlyer wrote:
Pierre tried to outdo his father by starting 3 Part 25 programs simultaneously and running transport business. With the crash of 2009, the bizjet division had to support the whole enterprise amid falling orders for the CRJs. He might have gotten away with one Part 25 program, maybe two in the best of times, but not three.

GF



Yep - that's the start, middle and end of the problem.

Pierre simply was not fit for the job of running the company.
 
GalaxyFlyer
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Re: UPDATED: Bombardier Sells Remaining Stake in A220 Program

Tue Feb 18, 2020 4:33 pm

The train business has been train wreck for quite awhile, the CRJ program on a downward spiral for a decade, but two of those three programs turned out pretty well. The C-Series, now A220, likely will turn out to be a long term success, if Airbus invests in it. Excellent basic design technically. The G7500 is going to be the flagship bizjet for a long time, it leapfrogs the new G700 technically, but they’re very close. Bigger cabin, newer engines. It was their best selling plane after it was announced, by way of rumors.

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