Bombardier Inc. sells its Q400 turboprop business to the west coast niche planner Viking Air as Canada's largest aviation manufacturer relieves non-nuclear businesses and builds a future cemented to an increasing extent on luxury beams and trains.
Montreal-based Bombardier announced the agreement on Thursday with third-quarter revenues, part of a number of measures that also include the sale of its aviation activities to CAE Inc. and reduce 5000 jobs over the next 12 to 18 months. Net revenue from the two transactions is expected to be about $ 900 million, said Bombardier.
Bombardier said that most of the cuts come in the aviation sector. About 2500 jobs will be lost in Quebec and 500 in Ontario. The rest of the cuts come in other operations all over the world.
"With today's announcements, we have launched the next round of actions necessary to release the full potential of the Bombardier portfolio," Bombardier CEO Alain Bellemare said. "We will continue to be proactive in focusing and streamlining the organization."
Mr. Bellemare has brought Bombardier back from the bankruptcy competition after development costs increased on its commercial airline program C Series. He has already cut thousands of jobs and reorganized the railways in an effort to restore profitability and ultimately reduce a debt of around $ 8 billion. The sale of turboprop and training companies increases the company's financial flexibility as it begins its work, says Bellemare.
The agreement with Viking marks the second significant delivery for Bombardier in the year following the sale of a controlling stake in the C Series Program for Airbus SE in July. Bombardier concluded that it could not stand alone against the industry's small-scale jet engines, and that Airbus's huge resources could make the C-series more successful. Airbus has since recreated the A220 aircraft.
Mr. Bellemare said as recently as May that the company was committed to its two remaining commercial airline programs, Q400 and Canadair CRJ regional jet. "We are not thinking about quitting" these businesses, "he said. "We are thinking of growing."
Why Bombardier Management changed, was not immediately clear. Nevertheless, there had been whispering behind the scenes that Bombardier and Viking officials had been in again, again talking for several months. The viking company Longview Aviation Capital makes the acquisition. The agreement also includes rights to the Havilland trademark.
The order backlog for Q400 was 56 aircraft from July 1st.
Q400, while it's technological sound, is outsourced by competitor turboprop maker ATR globally. Bombardier had investigated ways to reduce production costs to increase profitability, but concluded that sales were a better option. It also considers options for CRJ.
This is a great deal for Viking. Historically, the company has been willingly thanking for Bombardier's unwanted assets, recently purchased Bombardier's CL-415 water bombers program. The Victoria, B.C.-based company has developed a flair to revive moribund flight programs. However, Q400 management is on a scale as opposed to all it has done before.
Bombardier said that it achieved its best quarterly performance this year in the third quarter ended September 30, with a profit of $ 149 million or 4 cents per share on revenue of US $ 3.6 billion. Profit before interest and tax, not including special items, increased by 48 percent to USD 271 million. Free cash consumption for the quarter was USD 370 million. The company still expects to report break-even free cash flow for the full year, plus or minus USD 150 million.
The company launched a business restructuring, which includes "flattening management" and additional cutting costs. It expects to save $ 250 million with the movements as they are all implemented in 2021. It expects to register a restructuring fee of the same amount.
The efficiency work also includes two main actions affecting its engineering division. First, Bombardier intends to justify its central aviation engineering team and move key personnel to other parts of the business, with the largest group moving to private aircraft to work on future flight development programs. Secondly, the company said it would establish a new advanced technology office to focus on system design and engineering.
The company confirmed its financial targets for 2020.
Bombardier shares have fallen about 40 percent from a 52-week peak in July as investors questioned the company's ability to handle future debt payments, among other things. Today's actions can assure the market that management continues to take dramatic steps to make the company a slimmer monetary, even though the toughest work has been completed.