Bombardier Exits Commercial Aviation and Rail Divisions

When Bombardier decided to exit its commercial aviation and rail divisions a lot of questions came up. Senior aviation journalist Alex Martinez Rivera is analyzing the business decisions behind such moves in his investigative report.

To concentrate on Business Aviation, Bombardier has divested parts of the company by exiting Commercial Aviation as well as its Rail Division.

Bombardier is attempting to pay its debts from the development of the Airbus 220.

Bombardier has left the Commercial Aviation division.

As previously mentioned, Bombardier sold its CRJ aircraft to Mitsubishi. The company sold it, as a result, to pay its debt from its development of the CS Series, now the Airbus A220 Aircraft.

I expected for Bombardier to find ways to pay down its Debt

Airbus negotiating the stake requirements with Bombardier and the Government of Quebec
Video: CNBC/Youtube

According to Reuters, Bombardier sold its stake of 33.5% to Airbus and the Government of Quebec. Bombardier Debt accrued $9 Billion, which $1.5 Billion comes due next year.

The final tally on the new A220 stake

  • Airbus goes from a stake of 50.1% to 75%. That’s a 25% increase.
  • The Government of Quebec goes from a stake of 16.4% to 25%. That’s an 8.6% increase.

The new contract stipulates that the A220 can’t be bought from the Quebec government until 2026. That is a three-year setback from the original contract with Bombardier.

Now with Airbus in control, I don’t think they are in a hurry to perform a buyout from the Quebec government.

However, the bombshell came and didn’t expect this

However, the buyout of its rail division to the French Company Alstom was a shocker. I didn’t expect this at all.

French Rail Manufacturer Alstom buyout the Rail Transport Division of Bombardier
Video: Courtesy France 24/Youtube

The Buyout from Alstom valued at $6.8 billion was as creative as the equivalent of Alaska merging with American or Southwest buying out JetBlue.

What does it mean for Bombardier?

Although there were confirmed talks between Bombardier and Textron Aviation, that seems to have fizzled out at the moment.

Bombardier’s CEO, Alain Bellemare described this as:

“An Exciting New Chapter.”

Alain Bellemare, Bomberdier CEO

In view of recent divestitures, Bombardier hopes to make a dent with the debt accumulated.

It is possible for Bombardier to become a company with manageable debt very soon. Just by having the Challenger, Global, and Learjet aircraft lines within the market of Business Aviation.

However, that is provided the company doesn’t make anything foolish with the creation of another line like the CS Series.

CEO says Business Aviation has a path to growth

Alain Bellemare continues by saying that its Business Aviation has the potential for growth and expansion for cash generation.

The key to performance is in large cabins. Examples of these are the Global 7500 and certificated Global 6500 and 5500.

However, growth is also found in popular expansions like fractional ownerships and efficient aircraft.

Bombardier will pay its Debt

bombardier exits commercial aviation
Bombardier Global 5000. Photo: Bombardier.

Author’s opinion

With a $14.4 billion dollar aircraft backup, Bombardier has one of the largest cushions in aircraft history.

Even if they don’t use all the proceeds from the Alstom buyout it certainly makes it more manageable than it is now. With this in mind, they certainly don’t require to sell the core business now of Business Aviation. They are on their way.

Furthermore, with a quality product, they know how to create. Even so, they will find a creative way to pay off its debt and make whole the Government of Quebec.

What do you think about Bombardier’s decision to exit commercial aviation, as well as its rail division? You can send your response directly to the author here.

Featured Image: Bombardier.

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