With the disposal of its rail-related transportation division, Bombardier has reached the zenith of its restructuring efforts. After years of divestments and restructurings, today’s Bombardier is a pure-play aerospace company focused on large-cabin business jets.
Prior to this most recent divestment, Bombardier completed four major sales in the aerospace sector – the CSeries to Airbus, the Q400 to Longview Aircraft, the CRJ to Mitsubishi Heavy Industries (MHI), and its aerostructures operations to Spirit AeroSystems.
The most dramatic of these steps was the formation of a joint venture, majority led by Airbus, to take over the CSeries program. This effort, begun in late 2017, became official in July 2018 when Airbus assumed a 50.01 percent controlling stake in the program. Airbus quickly rebranded the CSeries as the A220.
The CSeries had been a risky venture for the company insofar as it straddles the high end of the regional jet market and the low end of the narrowbody market – hypercompetitive Airbus and Boeing territory.
Debt burden over the delayed program had also been a drag on Bombardier in recent years – so much so that in 2016, Québec’s provincial government finalized a $1 billion investment to bail out the CSeries program. In return, Investissement Québec became a minority partner in the CSeries program.
As part of the deal, A220 operations will remain in Québec for at least 20 years. The investment introduced a new flow of cash to support the aircraft’s entry into service and production ramp-up. In June 2019, the CSeries Aircraft Limited Partnership (CSALP) joint venture was renamed Airbus Canada Limited Partnership to better reflect Airbus’ majority stake.
In February 2020, Bombardier exited the commercial aviation business entirely when it sold its remaining 34 percent stake to Airbus and Investissement Québec. Airbus now holds 75 percent, and the government of Québec 25 percent. By cutting its stake, the debt-ridden Bombardier no longer had to make investments of approximately $700 million in the program, according to news reports.
This deal was followed by the sale of Bombardier’s Q400 turboprop operations in mid-2019. The program, as well as the storied de Havilland trademark, was acquired by Longview Aircraft Company of Canada Ltd, which is now known as De Havilland Aircraft of Canada Ltd. Longview Aircraft is owned by Longview Aviation Capital, which owns Viking Air. Back in 2016, Viking Air bought out Bombardier’s amphibious aircraft programs: the CL-215, CL-215T, and Bombardier 415. With these two acquisitions, all former De Havilland Canada aircraft are once again under the same roof.
Next on the auction block was the CRJ regional jet program. Under a $550 million deal, Mitsubishi Heavy Industries acquired maintenance, support, upgrade, marketing, and sales activities for the CRJ Series aircraft, including service and support network activities located in Montreal and Toronto as well as in Bridgeport, West Virginia and Tucson, Arizona. The deal gives MHI ownership of Bombardier’s regional airliner support network, something MHI will eventually need to support its own regional jet – the Mitsubishi SpaceJet – in North America. In the meantime, it can operate the facilities profitably by supporting the large CRJ fleet in operation. Under MHI, the CRJ program will be operated under the newly created group entities of MHI RJ Aviation Group (MHIRJ).
Most telling is that the deal does not include the CRJ production facility in Mirabel, Quebec. This facility continued to assemble the CRJ family on behalf of MHI until Bombardier’s backlog was exhausted in December 2020.
Finally, in October 2020, Bombardier completed the sale of its aerostructures and aftermarket services businesses in Belfast, Northern Ireland (known as Short Brothers); Casablanca, Morocco; and Dallas, Texas, United States to Spirit AeroSystems for $275 million. The divested Bombardier operations employ approximately 3,300 people at three sites comprising approximately 3.4 million square feet. The backlog of work includes long-term contracts on the Airbus A220 and Bombardier business jets, along with aftermarket service facilities at two of the acquired sites.
Today, Bombardier is a pure-play business jet manufacturer, generating revenue of $6.5 billion in 2020. Nevertheless, even now the company has once again adjusted its focus, announcing that production of the storied Learjet brand would end in 2021. Once this occurs, Bombardier will be a pure-play supplier of large-cabin business jets via its Challenger and Global aircraft families.
In order to better support this sector, the company has been expanding its aftermarket activities. As part of its ongoing strategy, Bombardier has ramped up investment in and acquisition of maintenance and distribution facilities around the world, including a fresh push into Asia. Since 2017, Bombardier has been rapidly expanding its service center footprint worldwide and is currently on the way to growing its Services and Support infrastructure footprint by 50 percent.
With this dedicated focus on business jet production and aftermarket support, the company hopes to reach $7.5 billion in revenue by 2025.
As the world begins to emerge from the COVID-19 pandemic, early results may help the company meet its goal. By mid-2021, demand for business jets had rebounded, with the company upping its aircraft delivery forecast for the year from 110-120 units to over 120. Worldwide business jet utilization continued to rise, nearly reaching pre-pandemic levels in North America and Europe, the company said. Should the trend continue, the company hopes to hit its revenue goal of $5.7 billion for the year.
Interestingly, another option for the slim-downed Bombardier could resurface: a possible tie-up with Textron. In early 2020, the two companies had reportedly been in talks over the sale of Bombardier’s business jet division. The merger would be complementary, as Bombardier’s large-cabin models would fill out Cessna Aircraft’s small-cabin models. Such a move would allow Textron to offer a larger range of aircraft similar in scope to competitors Gulfstream and Dassault Aviation.
Bombardier’s management team has taken tough medicine in deconstructing its commercial aerospace operations. With Bombardier’s difficulties behind it and a clear strategy to guide it, its outlook is much brighter than it has been in several years.
Forecast International’s Defense & Aerospace Companies, Volume I – North America service includes coverage of over 100 key U.S. and Canadian primes and their subsidiaries. Each of the 39 reports contains data on recent programs, mergers, and joint ventures. Among the notable corporations covered are OEMs such as Boeing, Lockheed Martin, Raytheon Technologies, and General Dynamics. Also featured are Tier I and Tier II contractors such Pratt & Whitney, Honeywell, Parker Hannifin, and Spirit AeroSystems. Click here to learn more.