Canada’s Bombardier Tightens Belt, Lands Deal with Air Canada

Stephen L Kanaval |

The Montreal Aerospace firm Bombardier Inc (BBD-B.TO) will layoff 7,000 employees as it tries to turn finances around. However, a new deal with Air Canada could be a big boost toward getting things going skyward again.

It is a mix of good news and bad news for Bombardier. The bad news hurts many Canadians employed by the company, which employs nearly 74,000 people worldwide. 2,830 jobs will be cut in Montreal and another 2,400 in Quebec. Most of those jobs will be from the Bombardier Transportation sector, which focuses on railway technology and rail vehicle production.

Yet, these cuts will be balanced by an increase in hiring in its aerospace division. The new CSeries 300 planes just received a letter of intent from Air Canada. The airline wants 45 new planes plus an additional option to buy 30 more. "We are turning Bombardier around," CEO Alain Bellemare said during a conference call. "We have a plan to make this great company stronger and more competitive." The CSeries 300 is a smaller aircraft than the Boeing or Airbus commercial models, but this is specifically the reason why Bombardier thinks the plane is going to sell. The thinking is that smaller and cheaper airlines will have a great need for the CSeries 300. However, production of the airplane is two years behind schedule.

Bombardier is hoping that the Canadian government will come to the rescue with some financial assistance. The government issued this statement: "Any action the government takes with respect to Bombardier will be first and foremost in the interest of Canadians," federal Innovation Minister Navdeep Bains said. "We have been clear that such an important decision will only be made after due diligence, careful consideration and a strong business case."

Bombardier, the company started in 1907 by Joseph-Armand Bombardier after building a snowmobile, will also look to reduce the number of shares outstanding. The company is planning a board meeting for approval on the stock split, which will aim to exchange shares for consolidated shares at C$10 or C$20 each.

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Companies

Symbol Name Price Change % Volume
BBD.PR.D:CA Bombardier Inc. Series 3 Cumulative Redeemable Pre 8.43 -0.05 -0.59 2,600
BBD.PR.C:CA Bombardier Inc. 6.25% Series 4 Cumulative Redeemab 16.11 -0.04 -0.25 13,080
BBD.PR.B:CA Bombardier Inc. Series 2 Cumulative Red. Preferred 8.51 0.14 1.67 1,710

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