Bombardier to eliminate 7000 jobs, but announces jet deal with Air Canada

Amid the bad news, Bombardier ended its almost 18-month sales drought for the CSeries with a letter of intent with Air Canada for the purchase of 45 CSeries 300 planes, with an option to buy up to 30 more.

Bombardier Chief Executive Officer Alain Bellemare said the company still wanted federal assistance for the CSeries, which has been plagued by delays and cost overruns.

Bombardier also said that he decision to optimize the company is based on an in-depth review of the company carried out over the past year where production rates have been modified for some aircraft models due to macroeconomic conditions. Bombardier said it would cut about 7,000 out of its workforce of about 71,000 workers over the next two years, with the cuts coming in both Canada and Europe and evenly split between its plane and train operations.

Nonetheless, the CSeries – behind schedule, about US$2 billion over budget and with fewer-than-expected buyers – is the primary reason for Bombardier’s request for financial aid from the federal government.

Bombardier’s quarterly results missed analysts’ expectations with revenue in the fourth quarter at $5 billion, down from just under $6 billion a year earlier.

“Today I feel we have done our homework”, Bellemare said in an interview.

Bombardier Inc. plans to hire for its C Series aircraft program and other areas.

“Our plans for Plattsburgh for 2016 remain unchanged and include ramping up production and increasing employment levels for the San Francisco BART and New York City Transit orders”, she said.

Montreal Gazette Business Columnist Peter Hadekel says the job restructuring confirms that Bombardier has been struggling in all its divisions, including its European rail manufacturing. The rest of the cuts will be in the Bombardier Transportation rail business. The company also forecast lower-than-expected revenue for 2016.

Last year, the Quebec government offered the beleaguered company a $1-billion bailout in exchange for half of a new subsidiary that will own the C Series jets. This was before special items totaling $5.39 billion for the full year, including third-quarter write downs of $3.2 billion for the CSeries and 41.87 billion for the Learjet 85.

That said, the ugly numbers were already well known before Bombardier released this update, so it’s not surprising that the stock has reacted well.

Meanwhile, Airbus secured an order from Philippine Airlines Inc. valued at US$1.8 billion as the Southeast Asian carrier seeks to fly to NY and the US West coast, Bloomberg reported.

Investors focused on the order news, propelling the stock up 20% in recent Toronto trading to 1.08 Canadian dollars(US$0.78).