Bombardier hands over its largest CSeries jet to Latvian carrier, the first in 20-plane order

Originally published by Damon Van Der Linde for the Financial Post on November 28th 2016

MIRABEL, Que. – Standing on a stage in a hangar filled with hundreds of Bombardier Inc. employees, CEO Alain Bellemare officially handed over the first of its largest model in the CSeries jet family to Latvia’s airBaltic Monday.

“A year ago we were standing here and a lot of people were thinking that this program would be shut down, that Bombardier would actually go down,” said Bellemare at the company plant 50 kilometres north of Montreal. “What a turnaround.”

The Latvian national airline ordered 20 CS300 aircraft in 2012 and will make its first commercial flight on Dec. 14 between Riga and Amsterdam. Sold at US$85.7-million, this is the largest plane built in Canada and seats between 130 and 150 people.

Based on the list price of the CS300, Bombardier values the 20-plane order at about US$506 million. This comes just five months after Bombardier’s smaller 125-seat CS100 began flying with Swiss International Air Lines. Bellemare says it’s too early to say whether it would be building an even larger CS500.

“Presently we are focusing on the delivery of the CS100 and CS300. We want efficient production and most importantly to support our clients in service in the best way possible,” he said. “It’s a good moment right now to think about what we are going to do for the next airplane in 2018.”

AirBaltic Corporation AS placed its first order for the CS300 in 2012, and airBaltic CEO Martin Gauss says the company is satisfied with the choice it made between jets and from Bombardier and competitors Airbus and Boeing.

“We’re very happy with the CS300 and if Bombardier does something more we’re very happy to have a discussion,” said Gauss.

Bellemare says this year has represented a turnaround for the company after he admitted that in 2015 Bombardier was flirting with bankruptcy protection.

On Nov. 16 Bombardier priced its offering of $1.4 billion senior notes at 8.75 per cent to raise funds in order to refinance some of its debt. The company said it intends to use the net proceeds and cash on hand to redeem its outstanding 7.50 per cent senior notes due March 2018 and 5.50 per cent senior notes due September 2018.

“We’re in the second phase of regaining earnings power and in that context refinancing our bonds earlier with certainty that we have all the cash needed for years to come was a big deal,” said Bellemare. The Quebec government has a US$1-billion investment in the CSeries for 49.5 per cent ownership of the program, though the company says it is still in negotiation with the federal government for further support.

“Clearly our needs have changed and that’s why we continue to discuss with [the federal government] to find a solution that will be a good solution for them and for us,” said Bellemare.

After addressing the crowd of enthusiastic Bombardier employees, the CEO did not rule out the possibility of more future layoffs just a month after announcing 7,500 layoffs, mainly in its train division. It is the second round of layoffs this year, adding up to a total of 14,500 people or approximately a quarter of its workforce, though none in the CSeries program.

“It’s not only looking at what you cut, but actually what you preserve. How do you make the company stronger so that you can keep on growing the business in the long run and create more jobs?” said Bellemare.

“It might be short term pain for long term gain.”

Dominique Anglade, the Quebec government’s Minister of Economy, Science and Innovation said she is not concerned with the job losses because she believes the CSeries program will create more work for the province in years to come.

“What really matters is the innovation program we have with the CSeries. That’s really the future of the industry and that’s why we decided to invest in the CSeries,” she said.