Bombardier, Airbus Say Talks Over 'Business Opportunities' Have Ended -- 2nd Update
October 07 2015 - 01:31AM
Dow Jones News
By Ben Dummett
Airbus Group SE and Bombardier Inc. said late Tuesday that talks
between the two jet makers over possible "business opportunities"
have ended.
In separate releases, the companies confirmed that they had been
exploring strategic initiatives but those discussions had
collapsed. Neither Airbus nor Bombardier offered details of the
talks or reasons for their ending.
The releases come after reports from Reuters and The Wall Street
Journal that Bombardier had been in preliminary discussions to sell
a stake in its troubled CSeries jet program to its bigger European
rival.
The collapsed talks are potentially a big blow for Bombardier.
The Montreal-based company has been burning through cash and
suffering from declining profits at a time when it has struggled to
launch its new CSeries jets. The aircraft, which Bombardier is
betting on to reignite growth, compete with the smaller passenger
jet offerings from Airbus and Boeing Co.
Bombardier has already raised about $3 billion in debt and
equity this year and announced plans to sell a minority stake in
its train-equipment business to help shore up its balance
sheet.
Its stock jumped 15% in Toronto trading on Tuesday following
initial reports of its talks with Airbus. But the stock is down 57%
year to date, underscoring investors' concerns over the much
delayed launch of the CSeries jets.
A deal with Airbus would have enabled Bombardier to lean on a
financially stronger company to help finance marketing of the jet
program. Bombardier has been slow to lock in new orders for the
plane in recent months, raising questions about the program's
success.
Bombardier said it "will continue to explore initiatives such as
a potential participation in industry consolidation," but won't
comment on potential outcomes of these talks.
For Airbus, an equity stake in the CSeries would have allowed
the European jet maker to share in the revenue generated from sales
of the CSeries jets without incurring the heavy upfront costs to
develop the program.
Airbus this year plans to deliver the first A320neo, an upgraded
model of its single-aisle plane, which has become its best-selling
product. It has won more than 4,200 orders for the new family of
upgraded planes that come in three models and compete with the
Boeing 737 Max jetliner, due for introduction in 2017.
The smallest version of the new Airbus plane family, the
A319neo, which seats around 150 passengers, competes most closely
with the CSeries. It has been less popular, though, with only 49
sales. Airbus has focused on trying to sell the two larger versions
that deliver higher profit.
The CSeries 100 is expected to begin flying commercially in the
first half of 2016. Bombardier has touted the aircraft's fuel
efficiency and lower operating costs as key advantages over rival
aircraft. The smaller CSeries 100 model seats up to 125 passengers,
while the CSeries 300 seats up to 160.
Bombardier has said it expects more customers to sign up once it
gets full certification of the jet program, on track to be
completed by the end of the year.
Last month, Bombardier said it had booked orders and commitments
for 603 CSeries aircraft, which included firm orders for 243.
Jacquie McNish contributed to this article.
Write to Ben Dummett at ben.dummett@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 07, 2015 01:16 ET (05:16 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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