MONTREAL — Bombardier Inc. has closed a deal to sell its regional jet program to Mitsubishi Heavy Industries Ltd. for US$550 million, cementing the plane maker’s departure from commercial aviation following a three-decade run.
The sale of its CRJ aircraft series paves the way for Bombardier to focus on its one remaining income stream — private jets — as the company ramps production back up following factory closures during the COVID-19 pandemic, which cost the company up to US$800 million last quarter.
The deal adds sorely needed capital to a firm whose debt tops US$9 billion and whose backlog of business jet orders is falling fast as clients and companies rethink the value of a private plane purchase in a recession.
Once a cash cow for the Montreal-based company, the CRJ series now struggles to generate profits, 29 years after its maiden voyage. For the past five years, Embraer SA’s E175 narrow-body aircraft has dominated the U.S. market, where the majority of regional jets are sold.
Under the agreement, Mitsubishi scoops up the CRJ’s maintenance, marketing and sales activities, but not its manufacturing operations.
The deal includes the related services and support network located in Montreal and Toronto and service centres in Bridgeport, W.Va., and Tucson, Ariz.
Bombardier says it will continue to supply components and will assemble the remaining 15 CRJ aircraft on the order book on behalf of Mitsubishi until the backlog is delivered, expected by the end of this year.
Bombardier says the deal is still subject to post-closing adjustments and that the company retains liabilities that represent credit and residual value guarantees totalling US$288 million.
This report by The Canadian Press was first published June 1, 2020.
Companies in this story: (TSX:BBD.B)
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