Interest-free loan supports Global 7000 business jet and CSeries passenger aircraft projects.
February 17, 2017
by Ross Marowits
MONTREAL — It will take 15 years for Bombardier to repay the $372.5-million loan it is receiving from the federal government, the company’s chief financial officer said.
During a quarterly earnings conference call, John Di Bert shed some light on the terms of the federal assistance package announced last week for the Montreal-based aerospace giant, including how long it has to repay the money.
“It will be over a significant amount of time, the program length about 15 years, including a bit of a grace period the first two years, so no repayments the first two years,” Di Bert said.
The company expects to receive the money in instalments over four years, with anywhere between $70 million and $100 million flowing to Bombardier annually.
The interest-free loan is to support Bombardier’s Global 7000 business jet and CSeries passenger aircraft projects. Under the arrangement, Bombardier will repay Ottawa based on royalties for the number of CSeries sold and revenues generated from the Global 7000.
About two-thirds of the loan is set aside for the Global 7000s, with the rest devoted to the CSeries.
The aid to Bombardier has been the subject of much public criticism, but the federal government and the company have both defended its merits, saying it’s needed to preserve jobs and compete globally.
Brazil has filed a complaint before the World Trade Organization, accusing Canada of unfairly subsidizing Bombardier, an allegation both the company and the federal government reject.
Bombardier expects to begin paying royalties in April from a $350-million federal loan it received in 2008 to develop the CSeries. The initial payments are based on seven CSeries planes delivered to Swiss International Air Lines and AirBaltic last year.
The company expects to deliver 30 to 35 CSeries aircraft this year, including to Korean Air, its first customer in Asia. Most of the deliveries will come towards the end of the year as Pratt & Whitney resolves problems building engines that reduced CSeries deliveries last year, Bombardier said.
Bombardier is in the midst of a five-year turnaround plan that has involved mass layoffs as it tries to regain its financial footing.
The company reported 2016 year-end losses of US$981 million, down from US$5.34 billion in 2015. Full-year revenue – reported in US currency – fell by $1.8 billion from 2015 to $16.34 billion last year.
CEO Alain Bellemare said lessons learned from developing the 100- to 160-seat CSeries, which incurred delays and cost overruns, are being taken into account as Bombardier builds the Global 7000, its largest business jet, which is scheduled to enter service late next year.
“Like any new program, we will have some hiccups and some issues along the way,” he said on the conference call. “But right now we’re not seeing anything that is abnormal.”News from © Canadian Press Enterprises Inc. 2016