Bombardier is to initiate a financial overhaul of the CSeries programme, with its latest plan including a $3.2 billion writedown on the development of the new twinjet, while pushing out the unit breakeven milestone to 2020.
But the Canadian airframer will need to inject $3 billion over the next five years before the CSeries can contribute positively to the balance sheet, said Bombardier finance chief John Di Bert during a third-quarter earnings call today.
The first $1 billion of that total will come next year in the form of two $500 million instalments from the Quebec government. In return, the provincial administration will receive a 49.5% stake in a new company that will manage the CSeries programme, with Bombardier holding the remainder.
Bombardier plans to spend another $1 billion from cash flow as CSeries production begins to ramp up in 2016, Di Bert says.
The remaining $1 billion will be contributed by Bombardier over the next four years as the CSeries reaches full-rate production in 2020 or 2021, he says.
With Quebec stumping up one-third of the required financing, Bombardier's planned $2 billion investment could come from a variety of internal sources, Di Bert adds.
The manufacturer plans to end this financial year with $5 billion in cash and revolving credit, and also expects to raise $6 billion with an initial public offering of a minority stake in the Bombardier Transportation train-manufacturing business.
The point of the CSeries financial reshuffling is to clear away any obstacles to continuing the programme after a 2.5-year delay to reach entry into service.
With only 243 firm orders, the breakeven milestone in 2020 now seems to extend beyond Bombardier's current backlog, so the manufacturer's sales teams must bring in new customers.
Bombardier plans to begin the ramp-up next year with 15-20 aircraft deliveries, says chief executive Alain Bellemare.
However, Bellemare does not offer a ramp-up forecast beyond 2016, but a previous Bombardier management team had expected to reach full-rate production of 120 aircraft within three years of entry into service.
The CSeries programme has not booked a new firm order in more than a year, but Bellemare says interest in the small narrowbody remains high.
"We're in good shape to make this programme successful, and there is no liquidity concern whatsoever," Bellemare says.
The CSeries remains the only clean-sheet design in the 100-150-seat market segment. Bombardier says airworthiness certification by Transport Canada is now "imminent", with the CS100 achieving improved fuel burn, range and payload performance.
"We knew that there was going to be significant challenges with stepping our game up," Bellemare says. "There's more to come, but I feel we are at the right place and we will get more traction going forward."
Source: Cirium Dashboard
