Bombardier Inc. has completed the sale of its regional jet business 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 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 will continue to assemble the current CRJ backlog — 15 planes as of March 31 — on behalf of Mitsubishi, with all deliveries expected to be made before 2021.
The transaction is part of a string of sales aimed at reducing the company’s overhead and injecting liquidity in the wake of debt racked up to fund its C Series commercial aircraft program.
In February Bombardier announced the sale of its remaining stake in that business — rebranded as the Airbus A220 — to Airbus SE, marking the end of its failed bid to take on the commercial aircraft duopoly of Airbus and Boeing Co.
Bombardier sold its Q400 turboprop business last year to an affiliate of Longview Aviation Capital Corp. for about US$250 million in net proceeds.
Meanwhile the US$500-million sale of its aerostructures business in Belfast and Morocco to Spirit Aerosystems — initially anticipated in the first half of 2020 — should close “in the coming months,” CEO Eric Martel said in May.
He said he does not foresee any pandemic-related delays to the US$8.2-billion sale of its rail division to French train giant Alstom SA — now undergoing regulatory scrutiny in the European Union — expected to close in the first half of 2021.
For Mitsubishi, the appeal of the CRJ lies in aftermarket sales and maintenance as well as engineering know-how.
Mitsubishi chief executive Seiji Izumisawa said last year the deal is an important step towards building a strong, global aviation capability, which includes a Mitsubishi-made CRJ variant, the MRJ, that it hopes to launch this year.
The CRJ production facility in Mirabel will remain with Bombardier, which will also continue to supply components and spare parts as part of the deal.
Bombardier says the transaction is still subject to post-closing adjustments and that the company retains liabilities that represent credit and residual value guarantees totalling US$288 million.
Christopher Reynolds, The Canadian Press