Bombardier has sold its aerostructures division for US$500 million, an expected move that finalizes the company’s transformation away from commercial aviation to one focused on producing more profitable trains and private planes.
The Montreal-based company announced Thursday that Spirit AeroSystems Holdings will purchase the aerostructures business, which includes operations in Belfast, Casablanca, and Dallas. Spirit will pay US$500 million in cash and assume US$700 million in liabilities, as well as continue to supply aircraft components for Bombardier’s private jet business going forward.
Bombardier chief executive Alain Bellemare said on a conference call with analysts that the sale of the division was another step towards building “a lean, efficient and strong business aircraft franchise.”
“This transaction represents another strategic milestone in the reshaping of our portfolio to focus on our strong business aircraft and rail franchises,” Bellemare said.
“We are confident that Spirit’s acquisition of these aerostructures assets is the best outcome for customers, employees and shareholders, and we are committed to ensuring a smooth and orderly transition.”
The aerostructures businesses in Northern Ireland and Morocco were largely tied to the former CSeries program now operating as the A220 under Airbus’ control.
Over the last two years, Bombardier has been selling businesses that were part of its costly effort to compete in the commercial aviation space, dominated by a duopoly made up of Boeing and Airbus. In June, it entered an agreement to sell its CRJ aircraft program to Mitsubishi. It also previously sold its Q400 program and offloaded the CSeries to Airbus.
Bombardier is closing in on the end of a five-year turnaround plan launched by Bellemare in 2015, shortly after he stepped into the role of chief executive. The strategy includes several ambitious targets, including overall revenue of US$20 billion by 2020 – but it has stumbled in the last year.
In August the company adjusted its 2019 financial targets, including its forecast for earnings before interest and taxation (EBIT), due to the rising costs tied to several key rail projects. The company had to sink additional cash – between US$250 million and US$300 million – to ensure those late-stage projects are completed and delivery schedules met.
Bombardier said it is making progress on the complex legacy projects that have weighed on results, including the streetcar contract for the Toronto Transit Commission. Bellemare said the contract will be completed by the end of the year, and that reliability of the fleet “continues to improve.”
“Of course, there is still a lot of work to do, with some volatility in the timing of train deliveries,” Bellemare said. “As such, the recovery will be gradual over the next 12-months.”
Bombardier reported a net loss of US$91 million in the three month period ending Sept. 30., down from a profit of $149 million at the same time last year.