Canadian aircraft maker Bombardier’s shares slump as talks with Airbus fail; CSeries jet project lands it in deep debt

Bombardier, Canadian plane and train manufacturer, has suffered a setback as its plan to sell its CSeries jet program to Airbus failed. Alternatively, it started looking for Chinese investors to stitch a deal.

CSeries is a lean bodied twin-engine, medium-range jet airliner project by the company that seeks to offer 110-seat CS100 and the 135-seat CS300 models. The breakdown of talks also pulled down the Canadian firm's shares in the stockmarket.

The offer made to Airbus involved the sale of a majority stake in the CSeries project in return for cash injection to improve the financials of the project. It sought Airbus’ help to complete the development of the troubled aircraft in liue of the controlling stake in the program, Reuters reported.

Huge development costs

Development costs for the CSeries had escalated from CA$2 billion (AU$2.2 billion) to CA$5.4 billion (AU5.72 billion). The delays have already trailed the plane project, two years behind schedule from its planned 2016 debut. Bombardier started off with the intent to crack the Airbus-Boeing dominance in the narrow-body airliner market, Bloomberg reported.

But CSeries drained Bombardier financially and sunk it in deep debt. It is exploring asset sales to raise cash. As of June 30, Bombardier had CA$9 billion (AU$9.54 billion) in long-term debt as fallout from the project.

Offer for Airbus

With CSeries, Bombardier was aiming to enter the aviation big league on its own terms though it is struggling to sell the narrow-body jet, which failed to attract any new order for more than a year. Its last purchase deal came in September 2014, when Australia’s Macquarie Group Ltd placed orders to buy 40 of the jets.

The breakdown of talks also hit the shares of Bombardier as they tanked 13 percent on the Toronto Stock Exchange on Wednesday. However, Quebec's Economy Minister Jacques Daoust justified the initiative for a deal and hinted that a majority stake offered to overseas interests is not unusual.

“Look at the ownership of Quebec crown jewels that are listed on the stock exchange. You are going to realise that they are not majority-held by Quebecers,” the minister told reporters in Quebec City.

But any deal involving Chinese buyers can trigger a federal government review though the federal department on foreign acquisitions has not made any comment so far.

Meanwhile, Bombardier made clear that it has no plans to scrap the the CSeries even though a deal sought from Airbus had triggered doubts about the future of the aircraft program.

“Bombardier is fully committed to the CSeries and we have the financial resources in place to support the program,” said spokeswoman Marianella de la Barrera. She said the CSeries is about to gain certification and is in advanced discussions with potential customers, reported the Canadian Press.

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