Quebec has finalized its investment in the Bombardier CSeries Aircraft. The provincial government made the official announcement yesterday. The definitive agreement to invest $1 billion U.S. in the aircraft program is in exchange for a 49.5% stake in the project. The investment will be made in two separate installments. The payments of $500 million each will be made on June 30 and September 1. The infusion into the troubled airliner program is designated for cash flow purposes only, according to Bombardier.
The agreement calls for the formation of a new Limited Partnership for the CSeries jet. All of the projects assets, liabilities, and obligations will be transferred to the newly formed group. Bombardier will hold the remaining 50.5% in the partnership. The agreement calls for all of the assembly, engineering, manufacturing, management, and R&D activity to stay in Quebec for 20 years. The CSeries program had been unable to secure any big orders until recently.
Quebec invests in Bombardier, is it legal?
The recent order that may have saved the day for Bombardier came from Delta Air Lines. The firm order for 75 CS-100 series jets is viewed by many as a life saver for the troubled program. However, the world of aircraft manufacturing is a global competition, with all companies trying to play on an even field. In such an environment, some are viewing this cash infusion as illegal. Embraer, an aircraft manufacturer based in Brazil, alleges that Bombardier only won the Delta order because of this government subsidy. Bombardier beat out Embraer for the Delta contract, and has alleged that they offered the aircraft “below cost”. Embraer has threatened to have the Brazilian government file a complaint with the World Trade Organization. With Bombardier seeking even more additional funding from the Canadian government, we’ll have to stay tuned.
Image from www.bombardier.com