Bombardier Gives Up Jetliner Ambitions for Luxury Planes, Trains

By relinquishing control of its C Series jets to longtime rival Airbus SE, Bombardier Inc. is scaling back its ambitions to build jetliners for the world’s airlines.

The deal marks a step away from what had been touted as the crown jewel of Canada’s biggest aerospace company before it was tarnished by cost-overruns and trade disputes. With the future of the C Series now up to Airbus, the Montreal-based manufacturer is likely to sharpen its focus on private jets and trains -– two businesses with higher margins.

“This is Bombardier opening the door to the transition away from commercial aviation,’’ Karl Moore, a professor of management strategy at Montreal’s McGill University, said in a telephone interview. “I’m not sure they had much of a choice. Surely they will have interesting opportunities in executive jets and trains, and they can reinvest in those.’’

Private business jets have been Bombardier’s most profitable division, while commercial aircraft –- weighed down by losses tied to the development of the C Series -– ranked among the company’s worst-performing. Bombardier’s commercial unit includes older products such as the CRJ regional jet and the Q400 turboprop.

The C Series is Bombardier’s biggest and most expensive commercial jet program, often billed by the company as a “game-changing’’ aircraft with superior economics and fuel efficiency. The deal with Airbus gives the European planemaker majority control with a 50.01 percent stake. Bombardier will retain about 31 percent, and the Quebec government will hold 19 percent.

Fizzling Business

Regional commercial jets contributed the bulk of Bombardier’s revenue during the 1990s, but orders eroded over the last decade as Brazilian rival Embraer SA captured market share with newer models. Sales have also slowed for turboprops as European rival ATR -– partly owned by Airbus -– offered cheaper and lighter products.

As business has lagged in commercial aviation, trains and business jets promise growth. Deliveries of luxury jets are forecast to rebound in 2018, and with Bombardier about a year away from starting shipments of its biggest-ever private plane, the Global 7000, prospects in that segment are rising, said Cam Doerksen, a National Bank Financial analyst in Montreal.

“The business jet market is at a cyclical low with deliveries, and Bombardier has a brand new aircraft coming to market in a year,’’ he said. “This constitutes upside for the stock.”

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