Bombardier wants to recover height | Economy

Bombardier wants to recover height | Economy

Bombardier has been a pride for Canada for decades, especially for the Quebecois. Founded in 1942 by the mechanic and inventor Joseph-Armand Bombardier to market his great invention, a half-track on skis that would develop as the first snowmobile, the company is listed on the stock exchange since 1967 and has grown for decades absorbing other Canadian companies, especially in the railway and aviation sectors. It is precisely this last one that is more in question: a series of decisions have been questioned by analysts, politicians and ordinary citizens.

In November, the company announced the elimination of 5,000 of its 70,000 jobs; 75% of them in their aviation division. Half of the cut occurred in Quebec. He also reported the sale of the Q400 turboprop production line to the Canadian Longview Aviation and the transfer of the training programs for technicians and pilots. "It is a difficult measure, but we want to be a global organization and a reference in terms of income per employee," Alain Bellemare, CEO, said at the time.

Public opinion revolted over the cuts, given that both the Canadian and Quebec federal governments had injected public money into Bombardier. In February 2017, Ottawa authorized an interest-free loan of 372 million Canadian dollars (200 million euros). The provincial government risked even more: 1,000 million US dollars (873 million euros) in exchange for a stake in the company.

The objective of both capital injections was to save the company's big bet: the C-Series, a family of reactors between 110 and 160 passengers, larger than the regional aircraft that until then had been the pillar of the growth of the division but smaller (and efficient) than the traditional Boeing 737 or Airbus A320.

The rollover to larger aircraft had a double objective. First, the airlines abandoned the routes that drove the demand for regional aircraft and looked for aircraft capable of making direct flights more efficiently. The C Series occupies that niche market. "In Bombardier they started from a realistic analysis, since there was a good percentage of seats not occupied in larger aircraft," says Mehran Ebrahimi, an aeronautics expert at the University of Quebec in Montreal (UQAM). On the other hand, the Brazilian Embraer's competition in the regional aircraft market was getting stronger.

But the problems began to overlap. The first airplanes of the C Series were going to enter service in 2013, but different difficulties delayed their departure to 2016. In addition, Brahimi points out, "it was thought that Boeing and Airbus were going to stay on the sidelines. However, they cut the prices of their small airplanes, and the airlines trusted more in their apparatuses "in front of a totally new product and without trying.

To this we must add that the Bombardier executives did not have the knowledge and experience to sell this type of aircraft. "In addition, the price of oil fell significantly, so that its higher efficiency lost comparative advantage." Brahimi believes that the firm fell into a strategic error that they paid dearly: "They opened many fronts. In addition to the CSeries, they worked on new models of their fleet of executive aircraft, which also needed a lot of investment. " The company went into crisis and announced 7,500 redundancies in 2016. That's when Canada injected capital into the firm.

Airbus to the rescue

But in September of 2017, came what appeared to be the coup de grace: under pressure from Boeing (which argued that it competed with the 737), the US government announced a punitive 300% tariff on the C Series, which closed him out of his biggest potential market. In these circumstances, Airbus came to the rescue: it took 51% of the program for one euro. The aircraft could be manufactured in the USA (at the Airbus facilities in Alabama) and, in addition, had behind it the imposing marketing machinery of the European group, as well as his capacity for political pressure.

And the response was immediate: in January 2018, the US International Trade Commission voted unanimously to reject punitive tariffs on the plane. The project was saved; but for that then it was no longer the C Series, but the Airbus A220. With the sale of the Q400 project, the only commercial aircraft still 100% in the hands of Bombardier are its regional CRJ reactors; but on November 15, the conservative François Legault, newly elected prime minister of Quebec (and founder of an airline), declared that Bombardier should do with the CRJs as with the C Series.

The group has decided to concentrate on executive aviation and aerostructures. "We rely on the G7500 executive jet, which has just entered service. We have the complete order book until 2021. We also take different initiatives to increase our margins, "says Simon Letendre, head of communications and public affairs at Bombardier. "The plan is designed to significantly reduce debt, which is around 9,000 million dollars (7,850 million euros)." The firm calculates that the latest cuts will allow it to obtain around 10% of that last sum.

"Bombardier's aeronautical division has more than 14,000 workers in Canada. Our presence is very important and translates into benefits for governments and local economies. We are the largest investor in research and development in Canada; we invested 1,600 million dollars (1,390 million euros) in 2017. Citizens have the right to express themselves and we listen to what they say, but it is important to understand the importance of Bombardier for the local economy. In Quebec, there are 40,000 jobs related to aeronautics, which depend largely on the company, "says its spokesperson. "The agreement with Airbus allowed us to secure some 2,000 jobs at least until 2040. In 2017 we generated thousands of jobs with the Global 7500 program. We had to make difficult decisions because the company has a high debt, but these decisions are also made with our employees, "he adds.

Ebrahimi emphasizes that, after the raw materials, the aeronautical industry is the one that generates the highest income in the country. "The contribution is great. We must also consider that Canada invests little compared to the United States, China, South Korea and Europe. The Canadian government has given more support to other sectors, such as dairy and wood, "he says.

In spite of everything, it has not helped Bombardier that, while they were immersed in the worst crisis in their history, the remuneration of their top positions grew by 12% on average between 2016 and 2017. The company justified it because they managed to reach " precise individual objectives. " An unlikely explanation, given the circumstances.


Source link