Bombardier to lose 7,000 jobs despite major Air Canada order

At the same time as Air Canada and Bombardier have announced the firm order for 45 CS300 aircraft with an option for a further 30, Bombardier has also announced the loss of 7,000 jobs from its aerospace and rail equipment facilities in Canada and Europe. This news also comes less than a week after it was announced that the Company was seeking a further cash injection ideally from the Canadian government, though Quebec has confirmed that it is prepared to invest on a provincial level if federal government funds are not forthcoming.
According to Navdeep Bains, Canada’s Minister of Innovation, Science and Economic Development: “We are continuing our dialogue with Bombardier on its request for federal assistance. Any action the government takes with respect to Bombardier will be first and foremost in the interest of Canadians. We have been clear that such an important decision will only be made after due diligence, careful consideration and a strong business case.”
Bombardier has confirmed that at list price, the order from Air Canada is worth in the region of US$3.8 billion and delivery is anticipated to commence in 2019. The manufacturer also confirmed that Air Canada will become the first mainline, international North America-based carrier for the C Series family of aircraft.
The redundancies, which will commence in 2 weeks’ time and be spread out until 2017, will include: 3,200 from its transportation division, 2,500 from its aerostructures and engineering services division, 800 from its aerospace product development engineering group and 500 from its business aircraft unit. Bombardier confirmed no jobs will be cut from its commercial aircraft unit.
One of Bombardiers recent problems has been focused on its share price, which has fallen from US$4.00 a share to as low as US$0.80 in recent weeks, which puts them in danger of being delisted from the TSX for being too cheap. This has the potential to create a new round of selling of the shares as many funds are mandated to buy index-listed shares only.
However, under a new proposal to shareholders, Bombardier will do a reverse stock split to consolidate shares and put the individual price of each one at between US$10.00 and US$20.00. The actual value of any given investor’s stake will not alter.