Bombardier - General Discussion

An attempt by Mitsubishi Heavy Industries to buy only the aircraft maintenance network of Bombardier's CRJ regional jet program has been rebuffed by the Canadian company, which wants to sell both the loss-making production lines as well as the more lucrative services operation.

Bombardier has told MHI it will not allow "cherry-picking," said a person with knowledge of the situation on Friday. Another person familiar with the talks said the Canadian company was insisting on selling the unit as a whole, rather than breaking it up.

The two companies are in advanced discussions about a possible sale of the CRJ, the last of Bombardier's fully owned commercial jet programs. Although the CRJ program is loss-making a deal could still be worth several hundreds of millions of dollars. Both sides say there is no guarantee of agreement.


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MHI's biggest interest lies in CRJ's maintenance and repair operations, which will be critical if Mitsubishi wants to win orders for its passenger jets. The company is planning to release two types of regional jets, one seating 90 passengers and another seating about 70. Mitsubishi is going to formally unveil the smaller version -- which is set to be the company's core model -- at the Paris Air Show later this month. Whether it can win any purchase commitments from airlines will depend in part on its ability to provide seamless maintenance support for customers, most of whom are likely to be in North America.


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Bellamy said the program was now on track to finally deliver. "We know that the development at MRJ has been slower than we wanted, but this now really is the turning point between the history and the future of us being able to capture significant global demand," Bellamy emphasized.

"With the market as it is growing today, with a competitor moving out and (another) competitor focusing on other things, Mitsubishi Aircraft Corporation is really well positioned -- probably the best positioned in our history -- to go and capture the regional aircraft business," he said in a briefing on the program.

Aircraft testing was progressing and is expected to complete next year, Mitsubishi said. But the 90-seater aircraft is unlikely to find buyers in the U.S. because it exceeds the 76 seat limit for regional aircraft agreed between airlines and pilot unions. Mitsubishi aims to release a smaller 70-seat model in the Paris Air show later this month.

Mitsubishi Aircraft President Hisakazu Mizutani also raised the prospect that the MRJ could eventually be produced in the U.S., the world's biggest regional jet market. U.S. production was "a possibility in the future" if there was more demand than the company could meet in Japan. Mizutani noted that the company could miss opportunities if it had to wait for the Japanese to build sufficient skills to produce the aircraft, he said.

Bombardier (TSX: BBD.B) today announced a definitive agreement to sell its aerostructures business to Spirit AeroSystems Holding, Inc. (Spirit), supporting Bombardier’s strategic decision to focus on its two strong growth pillars, trains and business aircraft.

With this transaction, Spirit will acquire Bombardier’s aerostructures activities and aftermarket services operations in Belfast, U.K.; Casablanca, Morocco; and its aerostructures maintenance, repair and overhaul (MRO) facility in Dallas, U.S. for a cash consideration of $500 million and the assumption of liabilities with a total carrying value in excess of $700(2) million, including government refundable advances and pension obligations. Following the transaction, Spirit will continue to supply structural aircraft components and spare parts to support the production and in-service fleet of Bombardier Aviation’s Learjet, Challenger and Global families of aircraft.