Airbus A220 | Quebec reinjects hundreds of millions

Quebecers will remain shareholders of the old C Series for longer, but it will cost them several hundred million dollars more, we have learned The PressIn the hope of recovering some of its profits, the Legault government has agreed to put money, alongside Airbus, into the A220 — still in deficit.

This announcement will be made official Tuesday afternoon at the European giant’s facilities in Mirabel, while the major aeronautics event, the Farnborough Air Show in the United Kingdom, is taking place on the other side of the Atlantic. As a sign of the importance of the issue, Premier François Legault will be on hand, as will his Minister of Economy and Innovation, Pierre Fitzgibbon, and the CEO of Airbus Canada, Benoît Schultz.

According to our information, the reinjection of funds from the Quebec government should resemble that of 380 million CAN announced in the winter of 2022.

Airbus had put $1.1 billion on the table at the time. Quebec’s financial effort is not expected to exceed the half-billion dollar mark.

Still, this means that the public funds injected since 2015 into this program developed by Bombardier should exceed 2 billion, taking into account what will be announced. Mr. Fitzgibbon’s office and Airbus had not commented on Monday on the details obtained by The Press.

Expected profits

Why is the Legault government loosening the purse strings once again? Otherwise, its 25% stake in the Airbus Canada Limited Partnership (SCAS), the structure that owns the A220, would have melted away. In exchange, Quebec is postponing until the next decade the moment when Airbus, which owns 75% of SCAS, can buy back its stake. The current deadline has been set for 2030.

In other words, the Legault government is paying to buy time. It is betting that this decision will allow it to obtain more compared to a buyout in five years. The more profitable years the A220 accumulates, the better the chances will be for the Quebec government to recover part of its investment. The reverse is also true.

The program must first and foremost get out of the red.

“It’s not that the demand isn’t there,” says aviation expert and lecturer John Gradek. “The question is whether Airbus can ramp up production.”

Airbus aims to produce 14 A220s per month in Mirabel (Laurentides) and Mobile (Alabama) by 2026 — a sine qua non condition for generating profits, according to the European aircraft manufacturer. The speed at which the planes are built must therefore double in about two years to reach the target of 140 A220s per year.

The path to that goal remains winding, even though Bombardier’s former C Series had its best year in sales in 2023 with 142 firm orders.

Like other programs, the A220 is suffering from persistent problems at several of its suppliers, including engine manufacturer Pratt & Whitney. To reduce the time spent on each aircraft on its assembly lines, the European giant had notably installed a pre-assembly line in Mirabel in 2022.

This space is used to install electrical wiring, floors and other modules in fuselages that then end up on assembly lines. Over the past two years, some 1,600 people have been recruited by Airbus in Mirabel, which has also rolled out other projects, such as the construction of a delivery centre — the place where airlines officially become owners of an aircraft. The initiative aims to free up space in the plant’s hangars.

However, this is not enough. According to Mr Gradek, other suppliers of the A220 are struggling to deliver the goods.

“It’s going to be very difficult,” said American analyst Richard Aboulafia, CEO of the American firm AeroDynamics, earlier this year about the production rate that Airbus wants to achieve. “The reality is that they [Airbus] depend on their suppliers.”

Slow takeoff

At the end of the first 6 months of the year, the European manufacturer had made 28 deliveries, 3 more than in the same period a year ago. Mr. Gradek, who did not have the details of Tuesday’s announcement, believes that the money injected by Quebec and Airbus could trickle down to its suppliers.

“Until now, Airbus has invested in Airbus,” the expert illustrates. “The thing we need to do is not necessarily reinvest in Airbus, but rather in its suppliers. This is how the multinational can ensure that its supply chain is as strong as that of each of its suppliers. This is done in the automotive industry.”

A sign of the widespread supply difficulties at the European aircraft manufacturer: last month it had already slashed its delivery target for the current year, which fell from 800 aircraft to “around” 770 devices.