To make the A220 profitable, Airbus must triple the current production rate of the aircraft, which comes with a bill of 1.5 billion. Quebec contributes by handing over 380 million to remain a shareholder for four more years, estimating that otherwise, its chances of “making a profit” from its participation would have been “non-existent”.
Updated yesterday at 3:51 p.m.
At the controls of the former C Series for three and a half years, the European giant, which will invest around 1.1 billion, believes that this is the ultimate financial effort to allow the program to come out of the red – this which is expected to materialize in 2025.
“It takes a long time and it takes a lot of money to set up what is called industrialization,” Airbus CEO Guillaume Faury said Friday by videoconference from Toulouse, France. “It’s a short-term expense for long-term success. »
He participated in the press conference that took place in Montreal in the presence of Prime Minister François Legault, the Minister of the Economy, Pierre Fitzgibbon, and the President and CEO of Airbus Canada, Benoît Schultz.
PHOTO PETER MCCABE, THE CANADIAN PRESS
Pierre Fitzgibbon, Minister of the Economy of Quebec, François Legault, Premier of Quebec, and Benoît Schultz, CEO of Airbus Canada
The investment will not be used to finance other projects, such as a possible stretched version of the A220, and should also benefit the assembly line in Mobile, Alabama.
Partners in the Airbus Canada Limited Partnership (SCAS), the European giant (75%) and Quebec (25%) invest in proportion to their participation. The Quebec State, which has already injected 1.3 billion into the adventure, thus avoids dilution.
If we had not reinvested, the participation [du gouvernement] would have been practically eliminated and the chances of making it profitable would have been practically non-existent.
Pierre Fitzgibbon, Minister of the Economy of Quebec
Mr. Legault, who, in the opposition, multiplied the criticisms of the Liberal government of Philippe Couillard following his decision to inject 1.3 billion into the C Series, had changed your tone on Friday. Visibly more optimistic, the Prime Minister even hinted that the taxpayers would emerge winners from the adventure.
To prepare the ground
In response to a question about whether execution problems at the Mirabel and Mobile factories were the reason for the new injection of funds, the multinational’s management said that was not the case.
To increase the pace, you need more workers, it’s a big investment item. It is necessary to add tools, machines for the segments of the assembly line which are automated.
Benoît Schultz, President and CEO of Airbus Canada, in an interview with The Press
Last November, Mr. Schultz indicated that Airbus wanted to recruit 500 more people in Mirabel over the next few years, which would swell the workforce to 3,000 employees.
The production rate of the A220 – which has 500 aircraft to deliver in its order book – should soon increase to six aircraft per month: four in Mirabel and two in Mobile, Alabama. The rate should gradually be established at 14 aircraft monthly around 2025.
“The increase in speed is an extremely complicated phase, underlines Mehran Ebrahimi, professor at UQAM and director of the Observatory of aeronautics and civil aviation. When you make one plane a month, that’s fine, but when it’s 14, you need a lot of layout infrastructure. »
The expert believes that the sum of 1.2 billion is reasonable, like Richard Aboulafia, managing director of the firm AeroDynamic Advisory. The latter stresses, however, that the establishment of a second production line in Mobile, while the A220 is still at the beginning of the marketing phase, complicates the task for Airbus.
“It’s unusual at this stage,” says Aboulafia. Given the current volume [cinq avions par mois], there are costs associated with operating two assembly lines. This perhaps explains part of the need for the investment. »
A defensive position
By loosening the purse strings, Quebec is postponing to 2030 the time when Airbus can buy back its stake in the A220. If the program is profitable for several years, its value should increase, which will allow the Quebec state to recover some of its logs.
However, the slope to be climbed is steep. According to the most recent Economic Development Fund report, the “fair value” of the government’s investment in the old C Series was “nil” as of March 31, 2021. After insinuating in June 2020 that it should probably write off the placement of 1.3 billion in the A220, Mr. Legault held a different speech on Friday.
“We will make profits with this investment,” he said, adding that the new investment comes with guarantees.
If Airbus has fewer than 2,500 employees at Mirabel in 2028, Quebec may force the buyout of the tranche of the investment announced Friday. The fewer workers there are, the higher the sum to be remitted by Airbus. For example, if all the jobs were to fly away from Mirabel, the European aircraft manufacturer would have to repay the entire 380 million.
Quebec and the A220 in a few dates
- October 29, 2015: the Liberal government of Philippe Couillard comes to the rescue of Bombardier and announces an injection of 1.3 billion into the C Series in exchange for a 49.5% stake.
- 1er July 2018: Airbus takes control of the C Series, which becomes the A220. Bombardier’s share declines to 33.7%. That of the Quebec government melts to 16.2%.
- February 13, 2020: to reduce its heavy debt, Bombardier leaves the adventure and sells its stake to Airbus and Quebec. The two partners hold 75% and 25% of the program respectively.
- September 29, 2020: Quebec cuts the value of its investment in the A220. The fair value of the investment was “Nil” as at March 31, 2021.
- February 4: the Legault government agrees to hand over 380 million to maintain its 25% stake.
Learn more
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- It is the Airbus workforce that works on the A220. There are about 2,500 employees in Mirabel and another 400 in Mobile, Alabama, where planes are assembled for American customers.
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