A220 production increase requires more investment Bombardier or exit a Joint Venture A220

Bombardier’s shares plunged 32 percent on Thursday after it issued a disappointing fourth-quarter sales warning and disclosed that it might pull out of its A220 joint venture with Airbus, its biggest drop in its history, falling to its lowest level in almost four years, Bloomberg reported. Bombardier said in a statement on Thursday that the A20’s increase driven production would require more cash investment, delaying the break-even point and driving down returns over the life of the product.

A220 production increase requires more investment Bombardier or exit a Joint Venture A220

Bombardier said the value of the A220 joint venture was likely to be reduced and it would disclose the writedown when it reports full-year results for 2019 next month.

Airbus said it would continue to fund the A220 project, which is “on track to break even.” Airbus owns 50.01 per cent of the A220 joint venture, Bombardier 31 per cent and Quebec Investment Company about 19 per cent.

If Bombardier pulls out of the A20 joint venture, it will mean an end to its relationship with its regional aircraft project, which has invested more than $6 billion.

Fadi Chamoun, an analyst at Bank of Montreal, said Bombardier’s reassessment of its role in the A220 could lead to writedowns.

In 2018, Bombardier transferred a controlling stake in the A220 project to Airbus. The aircraft won plaudits for its fuel efficiency, composite wings and large rits, but the project was more than two years over the course and its budget was about $2 billion.

In 2019, the A220 project received 63 orders, currently 105 aircraft in service, the reserve order volume is close to 500.

Later this year, Airbus’s second assembly line at its Mobil plant in Alabama will begin production of the A220.