Bombardier's Stock Takes Off
Bombardier Inc.'s share price soared to its highest level in more than two years as investors responded to news that Airbus SE agreed to take control of the company's struggling CSeries jet family.
The company's Class B stock rose sharply by nearly 19% to C$2.80 ($2.24) a share in heavy early-morning trading Tuesday on the Toronto Stock Exchange. The company's stock price hasn't traded that high since early 2015.
The market reaction reflects renewed investor confidence in Bombardier's faltering bet on its CSeries line of narrow-body jets. The program has been plagued by delays, potentially devastating U.S. tariff decisions and customer concerns about the financial health of the Montreal-based transportation company.
Although Airbus isn't investing any money to acquire control of the CSeries, the French plane maker's financial and marketing muscle is expected to revive sales of the jets that have stalled since December. Cameron Doerksen, an analyst with National Bank, said in a report Tuesday that the partnership will improve Bombardier's cash flow and lower production costs as it shifts production for U.S. sales to Airbus's Alabama plant.
Although the move may cost Canadian jobs, one union official supported the new alliance.
"This was a question of survival," Jerry Dias, president of Canadian union Unifor, which represents some Bombardier workers, told Canada's CTV network of the Airbus deal. "Am I thrilled that they will be building CSeries aircraft in Alabama? No. But ultimately I don't see that any other decision could be made."
Canadian officials on Monday night said the government had guarantees from Airbus about CSeries production and employment levels in Canada and maintaining headquarters in Montreal.
The deal is subject to a foreign-investment review, as stipulated under Canadian law, but officials signaled that approval is likely.
Airbus's investment in the CSeries represents "the survival of the aerospace industry in Canada," said François-Philippe Champagne, Canadian trade minister and a lawmaker from Quebec.
Bombardier Inc.'s share price soared to its highest level in more than two years as investors responded to news that Airbus SE agreed to take control of the company's struggling CSeries jet family.
The company's Class B stock rose sharply by nearly 19% to C$2.80 ($2.24) a share in heavy early-morning trading Tuesday on the Toronto Stock Exchange. The company's stock price hasn't traded that high since early 2015.
The market reaction reflects renewed investor confidence in Bombardier's faltering bet on its CSeries line of narrow-body jets. The program has been plagued by delays, potentially devastating U.S. tariff decisions and customer concerns about the financial health of the Montreal-based transportation company.
Although Airbus isn't investing any money to acquire control of the CSeries, the French plane maker's financial and marketing muscle is expected to revive sales of the jets that have stalled since December. Cameron Doerksen, an analyst with National Bank, said in a report Tuesday that the partnership will improve Bombardier's cash flow and lower production costs as it shifts production for U.S. sales to Airbus's Alabama plant.
Although the move may cost Canadian jobs, one union official supported the new alliance.
"This was a question of survival," Jerry Dias, president of Canadian union Unifor, which represents some Bombardier workers, told Canada's CTV network of the Airbus deal. "Am I thrilled that they will be building CSeries aircraft in Alabama? No. But ultimately I don't see that any other decision could be made."
Canadian officials on Monday night said the government had guarantees from Airbus about CSeries production and employment levels in Canada and maintaining headquarters in Montreal.
The deal is subject to a foreign-investment review, as stipulated under Canadian law, but officials signaled that approval is likely.
Airbus's investment in the CSeries represents "the survival of the aerospace industry in Canada," said François-Philippe Champagne, Canadian trade minister and a lawmaker from Quebec.
(END) Dow Jones Newswires
October 17, 2017 12:00 ET (16:00 GMT)