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The Canadian government has agreed to provide C$372m in loans to the Canadian train and plane maker Bombardier, ​well short of the ​US​$1bn in federal funding that Bombardier has been requesting since 2015.

The loans, which come from a Canadian aerospace and defense fund targeting research and development projects, will be used for Bombardier’s C Series narrow-bodied jets and the Global 7000 business jet, according to a statement from Ottawa.

Bombardier has been dogged by the unexpectedly high cost of bringing its C Series jet, intended as a challenger to Airbus’s A320 and Boeing’s 737 aircraft, into service.

In 2015 Bombardier was twice forced to turn to its home province of Quebec for a cash infusion. It sold a near-50 per cent stake in the C Series programme to the Quebec government in exchange for a $1bn lifeline, and also sold a 30 per cent stake in its rail business to the Quebec pension fund manager for $1.5bn. Bombardier had asked the federal government to match the $1bn injection from Quebec.

“The repayable contributions announced today will help to ensure that Canada remains at the center of Bombardier’s research and development activities,” Bombardier Chief Executive Alain Bellemare said in a statement.

Bombardier had asked the federal government to match the $1bn injection from Quebec.

“It’s better than nothing,” said aircraft analyst Richard Aboulafia of Teal Group. “But it falls somewhat short of what was expected. They could really use the full $1bn,” he said.

“This is a way to create high quality jobs in Canada,” said Navdeep Bains, Canadian Minister of Innovation, Science and Economic Development at a press conference.

The C series jet is sold out through 2018, “and Bombardier hopes the plane’s impressive operating performance will attract additional buyers for 2019-20 deliveries” at prices above those for its initial sales, aircraft analyst Cai von Rumohr of Cowen wrote in a recent research note. But “it’s unclear whether this will be sufficient to allow C series to break even going into 2020,” given that Boeing and Airbus will continue trying to “undercut Bombardier to keep C series out of key customers’ fleets”.

Bombardier said last October that it would cut 7,500 jobs, more than 10 per cent of its workforce, as it pushes ahead with a five-year turnround plan.

The company, which is based in Montreal, said about two-thirds of the job cuts would be in Bombardier Transportation, its train-building division, with the rest in its aerospace business.

The company said it expected to achieve savings of about $300m by the end of 2018. It also said restructuring charges of $225m-$275m would be accrued as special items, starting in the fourth quarter of 2016 and continuing through 2017.

“When we launched our turnround plan last year we committed to transforming our company . . . and that is exactly what we are doing,” said Alain Bellemare, chief executive.

Copyright The Financial Times Limited 2017. All rights reserved.
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