Bombardier Inc. says it will cut another 1,600 jobs and stop making Learjets, a business jet that has been around for almost 60 years.
The Quebec-based aerospace company announced the moves in posting its quarterly financial results, which showed the company lost $337 million US in the last three months of 2020.
The job cuts will bring the company’s total workforce down to about 13,000 people around the world.
“Workforce reductions are always very difficult, and we regret seeing talented and dedicated employees leave the company for any reason,” said Éric Martel, the company’s president and chief executive officer.
“But these reductions are absolutely necessary for us to rebuild our company while we continue to navigate through the pandemic.”
About 700 of the job cuts are planned in Quebec and 100 in Ontario. A further 250 jobs will be eliminated in Wichita, Kan., where the Learjet is built. The rest of the job losses will be scattered across the rest of the U.S and Canada.
“The only thing the pandemic did was accelerate a sad ending,” aerospace analyst Richard Aboulafia with the Teal Group said of the Learjet’s demise.
Unifor, which represents 2,500 workers at a Bombardier facility in Montreal, is calling on the federal government to do more to help the aerospace industry survive the pandemic.
But many of Bombardier’s problems predate COVID-19.
The company is currently a shadow of its former self, having gone from an integrated transportation conglomerate that made planes and trains of all shapes and sizes, into essentially a niche maker of business jets.
Its CSeries business, which was touted as the future of the company when it first took to the skies in 2013, was sold to Airbus in chunks in 2017 and then again last year for virtually nothing.
The company hired a new CEO in March 2020 and faced criticism at the time for the $17-million severance package of the one on the way out.
It recently sold its train-making business to European conglomerate Alstom for $3.6 billion, much less than initially thought.
Today, the company’s entire business largely consists of making two types of business jets, the Challenger series and the Global series. The company sold 44 of those jets during the quarter, down from 52 in the same period the year before.
For the year as a whole, the company sold 114 jets: 59 Globals, 44 Challengers, and 11 Learjets.
Learjets were first sold and flown in 1963, based on a design by inventor William Lear who was inspired by military jets The company was eventually acquired by Bombardier in 1990, and more than 3,000 Learjets have been sold over the plane’s history.
More cuts expected
Lecturer John Gradek at McGill University’s aviation management program said he suspects the Challenger jet could be next to get the axe as the company streamlines its business to be as efficient as possible, in an attempt to save up to $400 million a year.
“The only way they can do that significant cost cutting is to drop product.”
In its outlook, the company said it expects this year to be a “transition year” but it expects revenue from selling jets to improve as the global economy recovers from COVID-19.
Analysts underscored just how uphill the company’s climb is looking right now.
“While Bombardier outlined a series of restructuring efforts to improve earnings and cash generation, the company’s current financial position highlights the significant heavy lifting that still needs to be done within the organization even after all these asset sales,” TD Bank analysts Kevin Chiang and Krista Friesen said in a note to clients after the news came out.
Bombardier shares slipped about 5 per cent to 89 cents on the Toronto Stock Exchange on Thursday, which values the entire company at about $1.6 billion Cdn. That’s against a total debt load of more than $10 billion.
In 2018, those same shares were worth about $5. The company’s all-time value peaked in 2000 at roughly $25 a share.
Gradek said the share sell off makes sense considering the company’s prospects.
“They’re becoming more of an elite business jet manufacturer and that’s not a very comfortable place to be in given that business travel is down and people are being more careful about where they are spending their money.”
The company’s cheapest, entry level jet now starts at $30 million, while other plane makers have come to market with much smaller business jets that come with a price tag between $1 million and $2 million.
“The market is saying: ‘I’m not sure that’s the way to go.'”