MONTREAL (Reuters) – Europe’s Airbus and Quebec are set to announce an investment deal that would allow the Canadian province to remain in the loss-making A220 jet program until the venture is likely to turn profitable, two sources familiar with the matter said. The investment deal, set to be announced on Friday, would defer by four years the period when Airbus buys out Quebec’s 25% stake in the small jetliner from 2026 to 2030, one of the sources said. Under the deal, both Airbus and the Quebec government would invest in the program, both sources said.
Airbus declined comment. Quebec would not comment ahead of a press event this morning in Montreal.
While the 110-130 seat A220 has benefitted from airlines’ preference for relatively small jets during the pandemic, Airbus has yet to secure low enough prices for many of the plane’s components to push the A220 project into the black.
The program is not expected to be profitable before 2025.
Contracts with key suppliers such as Raytheon Technologies were originally set under Canada’s Bombardier, which lacked purchasing power as it tried to enter the mainstream jet market and ceded control of the jet program to Airbus in 2018.
Airbus was expected to use its global marketing network and higher purchasing power from suppliers to move the project into the black, but while sales have soared industry sources say it has struggled to win the concessions it wants from suppliers.
It has secured price cuts of some 20% from key suppliers but is pushing for another comparable cut, while looking at whether some parts could be redesigned to make them more efficient to produce, industry sources said.
The A220 is built both at an Airbus plant in the Montreal area and at the Mobile facility in Alabama.
In 2020, Canada’s Bombardier exited the program, the first all new narrow-body jet in 30 years initially called the CSeries, after it was beset with delays and cost overruns.
The deal gave Airbus a 75% stake in the A220 program and the Canadian province of Quebec was left with the remaining 25% after agreeing to invest $1 billion in the CSeries back in 2015.
Talks about an agreement were reported in January by the Journal de Montreal.
(Reporting By Allison Lampert in Montreal and Tim Hepher in Paris;Editing by Elaine Hardcastle)
