Actually, Quebec’s Bombardier bailout isn’t as crazy as it sounds

As taxpayer-funded gambles go, there have been riskier ones than Quebec’s flyer on the Bombardier CSeries jet


Bombardier workers look at the CS300 aircraft after it was unveiled at a news conference at its assembly facility in Mirabel, QuebecQuebec’s decision to plow $1 billion into Bombardier’s troubled CSeries jet program will no doubt be viewed by many as ill-advised “corporate welfare”—yet another example of throwing good money after bad. But that doesn’t necessarily mean it will be a rotten deal for taxpayers.

On the heels of a posting a $4.9-billion quarterly loss, which included a write down on the CSeries, Bombardier revealed Thursday the province will receive a 49.5 per cent stake in the CSeries in exchange for its billion-dollar “investment,” the latest in a long line of taxpayer help the company has received over the years. The CSeries, first launched in 2008 as a highly fuel-efficient alternative to the smaller jets built by industry titans Airbus and Boeing, is more than two years behind schedule and at least $2 billion over budget.

Such bailouts certainly aren’t unheard of in Canada. Both Ontario and the federal government invested more than $13 billion in the auto sector back in 2009. While the full amount was never recouped, Canadian politicians nevertheless deemed it a success because the program helped prevent the sector’s collapse and protected thousands of jobs. Similarly, Quebec Premier Philippe Couillard noted that Bombardier employs 18,000 workers in Quebec and anchors the province’s sizable aerospace sector.

Moreover, there’s still reason to be optimistic about the CSeries. Unlike Ford, GM and Chrysler, which are at risk of having their current renaissance sideswiped by tougher emissions regulations, the rise of car-sharing schemes and driverless vehicles, the market for commercial aircraft seems comparatively bright. The industry continues to grow around the world and many airlines are expected to replace their aging fleets in the coming years. And, by most accounts, the CSeries is a capable next-generation airplane, albeit one that has yet to fly a single paying passenger. “The market is there, our leadership is in place, we have the best product and with the support of the government, we are ready to make this aircraft a commercial success,” said Alain Bellemare, Bombardier’s CEO, in a statement.

The question, then, is whether Bellemare can execute on a CSeries project that was launched by his predecessor, and that’s expected to cost another $2 billion this year and next. So far, both Airbus and Boeing have managed to blunt the CSeries’ appeal by slapping new, more fuel-efficient engines on their existing jets. While the “re-engined” models don’t quite match the potential cost-savings promised by the CSeries, which also incorporates lightweight carbon fibre components in its design, the refurbished planes have proven to be an attractive alternative for airlines who remain uncertain about Bombardier’s ability to deliver in a brand new segment. The numbers tell the tale: Airbus’s A320neo (new engine option) boasts more than 4,100 firm orders, while Boeing’s 737 MAX has more than 2,800. By contrast, Bombardier only has 243 firm orders for the plane on Bombardier’s books (it needs about 300 to break even on the project).

If Bombardier can avoid further delays (not uncommon in the industry, as evidenced by Boeing’s drawn-out 787 “Dreamliner” saga), Bellemare stands a reasonable chance of pulling the CSeries program out of the fire—particularly since 97 per cent of flight testing is now complete. Indeed, some analysts believe that Bombardier will have a much easier time inking orders once CSeries jets are actually rolling off the production line and speeding down runways. Others predict there could ultimately be demand for as many as 2,500 aircraft in the market Bombardier is targeting with the CSeries, as evidenced by rumours U.S. carriers JetBlue Airways and United Airlines are considering the aircraft.

None of this is guaranteed, of course. The CSeries may still turn out to be a giant flop. Or, more likely, Bombardier will run into yet another unexpected hiccup. But, as taxpayer-funded gambles go, there have certainly been riskier ones.



Actually, Quebec’s Bombardier bailout isn’t as crazy as it sounds

  1. So, let me get this straight. The Quebec government, using funds that it gets from parts of the country that actually, you know, pay taxes, is going to give Bombardier a billion bucks in order to save some jobs?
    Irony, let me count the ways.
    Isn’t it ironic that a government that will tie itself in intellectual knots over climate change, is going to contribute a billion bucks to a company that builds what is probably the most fuel inefficient mode of transport known to man?
    Isn’t it ironic that a government that will go to great lengths to stifle new job creation in the energy industry, will take tax money from the people who work in that industry, and use it to prop up a business that is centered in a part of the country into which tax dollars flow like matter to a black hole?
    Isn’t it ironic that energy workers who pay more in income taxes than they will ever receive back in federal benefits get to watch their hard earned tax dollars go to keeping aerospace workers employed, while they themselves watch their friends and neighbors endure cutbacks and job losses?
    Why would we take tax dollars from those who work in the energy industry, so that people who don’t can build airplanes that get used by climate change activists to fly around the world telling people that the energy industry is evil? Does it get any more ironic than that?

    • @Bill. You forgot to mention the automobile industry.

  2. As someone with decades in an aerospace career, I am an avid believer in the CSeries. Nevertheless, there are questions. One being the length of time to complete the certification. I understand that there are a number of good reasons for flight testing and certification in the U.S., one being that F.A.A. (American) certification would enable very quick certification by other countries, but there are five ‘flight test vehicles’ that have been flying almost continually (I assume) for two years … certification of new Boeing and Airbus aircraft seems to be given within weeks of first flight, at least, that is the perspective given. I invite an explanation.

    Naturally, the two giants will pull out the stops to destroy the CSeries because (as mentioned in the article) neither of them have anything to compete at the moment … and the private family control of the company has not helped, not to mention the political pressure on the use of the Toronto Island Airport which is to be overcome.

    There really should be greater Canadian pride in our world-leading aerospace skills.

    • I have no issue with being proud of Bombardier, and other Canadian aerospace achievements. I do, however, have an issue with this direct line from my wallet to these companies at the same time that the list of governments in Canada working to hobble and belittle the oil industry is about as long as a Russian mfn novel.
      Just as a black hole cannot exist without a stream of mass to feed it, the heavily subsidized regions of this country will also not be able to exist without a very large, healthy, and profitable private sector to fund them. Currently, that is pretty much the Western, energy producing provinces and the industries that operate within, and that part of our economy is under attack from a lot of the people who would otherwise be in serious financial straits without it.
      Much of the hard work against the oil industry is akin to a duck wandering around the duck pond handing out shells to every guy packing a Remington.
      More irony for you. There is another article on this website about Quebec separatism. I say let Quebec go, if only for the satisfaction of watching them flounder when the flow of money from federal taxpayers dries up because, “hey, we have no obligation to give federal tax dollars to another country now do we?”, and “Sorry, but we have a policy of not giving federal tax handouts to companies in a foreign country.”

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