Government Legault | Millions in the A220 hope to remain a shareholder for much longer

By agreeing to pump a few hundred million more dollars into the A220, Legault’s government would like to allow the state to remain a contributor to the program a little longer, according to information obtained by Journalism. For the province of Quebec, this will increase the chances of getting some of the glass balls back.

Posted at 3:04 PM

Julian Arsino

Julian Arsino
Journalism

The two partners in Airbus Canada Limited Partnership (SCAC) are discussing over a call for capital from the European giant. Quebec, which owns 25% of the shares, has two options: inject new funds and keep its 25% stake, or see it dilute by opting for the status quo.

Investissement Québec (IQ) – the financial arm of the Quebec government – could expand “more than 200 million,” according to Montreal Magazine. It was not possible to obtain details about the amount.

Discussions are still ongoing. Ottawa is not involved. Airbus declined to comment on Monday. From what we have learned, Legault’s government would like to postpone the year in which multinational companies can buy Quebec’s participation in this program, which has already received 1.3 billion and is still running a deficit. Profitability is not expected before 2025.

“In order to have an opportunity to recover part of the investment, the goal is to postpone the moment of recovery,” said a government source who was not authorized to speak publicly.

The redemption deadline was originally set for 2023, and the redemption deadline was extended by three years when Bombardier drew a line on his C Series adventure in February 2020.

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Airbus has been controlling the program since 2018, without having to pay a penny, and now it owns 75% of the shares. The money injected by Legault’s government will be used to support an acceleration of the production rate, which is the element the multinational is betting on to make the A220 profitable and reduce production costs.

SCAC’s structure allows it to borrow from the markets, but if Airbus pumps money into the program, the state must follow suit if it wants to avoid dilution.

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After the disruption of the pandemic, which has accompanied a dearth of new orders, the A220 is headed for a bright future, believes John Graddek, aeronautics expert and lecturer at McGill University. However, he questions whether Legault’s government should untie the cash.

“As taxpayers, we can ask ourselves the question, says the specialist. Airbus has a very good product on its hands. But it seems that they want to increase production on the backs of Quebec rather than just investing their own money.”

According to the latest report from the Economic Development Fund (FDE), the “fair value” of the investment was “nil” as of March 31, 2021. Since then, the A220 has started to rise again, leading to a backlog of orders.

In 2021, the aircraft were awarded 64 fixed contracts. Taking into account LOIs, the total number increases to about 100 devices.

This can help increase government investment in the program. According to the FDE report, there was a “significant risk” in the past year of not recovering the full amount injected into the A220.

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Production should soon ramp up to six devices per month: four in Mirabel and two in Mobile, Alabama. The rate should be gradually established at a rate of 14 aircraft per month. There are 497 aircraft to be delivered in the order book, which represents several years of production.

Airbus eventually aims to offer an elongated version of the A220. It will be the third device for the family. This project has been rumored for several years. However, the aircraft manufacturer’s top management indicated last week that there was no “imminent decision” on the matter.

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This is Airbus’ workforce at Mirabel assigned to the A220. In Mobile, Alabama, there are 400 employees who assemble the planes.

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