Brenda O’Farrell
Investing.com – It was a big week for Bombardier Inc (TSX:BBDb) as it announced it is getting out of the commercial aviation business on Wednesday, selling its stake in the A220 plane program to Airbus. The decision buoyed the plane and train maker’s shares to claim the distinction of being the best performer of the week on the S&P/TSX Composite, gaining almost 15% on the week.
But the bounce was not enough to make up losses the Quebec-based company suffered in the last year.
Shares of the Bombardier on Friday afternoon were trading at $1.705, up about 2% on the day, but down about 5.5% in the last month. Overall, shares of Bombardier are down about 32.4% in the last year.
The decision to exit the plane-making sector was made in an effort to help Bombardier pay down some of its multi-billion-dollar debt. The company has more than US$9 billion in debt, and has posted an annual loss of $1.6 billion.
Under the terms of the deal announced Wednesday, Airbus Group SE (PA:AIR) will pay Bombardier US$591 million for its stake in the A220 plane program and Bombardier would walk away from its requirement to investment another US$700 million. The Quebec government will continue to hold 25% of the Airbus program.
In 2016, the Quebec government invested $1.3 billion in Bombardier’s C Series plane program. Two years later, Bombardier sold a controlling stake in the C Series program to Airbus for a token amount, making the provincial government a stakeholder in Airbus.
Bombardier is also reportedly in negotiations with the French company Alstom (PA:ALSO) over a possible sale of its rail and subway car division.