Bombardier acquires Global 7500 business jet wing program from Triumph Group
January 24, 2019 by Christopher Reynolds The Canadian Press
January 24, 2019 –Bombardier Inc. has signed a deal to acquire the Global 7500 wing manufacturing operations and assets from Triumph Group Inc., reinforcing the Quebec plane-and-train maker’s focus on its flagship business jet.
The company says the acquisition of the program for a nominal cash consideration is expected to close in the first quarter of 2019.
“It’s literally a nominal, symbolic amount,” says Bombardier spokesman Mark Masluch.
“It’s about getting the keys, making sure we’re on track with the ramp-up and focusing on the deliveries of the 7500.”
The Global 7500, which entered into service in December, is on track for between 15 and 20 deliveries this year, and between 35 and 40 in 2020, Bombardier said.
The wing-making operations will be incorporated into Bombardier’s aerostructures and engineering services segment.
“We have wing production expertise. So it made sense,” Masluch says.
The Montreal-based company will enter into a lease agreement for Triumph’s facility in Red Oak, Texas, and continue to operate the production line with the employees currently working on the program.
Bombardier will take on about 500 full-time employees from Triumph and give work to some 200 contractors now working for the Pennsylvania-based company, Masluch says.
In 2016, Triumph launched a $340-million lawsuit against Bombardier, alleging Bombardier had failed to pay what it owed the aerospace supplier for work on the business jet, then known as the Global 7000.
Bombardier denied the allegations. The parties settled out of court in May 2017.
“Since then, Triumph has been evaluating the program, how it was going to execute the ramp-up,” Masluch says. “Of course there would be logistical, technical and financial considerations to continue it effectively….”
Bombardier is aiming for US$8.5 billion in annual revenues by 2020, driven largely by Global 7500 sales _ a major bump from US$5 billion in 2017. The business jet backlog now totals about US$14.3 billion, Masluch says.
The Global 7500, along with the new Global 5500 and 6500, come partly as a response to products from rival business jet manufacturer Gulfstream Aerospace Corp. as demand for the larger jetliners keeps rising.
Despite the extra US$250 million to US$500 million in revenue the new deal is expected to give Bombardier, the adjusted earnings guidance for the company’s business aircraft segment in 2019 remains unchanged at 7.5 per cent, says analyst Benoit Poirier of Desjardins Securities.
“We are pleased with this transaction as it should enable Bombardier to solidify its position as an aerostructures manufacturer while ensuring the success of the production ramp-up and the long-term outlook for the Global 7500 program,” he wrote in a research note.
Bombardier’s share price continues to hover at about $2, down roughly 36 per cent from one year ago.