Bombardier Aerospace announced 2,000 job cuts Thursday – most of them in the Montreal area – as it slows down its production lines to reflect a slowing market for its smaller CRJ regional jets.

Bombardier (TSX:BBD.b)said the cuts start next month and will continue over the following nine months.

Bombardier CRJ 200
Bombardier CRJ 200

A total of 460 jobs will disappear at its facilities in Dorval, Que., next spring. About 410 jobs are being axed in Mirabel, Que., beginning next month; 260 jobs go in St. Laurent, Que.; 310 office jobs disappear at other Bombardier sites in Canada; and 560 jobs are being cut in Belfast.

"Given the context of the airline industry and the financial difficulties facing a number of our customers, we must continue to be prudent and proactively manage our production rates and delivery schedule to reduce our exposure to the cancellation or deferral of orders," said Bombardier Aerospace CEO Pierre Beaudoin in a statement.

"By making these difficult but necessary decisions, we will remain competitive and ensure our success in the long term," he said.

Regional jet production to be slowed
Regional jet production to be slowed

Bombardier said it was reducing the production rate of its 50-seat CRJ200 from one every three days to one every four days. It's planning to deliver 68 CRJ200 regional jets in the 2005/2006 fiscal year, down from the 98 it will deliver in the current fiscal year.

1,200 more jobs may be cut if Delta cancels jet orders

Bombardier also warned that Delta Airlines is facing serious financial problems and may not be able to follow through on its plan to buy Bombardier's CRJ regional jets.

"Should Delta be unable to take delivery of CRJ aircraft, a further cut in the Bombardier CRJ Series production rate would be implemented with an additional workforce reduction of approximately 1,200 employees," the company said.

One of Bombardier's unions estimates that if those 1,200 layfoffs proceed, about 800 of them would take place among its members in the Montreal area.

But all is not bleak for Bombardier. The company said its Q series turboprops are in increasing demand and it has increased production of those planes.

The company also said the business aircraft market is recovering (60 orders in the first half of this year versus 24 orders over the same period last year). "This strong increase in order intake will have a positive impact on the production levels of a number of Bombardier business aircraft," Bombardier said.

Bombardier said severance costs for its CRJ-related cuts would be $26 million US and would be expensed in the current fiscal year.

"As a consequence, Bombardier Aerospace cannot maintain its previous guidance of break-even at the earnings before income taxes (EBT) level for the current fiscal year," the company warned.

Dominion Bond Rating Service on Thursday placed Bombardier's debt rating "under review with negative implications."

Bombardier shares dropped 19 cents to close at $2.79 on trading volume of 11.1 million shares.