Bombardier, the Montreal-based maker of planes and trains, posted a second-quarter loss of $71 million US Wednesday as it wrote off a losing investment in a privatized London Underground maintenance operation.

Bombardier said its ground transportation group is getting new orders from emerging markets such as China, India and Russia.
(Jacques Boissinot/Canadian Press)

The $162-million US hit, which turned profit to loss for the three months to July 31, relates to the five-partner Metronet consortium Bombardier joined in 2003 to maintain and upgrade nine of the London subway's 12 lines.

The venture is now insolvent amid runaway costs and unheeded pleas for a public bailout. Bombardier announced July 16 that it would write off its 20 per cent interest.

The company, which reports in U.S. dollars, said it still has London contracts worth about $6.7 billion for new trains, signalling, train refurbishment and fleet maintenance.

These "are progressing well … as per contractual requirements," it said in a statement.

Bombardier's company-wide revenue for the quarter was $4.04 billion, up from $3.52 billion a year earlier.

The quarterly loss of $71 million or five cents a share compares with a profit of $58 million or three cents a share a year earlier.

Bombardier three-month chart

Investors overlooked the loss and concentrated on the higher revenue and news of a record backlog of aircraft orders.

Bombardier's Class B shares gained 46 cents to close at $6.19 Canadian in TSX trading.

After deciding to boost aircraft production, Bombardier has cancelled previously announced layoffs and may soon recall some workers, the Canadian Press reported.

"Today we are talking more about stability in our organization and we'll see in some cases if we will recall some employees," Pierre Beaudoin, head of the aircraft division, said in a conference call to discuss the financial results.

The world's third-largest aircraft manufacturer had completed 874 of 1,330 planned layoffs.

CEO Laurent Beaudoin said the air and rail divisions both turned in "solid performances" during the quarter.

The air group "made good progress in all areas, with increased profitability and high order intake for both regional and business aircraft, raising its backlog to a record level," he said in the statement.

The rail operation showed "strong improvement in free cash flow" and is getting new orders from emerging markets such as China, India and Russia, he said.

The company's order backlog was a record $47.9 billion as of July 31, up $7.2 billion in six months, the statement said.

With a report from the Canadian Press