Does Bombardier still need Ottawa's help?
Despite getting some good news this week, aerospace giant Bombardier will likely still need help from the federal government, airline industry analyst Karl Moore says.
Bombardier signed a deal this week to provide 75 of its CSeries aircraft to Delta Air Lines with options for an additional 50 planes.
But the company has also been strapped for cash, and the request for $1 billion US from the federal government is still on the table.
Bombardier CEO Alain Bellemare said this week that he "would welcome the participation of the federal government to add financial flexibility to what we're doing in terms of the CSeries, but also our ability to keep investing in aerospace in the future, right here in Canada."
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Moore told CBC Radio's The House there are two main reasons why Bombardier is still seeking help despite this week's announcement.
"One is that they are building an aircraft that's costing a bit over $30 million to build the new CSeries. But they don't get that revenue until they deliver the planes, and they're not going to start delivering them until towards the end of June and July," Moore said.
"As well, when you make the first ones, you're not as good at them. It's called the learning curve. The more you make over time, the better you get at it. So the first ones are particularly more expensive. So there's a cash flow problem there."
As to why the company won't seek a loan from a financial institution, Moore acknowledged Bombardier has had some management problems. "They have a lot of debt, so the banks are reluctant to lend them more money," he said.
The professor at the Desautels faculty of management at McGill University also said that the backing of the federal government would go a long way in reassuring potential customers.
"If the Canadian government steps up and says, 'we're going to stand behind Canada's greatest global competitor in terms of size, in terms of reach', that takes away that Bombardier is going to be around in 20 years."
After the news of the Delta Airlines deal this week, federal Transport Minister Marc Garneau would only tell reporters that "the conversation is ongoing between the federal government and Bombardier."