Aerospace — especially Bombardier — hits Canada's 'bulls-eye,' finance minister says

Federal Finance Minister Bill Morneau praised Bombardier Inc. as an innovative company and pillar of Canada’s globally competitive aerospace sector, the latest development in months-long negotiations over a government aid package.

Morneau, speaking in Japan, said the aerospace sector is exactly the kind of industry that fits with Prime Minister Justin Trudeau’s vision for economic growth.

“I think the aerospace sector fits right in our bulls-eye,” Morneau said when asked why the government was weighing aid. “It’s a highly innovative Canadian sector. It’s got the potential to be a growing and important part of our economy. We’re looking at how we can enhance Canada’s capability to be innovative — and focusing on a place where you’ve already got world-leading companies and world-leading technologies makes absolute sense.”

Despite federal praise of Bombardier (TSX:BBD.B) and its embattled CSeries jet project, federal aid talks are said to have stalled over demands for changes to corporate governance.

Trudeau has praised the CSeries aircraft while his point-man in Bombardier talks, Innovation Minister Navdeep Bains, has said the government is working to ensure Bombardier succeeds in the long-term as part of a viable Canada aerospace sector.

Morneau echoed that in saying the sector is one the government wants to support. “That is now and will continue to be an important sector to Canada, which is a reason we’re engaged in how we can continue to support the sector,” he said.

Morneau has previously cited a “timeline” to discussions, but said Friday there has been no publicly stated expiry date. “What we have said and we’ll continue to say is we’re going to support the aerospace sector. It’s obviously critically important. And we’re not going to negotiate with Bombardier in public,” he said.

Critics of Bombardier aid as a corporate bailout “don’t have enough information to come to that conclusion,” Morneau added.

Deal contingent on share structure

Quebec has already pledged $1 billion for the CSeries project and is prepared to proceed without federal support. The federal government, meanwhile, wants it and Quebec to each invest in the overall company, along with a share sale that would raise a total of $3 billion.

That deal is contingent on changes to Bombardier’s dual class share structure, which allows the founding Bombardier and Beaudoin families to control the company with only a minority stake.

The company has balked at such changes, however, saying the dual class shares are a pillar of the company’s ability to plan long-term.

Bombardier got breathing room this year with deals with Delta Air Lines Inc. (NYSE:DAL) and Air Canada (TSX:AC) to purchase the CSeries, with the federal government agreeing to loosen legal restrictions on Air Canada as part of the purchase. Despite the deals, Quebec is still calling for federal aid. Bombardier’s shares are up 49 percent this year.

Source: Montreal Gazette