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Bombardier Close To Russian Production Deal

Mon, 01/27/2014 - 2:12pm
Ross Marowits, The Canadian Press

MONTREAL (CP) -- Bombardier Inc. (TSX:BBD.B) says it's close to finalizing an agreement to start producing its Q400 propeller-driven airliners in Russia.

A deal to establish a joint venture with state corporation Rostec could lead to some 100 turboprops, valued at US$3.4 billion at list prices, being built for the Russian market.

The deal, which local media in Russia says will see production start this year, flows from a series of preliminary agreements signed last August.

The final assembly line in Russia would complement Bombardier's Toronto operations, where final assembly of the 70- to 80-seat turboprop currently take place.

Bombardier Aerospace announced last week the permanent layoff of 1,700 employees, primarily in Montreal and Wichita, Kan., where it makes jets, as it steps up efforts to cut costs amid delays with two new aircraft and a tough market for both commercial and business planes.

The Q400s are used by airlines around the world, including Toronto-based Porter Airlines and WestJet's new Encore regional service and Air Canada-affliated Jazz.

Bombardier spokesman Marc Duchesne wouldn't confirm details of the agreement, but said it would include a firm order from Rostec for up to 100 planes that would involve Russian leasing company Ilyushin Finance Co.

"Discussion between Bombardier and Rostec are ongoing and both sides are working toward the conclusion of a definitive agreement and things are going very well but we need a couple of more days just to finalize the details," Duchesne said in an interview Monday.

The Moscow Times quoted a Russian government official saying at the World Economic Forum in Davos that a deal had been signed and a Bombardier representative confirming the planes would be built in Russia's Ulyanovsk region, about 900 kilometres east of Moscow.

Analysts said the agreements are designed to deepen Bombardier's roots in Russia by "locking in" the Russian market for the Q400 against its main rival ATR.

They also had said the Russian agreements could "revitalize" the Q400, whose orders have been lagging.

Bombardier delivered 29 Q400s and received 17 net orders last year. That compares to 36 deliveries and 50 net orders in the prior year.

On the Toronto Stock Exchange, Bombardier's shares gained one cent at $3.87 in Monday morning trading.

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