|Bombardier has scrapped $1.75 billion in airplane orders in its sales restructure. Photo: Bombardier
[Avionics Today 01-14-2016] Bombardier Business Aircraft has announced further restructure with the aim to improve its business model and long-term profitability. The business segment has recently completed initiatives to increase the number of direct-to-market channels, including termination third-party sales representative and distribution agreements, as well as the restructuring of customer commercial agreements.
This includes the termination of a sales agreement with TAG Aeronautics, who served as Bombardier’s exclusive sales representative and distributor for new Challenger and Global series aircraft in 21 Middle Eastern and North African countries. Going forward, Bombardier will become directly responsible for sales activities in the associated regions leveraging its existing sales teams allowing for increased direct relationships with operators.
As a result of these agreements, Bombardier will incur pre-tax special charges of $278 million in the fourth quarter of 2015, of which approximately $145 million is non-cash. Of the cash impact, approximately $50 million was disbursed in the fourth quarter of 2015 and the balance will be paid in 2016.
Bombardier Business Aircraft has also completed a restructuring of certain customer commercial agreements. These agreements resulted in the cancellation of 24 firm orders, which had an aggregate value of $1.75 billion at 2015 list prices, with an additional cancellation of 30 optional orders. Bombardier expects to sell these positions at improved margins.