Airbus Claims Quebec’s A220 Investment No Longer Holds Value
Airbus has declared that the Quebec government’s investment in the A220 program, which amounted to $2.1 billion since 2015, has lost all its value. The future looks bleak as profitability remains uncertain. Despite having over 460 aircraft to deliver until the end of the decade, the financial outlook is troubling.
Financial Overview of the A220 Program
According to Airbus’s financial report as of December 31, the company would not have needed to pay for Quebec’s 25% stake in the A220 had the buyout option been executed. Analyst Carl Brousseau from Laval University noted that the likelihood of Quebec not recovering any of its investment is increasing. The government may soon write off the remaining estimated value of approximately $400 million related to this stake.
Investment History
- 2015: Initial investment of $1.3 billion by the Liberal government led by Philippe Couillard.
- 2022: An additional $380 million invested by the Quebec government.
- 2024: A necessity for further investment of $410 million is anticipated.
In 2020, the initial investment was marked down significantly, and last year, under Premier Francois Legault’s administration, the value of an additional $800 million was halved, further compounding the situation.
Production Challenges and Future Prospects
Airbus and Quebec are not at the end of the road yet. The company has until 2035 to negotiate the buyout of Quebec’s stake to gain full control of the A220 program. Company spokesperson Annabelle Duchesne highlighted that current financial assessments are merely estimates reflecting market value. The actual amount will be determined at the time of the buyout.
Airbus faces hurdles, having incurred a depreciation charge of around $810 million (500 million euros) linked to the A220, attributed to increased costs associated with acquiring facilities from Spirit AeroSystems. These challenges reflect broader profitability concerns.
Production Goals and Market Expectations
Airbus ambitions include assembling 13 A220 aircraft annually at its facilities in Mirabel and Mobile (Alabama) by 2028. However, it remains unclear if this goal will yield profitability. Historically, Airbus had indicated plans to reach production of 14 aircraft per month by mid-decade, a target that currently appears unlikely.
Production has struggled, with an average of fewer than eight aircraft constructed per month, significantly hindered by design issues with Pratt & Whitney’s PW1500G engines. Supply chain obstacles are also affecting progress.
Richard Aboulafia, an aviation analyst, pointed out that the A220 program must expand beyond its niche of 100 to 160-seat aircraft to succeed commercially. Airbus has consistently indicated ongoing interest in developing an extended version of the A220, with the potential to accommodate up to 180 passengers. However, significant investments will be required to realize this version.
The Road Ahead for the A220 Program
Airbus’s CEO, Guillaume Faury, acknowledged the complexities surrounding the potential extension of the A220 and emphasized that while the project is under serious consideration, various steps must still be addressed before proceeding. The manufacturer’s future success is contingent upon navigating its current financial hurdles while exploring broader opportunities in the market.
Despite the uncertain present, both Airbus and the Quebec government hold hope for a turnaround in the A220’s prospects.
