Troubled Bombardier faces demotion from top Candian index

Aircraft and train manufacturer worth just a fraction of former value

A worker cleans the cockpit windows of a Bombardier Global 7500 long range business jet. Photograph: Jasper Juinen/Bloomberg

A worker cleans the cockpit windows of a Bombardier Global 7500 long range business jet. Photograph: Jasper Juinen/Bloomberg

 

Bombardier is facing the boot from Canada’s main index as it slides toward irrelevance for equity investors.

The aircraft and train manufacturer’s share price has been below one Canadian dollar since early March, potentially making it ineligible to stay in the S&P/TSX Composite Index and, in turn, the S&P/TSX 60 Index of large companies.

To be included in the composite, a company must have a minimum volume-weighted average price of C$1 over the previous three months, as well as over the last 10 trading days of the month prior to the index provider’s quarterly review, according to S&P Dow Jones index methodology. For Bombardier, that average price is now sitting at about 53 Canadian cents for the three months leading up to June.

A departure from the index could hurt demand for Bombardier’s shares as exchange-traded funds drop the stock.

Bombardier’s shares have continued their downward spiral despite a corporate revamp initiated by former chief executive Alain Bellemare. The stock has lost almost all of its value in 20 years.

The Montreal-based company, which employs around 3,600 people in Belfast, was once seen as a Canadian champion of the industrial sector and a source of pride for Quebec. It made everything from snowmobiles to commercial aircraft but is now a shadow of its former self after ceding its marquee jet program, now known as the A220, to Airbus and agreeing to sell its rail business to French train maker Alstom in the face of more than $10 billion in debt.

The company’s market capitalisation peaked at C$36.2 billion ($27 billion) in the summer of 2000. Today it’s C$1.4 billion.

Mr Bellemare’s restructuring means Bombardier has made an all-in bet on the corporate jet market. That left the company, now led by Eric Martel, particularly exposed as the coronavirus pandemic shuttered travel globally and slashed corporate spending. Still, it’s possible that sales of private jets, which allow for physical distancing among passengers, may come back faster than commercial travel.

Last week, the company announced that it plans to eliminate 2,500 jobs at its aviation division following a slump in demand for business jets. In quarterly financial results released May 7th, Bombardier said it’s bracing for a drop of at least 30 per cent in sales of private jets as the crisis pummels demand this year. – Bloomberg