Chinese group in talks to aid Bombardier

China’s Comac and Bombardier have held talks about a deal that could inject new life into the debt-laden Canadian company’s passenger jet business.

Comac is working with at least one bank on a tie-up that could involve China’s state-owned aircraft manufacturer making an investment in Bombardier’s commercial aerospace arm or taking a stake in the CSeries 100-150 seater passenger jet programme. The companies are understood to have been in discussions about a deal for some time, although no decision is imminent.

Bombardier, which has received nearly $3bn in publicly funded cash injections over the past two years, is exploring a similar industrial tie-up with Siemens for its rail business. An attempt in 2015 to rescue the costly CSeries programme by injecting it into a joint venture with Airbus collapsed in acrimony. The Chinese approach to one of Canada’s most-prized industrial assets comes after at least one other government-controlled Chinese company launched talks with the group, which have since ended.

Bombardier has sought partners in its aerospace and transport divisions to mitigate the unexpectedly high costs of bringing its CSeries passenger jet into service, with the programme running billions over budget. The jet is widely acknowledged to be highly efficient but it has struggled in recent months to win big new orders with both Boeing and Airbus cutting prices on their smallest aircraft. The US Commerce Department on Thursday gave its go-ahead to an anti-dumping investigation against Bombardier requested by Boeing over the pricing of the Canadian company’s small single-aisle jet. The investigation could result in hefty tariffs and damage its appeal to the US market.

In recent weeks Comac has launched a test flight of its first short-haul commercial passenger aircraft aimed at competing with Airbus and Boeing. But the C919 is still mainly an assembly of parts from other foreign manufacturers. Based on older-generation technology, and not yet certified by western aviation safety authorities, it is not expected to win many orders with airlines outside China in the near term. Access to the CSeries programme and its new-generation aircraft technology would boost the development of Comac’s decades-long haul toward becoming an aviation giant. Comac and Bombardier have been close for years. In 2012, the companies signed an agreement to find commonalities between the C919 and Bombardier’s CSeries to reduce training and maintenance costs. The companies have floated the idea of co-operating to compete against Boeing and Airbus. Bombardier has also advised Comac on its smaller regional jet, the ARJ-21, which went into commercial operation last year following years of delay.

Comac is not the first Chinese group to pursue Bombardier. Avic, the state aerospace and defence group from which Comac was formed a decade ago, has held direct discussions with Bombardier in recent years. Avic explored taking a stake in and a deal for control of the Canadian group but the discussions did not reach an advanced stage, partially due to leadership changes at Avic. The apprehension probably stemmed from Avic’s deep ties to the Chinese military. Comac was spun out of Avic in 2008 and Avic remains a significant shareholder in the company. Comac’s operations focus on civil aviation and it was unclear whether a potential deal between the two companies would be beset with similar problems. Comac’s trajectory to the global market has been turbulent. The C919, the test flight of which came years behind schedule, is also 10-15 years behind the rest of the industry. Despite those problems, China is expected to become the world’s biggest aviation market by 2024. C919 already has 500 orders from Chinese airlines.