By Allison Lampert
MONTREAL (Reuters) -Europe's Airbus and Quebec on Friday said they have agreed to a $1.2 billion investment deal that would allow the Canadian province to remain in the loss-making A220 jet program until the venture is likely to turn profitable.
Airbus would invest $900 mln, while Quebec would put $300 million into the program, according to a statement from the province's government.
The investment would help the A220 program globally to support an increase in production, Benoit Schultz, chief executive of Airbus' Canadian unit, told a press briefing. The A220 is built both at an Airbus plant in the Montreal area and at the Mobile facility in Alabama.
The A220, previously known as the CSeries, is a 110- to 130-seater aircraft, a little smaller than Airbus’s mainstay A320 jet. Reuters reported on the deal earlier, citing sources.
The province has faced criticism for repeated investments in the program.
Airbus Chief Executive Guillaume Faury said the program should be profitable by the middle of the decade.
Faury told reporters that COVID-19 weighed on cost-cutting efforts because it impeded production increases.
"We need volume to have these savings," he said.
Quebec Economy Minister Pierre Fitzgibbon said the A220 program has promise to turn the corner and generates key jobs for the province, Canada's aerospace hub.
The deal would help maintain the equivalent of 2,500 jobs.
The deal would defer by four years the period when Airbus buys out Quebec's 25% stake in the small jetliner from 2026 to 2030, and Fitzgibbon said that could be advantageous.
"At that time we're going to have a fair market value assessment and I'm very hopeful we're going to make money and recuperate the original investment," he said.
While the A220 has benefited from airlines' preference for relatively small jets during the pandemic, Airbus has yet to secure low enough prices for many of the plane's components to push the A220 project into the black.
Airbus was expected to use its global marketing network and higher purchasing power from suppliers to move the project into the black, but while sales have soared, industry sources say it has struggled to win the concessions it wants from suppliers.
In 2020, Canada's Bombardier (OTC:BDRBF) exited the program, the first all-new narrow-body jet in 30 years, after it was beset with delays and cost overruns.