Mitsubishi in talks to buy Bombardier’s regional jets

Japan’s Mitsubishi Heavy Industries Ltd said on Wednesday it is holding talks to buy Bombardier Inc’s regional jet programme, in a deal that would shake up the market for narrowbody jets with fewer than 100 seats.

Mitsubishi Heavy, which is working to break into aviation with the launch of its own regional jet programme, told Reuters by email that it was in discussions but that no decision had been made.

Bombardier also confirmed that it was in discussions with Mitsubishi Heavy but did not give any details.

Their remarks follow an earlier report by the Air Current that said Mitsubishi Heavy was in advanced negotiations with Bombardier and that an announcement could come as soon as the June 17 start of the Paris Air Show, if a deal is finalized.

The talks come as the Canadian planemaker is trying to find a solution for its money-losing CRJ programme, which has no backlog past 2020. For its part, Mitsubishi is hungry for expertise to develop and certify its delayed regional jet programme, the MRJ.

“This has really been a Bombardier-Mitsubishi Heavy conversation,” said a source familiar with the Canadian company’s thinking. “The combination itself makes a tone of sense.” A deal would be the latest shuffling in aircraft competition and manufacturing, after Bombardier sold a majority stake in its flagship 110-130 seat jetliner programme to Europe’s Airbus. Bombardier’s CRJ competes against aircraft made by Brazil’s Embraer SA, which struck its own deal with US planemaker Boeing Co.

Bombardier’s withdrawal from the civil airliner market and its plans to sell two component-making plants in Belfast and Morocco, comes as Western rivals keep a watchful eye on China’s growing passenger jet ambitions, experts say.

Industry sources say Airbus is looking at the Belfast plant, which uses advanced wing manufacturing technology, but would prefer to see it go to a supplier such as GKN or Spirit. Airbus declined to comment.

Bombardier Chief Executive Alain Bellemare had said in January the company is considering “all strategic options” for the regional jet programme, including a potential sale.

The Canadian plane and trainmaker recently combined its aviation units to focus on more profitable business jets and passenger rail cars.

Mitsubishi is working to certify the MRJ, which has been delayed by several years with first customer ANA Holdings Inc now expecting delivery in 2020 rather than in 2013 as originally planned.

It is not yet clear how an agreement between Bombardier and Mitsubishi, if the transaction is completed, would affect the CRJ’s production in Montreal or what the value of the deal would be. Bombardier closed a separate deal this week to sell its Q400 prop planes for $300 million gross.

Bombardier shares rose 4.1% to C$2.04 in early trading, while the broader Canadian share index was flat, with analysts expecting overtures between the two companies. Nicholas Heymann, an analyst at William Blair & Company, said “this is not new or surprising news and as such likely suggests that after suing MHI for IP theft, the resolution may be for MHI to acquire the CRJ business.” Montreal-based Bombardier had recently clashed in court with Mitsubishi Aircraft Corp, a unit of Mitsubishi Heavy, over allegations that former Bombardier employees passed on trade secrets to help with the development and certification of the MRJ regional jet.

Meanwhile, US prices of liquefied natural gas (LNG) being shipped to Europe will remain competitive with Russian piped gas prices over the long term, US energy secretary Rick Perry said on Wednesday.

Perry, attending an international political and business conference in Slovenia, said: “This idea that somehow... LNG can’t compete with pipelined gas is just false.” “The US supply, the US reserves of natural gas are massive. The... pressure downward on price of LNG is going to continue,” he told reporters on the sidelines of the conference.

“Even if Russia wants to continue to subsidise their gas prices, at some point in time they will run out of gas to subsidise,” he added.

Perry also said the United States continued to have the option of imposing sanctions on the Nord Stream 2 pipeline project from Russia to Europe, but declined to elaborate.

“We think it’s a bad idea to rely on a single source of energy and that’s basically what you get with the Nord Stream 2, and Europe is seeing first hand that Russia will cut your gas off,” he said, adding most EU countries were against the pipeline being finished. Bombardier also confirmed that it was in discussions with Mitsubishi Heavy but did not give any details.

Reuters