Bombardier Inc. said Friday it will temporarily suspend production of its slumping 50-seat CRJ200 regional jet, a move that will realign its manufacturing with the "current market outlook for 50-seat regional jets."
The Montreal-based company said the suspension, set to begin in the middle of January, will result in 660 previously-announced layoffs in Montreal and Belfast.
Bombardier class B shares slumped 15 cents or 5.66 per cent to $2.50 on the Toronto Stock Exchange Friday morning. They have rise 14 per cent since the start of the year.
Orders for Bombardier's 50-seat CRJ200 regional aircraft have been slowing, with 18 of the planes forecast to be delivered in the fiscal year that begins in January. That's down from 54 CRJ200s in the current fiscal year.
"Total number of Bombardier aircraft deliveries for this fiscal year 2005/06 will remain, as planned, approximately the same as last fiscal year," the company said.
Production of the Challenger 850 business jet, the corporate version of the CRJ200, will continue on the existing assembly line. The company said the layoffs will be mitigated by new production of its Bombardier 415 amphibious firefighting aircraft and increased Bombardier business aircraft deliveries.
The company said the layoffs - the remaining 660 of the 1,135 layoffs announced last August - will be at Bombardier's Montreal-area and Belfast facilities, starting in November 2005.
The "combination of increased passenger traffic, lower yields and more relaxed pilot scope clauses are driving regional airlines toward larger capacity aircraft," said Bombardier Aerospace president Pierre Beaudoin.
"With our well-established customer base and regional aircraft such as the CRJ700/CRJ900 jets and Q400 turboprops offering outstanding economics, we are ready to capitalize on these market trends. This means making difficult but necessary decisions."
UBS Securities Canada Inc. analyst Peter Rozenberg raised his rating on Bombardier to "buy" from "neutral," citing the company's valuation.
A "glut" of 50-seat jets "remains a key concern undermining the outlook," he said. The outlook for regional jets is "unambiguously negative," he said, adding that he believes a "surplus of aircraft will negatively impact 50-seat regional jet deliveries and residual values."
Mr. Rozenberg lowered his projected deliveries of the CRJ200 from 14 to 12 for fiscal 2007.