Airbus and Quebec sign investment agreement

European planemaker Airbus and Québec on Friday agreed a $1.2 billion investment deal that will allow the Canadian province to retain a stake in the loss-making A220 jet program until the company is expected to return to profitability will.

Airbus would invest $900 million, while Quebec would put $300 million into the program, according to a provincial government statement.

The investments would help the A220 program increase production worldwide, Benoit Schultz, head of the Canadian Airbus unit, said at a news conference. The A220 will be built at both an Airbus facility near Montreal and the Mobile facility in Alabama.

The A220, formerly known as the CSeries, is a 110- to 130-seat aircraft, slightly smaller than Airbus' mainline A320 product. Reuters previously reported on the deal, citing sources.

The province has come under criticism for repeated investments in the program.

Airbus chief executive Guillaume Faury said the program should be profitable by mid-decade.

Faury told reporters that COVID-19 is hampering cost-cutting efforts because it is preventing production increases.

"We need volume to get those savings," he said.

Quebec Minister of Commerce Pierre Fitzgibbon said the A220 program promises a game changer and creates important jobs for the province, Canada's aerospace hub.

The agreement would help preserve the equivalent of 2,500 jobs.

The deal would push back the period by which Airbus buys Quebec's 25 percent stake in the small jetliner by four years, from 2026 to 2030, which Fitzgibbon said could be beneficial.

"At that point we will be making a fair market value assessment and I am very confident that we will make money and recoup the original investment," he said.

While the A220 has benefited from airlines' penchant for relatively small jets during the pandemic, Airbus has yet to achieve low enough prices for many of the plane's components to bring the A220 project into the black.

It had been expected that Airbus would use its global distribution network and greater purchasing power with suppliers to bring the project to profitability, but although sales have soared, industry sources have reported that Airbus is struggling to obtain the desired concessions from the suppliers.

In 2020, Canadian company Bombardier (OTC:BDRBF) pulled out of the program, the first all-new narrowbody jet in 30 years, after being beset by delays and cost overruns.