The agency downgraded Bombardier’s already poor credit rating and changed the outlook to Negative from Stable.
Moody’s changed the “Corporate Family rating (CFR) at B3 from B2, its probability of default rating to B3-PD from B2-PD, and its senior unsecured rating to Caa1 from B3. The company’s speculative grade liquidity rating is affirmed at SGL-2. Bombardier’s rating outlook has been changed to negative from stable,” it announced Tuesday.
“The downgrade reflects our expectation that Bombardier’s leverage will remain high through 2019 and its ability to generate positive cash flow in that year has headwinds related to the potential delay of C Series plane deliveries,” said Jamie Koutsoukis, Moody’s analyst.
The press release may be found here.
Bombardier’s future in commercial aerospace is in doubt. The long-suffering CRJ program’s future depends on the US, where labor union Scope Clauses prevent the new Embraer E175-E2 and MRJ90 from entering service. These airplanes are too heavy under the current Scope contracts.
SkyWest Airlines of the US has an order for 100 MRJ90s and 100 E2s, but these are both conditional on easing the Scope rule. Trans States Airlines of the US has an order for 50 MRJ90s, which is likewise conditional.
The CRJ900 (but not the CRJ1000) meets Scope rules.
The carriers have the option of downsizing to the MRJ70 and, in SkyWest’s case, the lighter E175-E1. These could affect potential CRJ900 sales.
The CRJ backlog is thin and the airplane is a dated design. Bombardier is undertaking cabin upgrades, but the cabin remains uncompetitive with the passenger experience in the EJet and the MRJ—should the latter ever enter service; it’s now facing a delay of up to seven years.
The Q400 program is in worse shape than the CRJ. Although a major order for 25+25 was placed by Spice Jet of India, the largest in years, Spice Jet has a spotty financial history and India is notoriously challenging for airlines.
Rumors surfaced recently that Bombardier may have a buyer for the Q400 program, but these are unconfirmed. The CRJ’s future has focused more on whether BBD may terminate the program than sell it, but nothing is confirmed. Bombardier insists it remains committed to both programs.