Ottawa loans airline $173m for Bombardier order

MONTREAL — Ottawa is looking to preserve Canadian aerospace jobs by lending Scandinavian Airlines SAS up to $173 million to help the European carrier buy eight aircraft ordered last year from airplane manufacturer Bombardier (TSX:BBD.B).

MONTREAL — Ottawa is looking to preserve Canadian aerospace jobs by lending Scandinavian Airlines SAS up to $173 million to help the European carrier buy eight aircraft ordered last year from airplane manufacturer Bombardier (TSX:BBD.B).

International Trade Minister Stockwell Day announced the loan Wednesday.

The loan will be administered by Export Development Canada, but the government assumes the risk should the loan not be repaid. The Canada Account is designed for transactions considered to be in the national interest but which don’t meet the requirements of a regular EDC corporate loan.

Day suggested the loan would help to support the aerospace industry, which employs tens of thousands of Canadians, especially in Quebec.

“EDC is providing repayable loans to ensure the aircraft production sector remains strong during this economic downturn,” he said in a news release.

The loan will support the sale of eight Q400 and CRJ900 aircraft, whose total list price ranges between US$232 million and US$320 million.

Terms of the loan are still to be negotiated by EDC and the airline.

SAS and three affiliates ordered 27 aircraft in March 2008, with options for two dozen more aircraft, as part of a compensation agreement after landing gear problems left some of the airline’s planes grounded in 2007.

Under the deal, which also involved landing gear manufacturer Goodrich Corp., the airline received more than US$164 million in compensation in cash and credits for future aircraft orders.

Bombardier spokesman Marc Duchesne said the latest government funding will help the company even though the money doesn’t go to the Montreal-based aircraft maker.

“It’s the customer’s responsibility to finance the aircraft, but it does help Bombardier to deliver the aircraft, that’s for sure,” he said in an interview.

The aerospace industry around the world benefits from government financial assistance. Duchesne said this financing deal is fully in compliance with aircraft sector international financing rules.

The government recently used the Canada Account to provide billions of dollars in financial aid to General Motors and Chrysler as they restructured under bankruptcy protection from creditors.

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