Bombardier in $3.4-bn aircraft deal with Russia's Rostec

Canadian aerospace and transportation company Bombardier Inc has entered into a preliminary deal with Russia's state-owned industrial and defence firm Rostec to supply at least 100 Bombardier Q400 NextGen aircraft.

Besides a letter of intent for the sale of 50 Q400 NextGen airplanes, the deal includes an agreement for at least 50 additional aircraft, and a memorandum of understanding for setting up a Q400 NextGen assembly line in Russia, which is a key component of the deal.

The agreements have been signed yesterday at the MAKS 2013 air show in Moscow.

Based on the list price of the aircraft, the total deal would be valued at approximately $3.4 billion.

Bombardier Commercial Aircraft president Mike Arcamone said, ''We recognise this as a landmark opportunity for the Q400 NextGen aircraft program.''

''This aircraft is ideally suited for airlines operating within the geographically diverse Russian Federation and the neighbouring regions where, together with Rostec, we are forecasting a 144 per cent growth in demand for 60 to 99-seat turboprops over the next five years,'' he added.

According to analysts, the deal will open up the lucrative Russian aviation market to Bombardier, giving a boost to its commercial airplanes, sales of which have been sluggish recently.

The short-haul Q400 NextGen is the latest aircraft in the Q400 series, and an advanced successor to Dash8/Q-series family. The 70 to 80-seater turboprop airplane is large, fast and fuel-efficient and boasts of reduced environmental footprint.

Bombardier has firm orders for 475 Q400 and Q400 NextGen. The aircraft are used by around 50 operators in over 30 countries on five continents.

The proposed Q400 NextGen final assembly line is a key component of the agreement that would be managed by a joint venture between Bombardier and Rostec. The JV would produce airplanes for Russian customers.

The proposed new line "would be incremental" to its current Q400 NextGen production operations in Toronto, Bombardier said.

Rostec's Aviation Projects director Alexey Fedorov noted, ''The implementation of this project with our potential partner, Bombardier, will contribute to the fleet renewal of our airlines, as well as to improve flight safety and reduce fares on regional routes.''

The parties would endeavour to conclude definitive agreements next year, subject to obtaining required approvals and conditions.

Following the announcement, Ilyushin Finance Co (IFC), a Moscow-based leasing company, has signed a letter of intent to acquire 50 Q400 NextGen airliners that would be assembled in Russia by the JV.

''Developing local roots in strategic markets is at the core of Bombardier's strategic framework, and we have identified Russia as being key to our growth and sustainability,'' Arcamone said.

Currently, more than 120 Bombardier commercial aircraft are in service in Russia and the neighbouring region. The company forecast the demand to grow to approximately 400 in the 20 to 99-seat category.

Montreal-based Bombardier is a multinational transportation giant, which manufacturers both planes and trains. The company reported revenue of $16.8 billion in 2012.