To improve long-term profitability, Bombardier Business Aircraft announced today it is increasing the number of direct-to-market sales channels and terminating third-party sales-representative and distribution agreements. The company is also restructuring customer commercial agreements. As a result, Bombardier will record pre-tax special charges of $278 million in the fourth quarter of 2015, with $145 million of that being non-cash. Approximately $50 million of the $133 million cash charges was disbursed in the fourth quarter, with the balance to be paid this year.
In line with this change, Bombardier and TAG Aeronautics have “amicably elected” to end their contractual agreements. This concludes nearly 40 years in which TAG Aeronautics served as Bombardier’s exclusive sales representative and distributor for new Challengers and Globals in the Middle East and North Africa. Thus, Bombardier will assume all sales activities previously held by TAG Aeronautics.
Bombardier Business Aircraft’s restructuring of “certain customer commercial agreements” resulted in the cancellation of 24 firm orders worth $1.75 billion at 2015 list prices and 30 options. The company expects to re-sell these positions at improved margins.
From the late 1970s, TAG Aeronautics was a key player in the market entry of what was then the Canadair Challenger family of aircraft. The group was among the early customers for the Challenger 601 and 604 models, and also directly supported the development of the supplemental type certificate that saw the Challenger 850 developed from the Canadair Regional Jet.
“We are adapting our business model to capitalize on growing market opportunities around the world and will focus on direct interaction with our customers,” said Bombardier Inc. president and CEO Alain Bellemarre. “I would like to thank TAG Aeronautics for decades of loyal services, and for successfully helping open a key region for Bombardier aircraft.”
TAG Aeronautics is part of the wider TAG Group Limited, which includes business aviation services companyTAG Aviation. Among TAG‘s many actitivies, which include aircraft charter and management, it operates the London-area Farnborough Airport. These businesses are unaffected by the ending of TAG‘s role as a Bombardier distributor.
“We appreciate Bombardier’s new philosophy and sales approach in response to changing market conditions,” commented TAG Group CEO Mansour Ojjeh. “I am pleased to say that reaching a mutually beneficial agreement for both parties was uncomplicated thanks to the shared respect engendered by our longstanding and very productive relationship. The TAG Group remains a Bombardier Business Aircraft customer and believes without question that Bombardier has the best product line in the business.”
– January 13, 2016, 9:31 AM