OTTAWA, October 28, 2004 -- The Honourable David L. Emerson, Minister of Industry, the Honourable Jim Peterson, Minister of International Trade, and the Honourable Jean-C. Lapierre, Minister of Transport and Minister responsible for Quebec, today announced that the Government of Canada has agreed to provide financial guarantees to enable Bombardier to compete on a level playing field for the sale of up to 45 regional jets to Air Canada. Government-sponsored guarantees for aircraft sales are standard practice in the aerospace industry worldwide. The guarantees announced today will be provided on commercial terms, and are based on market benchmarks. These guarantees will be provided from existing resources and the Government of Canada will charge fees for putting the guarantees in place. The guarantees are in full conformity with Canada's World Trade Organization obligations and other international trade obligations. The Government of Canada would disburse funds only if the buyer defaults on the purchase, as with all such government guarantees. In the event of a default, the Government of Canada would have a secured claim against the aircraft. The maximum program limit is $1.5 billion. "Bombardier is the cornerstone of the Canadian aerospace industry, maintaining a network of suppliers from all regions of the country," said Minister Emerson. "We are pleased to see the completion of this transaction, as it will contribute to the further development of this vital national industry." "We want to see Canadian companies compete on a level playing field internationally, and these guarantees will enable them to do just that," said Minister Peterson. "At the end of the day, it is the quality of the product -- top-class Canadian-made jets -- and not the financing that closes the deal. Canadian companies are second to none." "The Government of Canada has always considered aerospace to be a showpiece of the Canadian and Quebec economies," said Minister Lapierre. "In offering these guarantees, the Government is ensuring that Bombardier can fill Air Canada's order, and we have reaffirmed our intention to do our part." On September 27, 2004, Air Canada announced an order for 45 Bombardier regional jets, constituting 30 firm, and 15 conditional, orders. Bombardier and Embraer of Brazil are the only companies in the world able to compete for regional jet aircraft orders. Air Canada has also signed a purchase agreement for 45 jets from Embraer. For more information, please contact: Stéphanie Leblanc Office of the Honourable David L. Emerson Minister of Industry (613) 995-9001 Media Relations Industry Canada (613) 943-2502 Jacqueline LaRocque Director of Communications Office of the Honourable Jim Peterson Minister of International Trade (613) 992-7332 Media Relations Foreign Affairs Canada and International Trade Canada (613) 995-1874 http://www.international.gc.ca Irène Marcheterre Director of Communications Office of the Honourable Jean-C. Lapierre Minister of Transport (613) 991-0700 Backgrounder Government Program to Ensure Competitiveness of Canadian Aircraft Manufacturing The Government of Canada's announcement of a new program to provide guarantees to facilitate the sale of Canadian-made jet aircraft to domestic carriers will enable Bombardier to compete with a foreign competitor in the domestic market. The sales guarantee facility will be available to all Canadian airlines that choose to purchase Canadian-made regional jets where there is competition from a foreign manufacturer. The program is compliant with Canada's international trade obligations, and is consistent with past Government of Canada support for export sales of Bombardier aircraft. These measures are consistent with support other countries provide for export sales of aircraft. Government of Canada action will provide a level playing field on which Canada's aircraft manufacturer can compete. The Government of Canada's objective in this transaction, as well as in its continuing negotiations on aircraft financing, is to eliminate government-backed financing as a determining factor in competition between the world's two regional jet manufacturers. Bombardier and Embraer can and should compete on the basis of the merit of their respective products. The Government of Canada's action allows this healthy competition to occur in the context of the aircraft purchase agreement announced by Air Canada and Bombardier on September 27, 2004. As well, government guarantees will ensure that leading Canadian technology will be deployed in Air Canada's fleet. The new facility will be managed by Industry Canada and funded by existing federal resources that are otherwise allocated to guarantee export sales. As Canada's existing export credit agency, Export Development Canada, was not appropriate for sales of Canadian-made regional jets to a domestic buyer, a domestic sales guarantee program was created. Bombardier will not receive funds from this program. The Government of Canada is providing financial guarantees that will enable Bombardier to secure private sector financing and ensure Bombardier's ability to produce and deliver aircraft to meet demand from a domestic airline. Funds will be disbursed by the Government of Canada only in the event of default, to a maximum program limit of $1.5 billion. The Government of Canada will retain first security on the aircraft. As part of this facility, the aircraft manufacturer will provide support to the Government of Canada to the maximum extent possible, in the form of a first-loss deficiency guarantee. The Aerospace Industry in Canada In the Speech from the Throne of October 5, 2004, the Government of Canada committed to working with major economic sectors, such as aerospace, to facilitate their success and growth. This new program represents strategic action in this regard. Aerospace is a key element of Canada's economy, employing upwards of 75 000 Canadians across the country. The industry is also a significant example of Canada's technological capacity, operating in a highly competitive global environment. Canada's aerospace industry is in the top four in the world, and one of the very few that can compete for major international aircraft manufacturing contracts. Bombardier is the cornerstone of this industry, the world's third-largest commercial aircraft manufacturer, and is one of only two companies in the world able to compete for regional jet aircraft orders. Embraer of Brazil is the other. In addition, the Canadian aerospace industry integrates and influences the output and performance of many other sectors of the Canadian economy. Leading aerospace firms work with numerous suppliers and subcontractors across Canada in the production of complete aircraft, engines, structural components, satellites, flight simulators and many other products. Canada is also recognized for expertise in repair and overhaul services. Aerospace is also dedicated to research and development, and is a vitally important incubator of advanced technologies, bringing together a critical mass of Canadian firms that are helping to build a 21st century economy.
