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MH17 tensions drive wedge between Bombardier and Russia

July 23, 2014, Montreal - Rising international tensions over the shooting down of a passenger jet in the Ukraine are taking their toll on talks between Bombardier Inc. and its Russian joint venture partners for a $3.4-billion (U.S.) turboprop project in the country.


July 23, 2014
By The Globe and Mail

Montreal-based Bombardier struck a preliminary accord in August 2013 for
the final assembly of the regional-jet Q400 in Russia and also clinched
preliminary deals to sell 100 of the planes to Russian industrial and
defence conglomerate Rostec and leasing firm Ilyushin Finance Co.

The deal was set to close before the end of this year, but a
Bombardier Aerospace spokeswoman now says that date may have to be
pushed into 2015.

 

“Given the delicate situation and the timeframe
and the difficult context it would be unrealistic for us not to account
for a potential movement in the project’s timeline,” Marianella de la
Barrera said in an interview Tuesday.

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“There is a chance that the timeline could shift to the right.”

 

As
recently as last week, aviation industry reports said negotiations to
open an assembly plant in Russia were close to a successful conclusion
but that differences over the pricing of the Q400 remained.

 

Canada
announced a fresh round of sanctions against Russia on Monday as
criticism mounted over that country’s role in supporting separatists in
eastern Ukraine, who many critics accuse of shooting down the commercial
airliner.

 

Russia is laying blame for the downing of Malaysia Airlines Flight MH17, which killed 298 people, on the Ukrainian military.

 

Back
in March, the talks between Bombardier and its Russian partners were
already showing signs of strain after Russia’s incursion into Crimea and
the political crisis in Ukraine.

 

In May, Russia’s industry
minister was quoted in a Russian press report as saying that
Bombardier’s price for the 70-to-80-seat Q400 was too high.

 

Ms. de la Barrera said at the time that Bombardier “remains committed to finalizing the contract with Rostec in 2014.”

 

She
also said that no Rostec officials appeared on the list of Canadian
government sanctions against 17 Russian and Crimean officials.

 

Russia
and the Commonwealth of Independent States represent a potentially big
market with an estimated 350 turboprops that could be sold there.

 

The
Q400 deal in Russia is intended to solidify Bombardier’s presence in
the country and the region as well as counter a threat from lower-priced
turboprop manufacturer ATR.