The Quebec government has committed up to $1 billion (U.S.) in loan financing for customers interested in buying Bombardier's all-new CSeries plane.
Workers at Bombardier's Mirabel plant are working round-the-clock to get the aircraft ready for its first test flight, which company executives have promised will take place before the end of June.
The Quebec government's move may help to spur orders of the plane, which some analysts view as sluggish, given its maiden flight is only months away.
To date, the orders for the two sizes of CSeries planes have been weak, with firm orders of only 148 out of 382 commitments. CSeries customers include Lufthansa, Swiss International Airlines and U.S.-based Republic Airways.
However, when executives showed off the test airplane last month in Montreal, Bombardier Commercial Aircraft Mike Arcamone expressed confidence that the orders will follow.
"We do have active campaigns. That's why I feel very comfortable," Arcamone said in March, adding that if all 382 commitments are converted into firm orders, it will meet the company's target of 300 orders from 20 customers by the time of entry into service in mid-2014.
Marc Meloche, vice-president of structured finance for Bombardier Aerospace, said the Quebec government's support will come in the form of export credits of up to 10 per cent of the value of an airplane.
It comes in additional to similar commitments from the UK, where the wings are made in Belfast, and China, where parts of the fuselage are built, as well as the federal government through Export Development Canada.
"Aircraft financing has always been challenging," Meloche said. "Typically, what you see on a yearly basis, export credits are one of the dominant support levels. This is a capital good, a large value asset. It requires financing that can go out to about 12 years," he said.
And given some airlines have been struggling of late it can be more difficult to access traditional credit.
But if an airline qualifies for these interest-bearing loans, it will be required to pay market terms.
When asked whether these loans might spur sales, Meloche said: "If there's a comfort zone by airlines that there will be financing made available to secure an order, it's always useful."
In a research note, RBC Capital Markets analyst Walter Spracklin writes that Quebec support will help for total financing of up to 85 per cent of the value of the planes.
"The news helps to increase the availability of secure and attractive financing for CSeries buyers which we believe is likely now north of $10 billion in aggregate from governmental bodies," the note said, adding in the past the Quebec government provided $2.3 billion in loans to buyers of Bombardier's CRJ regional jet with no material losses.
The CSeries 100 jet, with 100 to 125 seats, sells for a list price of $62 million, and the CSeries 300 jet, now adjusted with 135 to 160 seats, is listed at $71 million, though airlines can usually negotiate discounts.