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Sanctions vs. Russia to slow Bombardier deals

Mar 24, 2014 | 04:38 PM | Frank Haflich

Tags  aerospace, Bombardier, Rostec, Q400 NextGen, Frank Haflich

LOS ANGELES — Economic sanctions against Russia for its action in Ukraine likely will slow the closing of a sales deal for $3.4 billion in Bombardier Inc. aircraft, as well as an agreement to assemble aircraft in Russia.

It “may take a little longer” than expected to finalize deals between Bombardier and Russia’s state-owned Rostec Corp. to sell 100 of the Montreal-based aircraft builder’s Q400 NextGen short-haul turboprop airliners and build a final assembly line in Russia, a Bombardier spokesman in Toronto said.

“But we remain committed to the project and to finalizing agreements with Rostec in 2014,” he said, without specifying the duration of the expected delay. Bombardier didn’t previously have a “precise deadline” for finalization, the spokesman added.

Canada is a party to sanctions being implemented by the United States and the European Union in the wake of Russia’s move to annex the Crimea region of Ukraine.

Bombardier, Rostec and Rostec’s aircraft leasing subsidiary, Avia Capital Services, signed a series of preliminary deals in August that included a letter of intent for the sale of 50 Q400 NextGen aircraft and a provision for at least 50 additional aircraft in Russia and the rest of the Commonwealth of Independent States (CIS). The deals were valued at about $3.39 billion.

The sale of the aircraft was contingent on the establishment of a joint-venture final assembly line in Russia, as outlined in a separate memorandum of understanding.

The Russian line, which would be in addition to the Q400’s existing assembly in Toronto, would be targeted to sales in that country and the rest of the CIS, the spokesman said.

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