Bombardier finally landed a badly needed order for its all-new CSeries plane from Air Canada, but it wasn’t enough to stave off deep job cuts in both aerospace and train divisions.

The company announced Wednesday that it was slashing 7,000 positions including 2,000 contractors, over the next two years — more than 10 per cent of its workforce of 64,000 worldwide.

Most of the job losses will be in Canada and Europe, but will be partly offset by hiring in certain growth areas as production ramps up for the new CSeries aircraft.

“We are taking this difficult decision to make Bombardier strong,” said Bombardier CEO Alain Bellemare on a conference call with analysts on Wednesday.

It was not immediately clear where the job cuts will be, though 2,830 will be in Canada, with 430 in Ontario and 2,400 in Quebec. In all, 400 jobs will be axed in the train division and 2,430 in the aerospace division in Canada.

At Toronto’s Downsview plant, where the Q400 turboprops are built along with business aircraft, 400 layoffs were implemented in the past three months.

Scott McIlmoyle, president of Unifor Local 112, said Wednesday’s announcement will have little impact on the Downsview facility, given so many jobs have already been cut.

A Unifor spokesman said no unionized job losses were anticipated at Bombardier’s transportation plant in Thunder Bay, which makes the long-delayed TTC streetcars.

Amid the grim news of additional job cuts at Bombardier was a glimmer of hope, with Air Canada’s letter of intent to purchase 45 CS300 aircraft, the larger of two planes, with options for another 30 planes.

“It is a turning point. We do have an order,” said Bombardier Inc. CEO Alain Bellemare at a news conference with Air Canada officials in Montreal.

“We are building very positive momentum on program,” he said, promising it will be a catalyst for future orders in North America and beyond. “This is not the end of the road.

“This is a big milestone.”

George Ferguson, senior airlines and aerospace analyst for Bloomberg Intelligence, said the Air Canada deal buys Bombardier more time, which it desperately needs.

“We would have liked to have seen a sale away from the neighbours, though there is nothing wrong with a sale to the neighbours,” said Ferguson, noting that Air Canada is also headquartered in Quebec.

“It would have been better, more confidence, and builds more credibility if it was from somewhere else,” he said.

Bellemare acknowledged to reporters that it had been a long time since Bombardier had a CSeries order — it’s been more than a year — but insisted the company was on track, with new executives in place, and more cash from the Quebec government and pension plan.

Quebec has put up $1 billion (U.S.) for a 49.5 per cent stake in the CSeries program, while the Caisse de depots et placement du Quebec spent $1.5 billion (U.S.) for a 30 per cent stake in the company’s train division.

But Bombardier says it is still looking for more money from Ottawa, but the federal government continues to study the idea.

Bellemare said federal investment is very important, because it would provide “a strong endorsement on the program, itself.” As well, it would bring additional financial flexibility to support sale campaigns and production.

He wouldn’t say how such a deal would be structured, but expressed hope it would “come close to what Quebec did,” which included equity ownership.

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Federal Transport Minister Marc Garneau reacted to the Bombardier news on Wednesday with “mixed feelings,” cheering news of the CSeries deal with Air Canada while expressing regret at the layoffs.

He said the airline’s purchase, which he branded as an “important order” for Bombardier,” will boost employment in the country’s aerospace sector, especially given Air Canada’s promise to keep heavy maintenance work on the CSeries in Quebec.

Ottawa put no pressure on Air Canada’s to buy the CSeries jet, Garneau said. “Air Canada makes its own decisions with respect to purchasing of its own aircraft.”

Sales for the all-new CSeries aircraft have been weak, as the program costs ballooned to $5.4 billion (U.S.) amid repeated delays. Until Wednesday, firm CSeries orders had been stuck at 243 for more than year.

The first plane of the CS100, the smaller version, is scheduled to enter commercial service in the second quarter with launch customer Swiss Air Lines, a division of Lufthansa.

On the markets

Bombardier shares jumped more than 20 per cent on Wednesday’s news, closing above $1 for the first time in weeks. The stock closed at $1.09, up 19 cents.

It fell into penny stock territory on Jan. 28, and, under market rules, the stock could be knocked out of the TSX composite index. Components are reviewed on a quarterly basis, and a stock must have a volume-weighted average price of $1 over the three months prior to the review. The next review will be at the end of Feburary.

The company announced Wednesday that is looking at a reverse stock split, a way to consolidate shares to raise the stock price, although it wouldn’t change the value.

The ratio would be chosen by Bombardier’s board of directors from a range of ratios, subject to shareholder approval, with an initial consolidated price of between $10 to $20.

Without a reverse stock split, Bombardier’s share price could be under even more pressure, as an estimated 60 million shares are tied to index investors.

If the company were kicked out of the index, then those shares would have to be sold.

—with files from Bruce Campion-Smith and Alex Boutilier

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