Bombardier Inc. (BBD.TO) will sell its regional jet division to Japan’s Mitsubishi Heavy Industries Ltd. for US$550 million, marking the company’s exit from the commercial airline space.

The Quebec-based plane and train maker announced Tuesday that it has entered a definitive agreement with Mitsubishi to sell its CRJ aircraft program for US$550 million, as well as an assumption of US$200 million in liabilities.

Bombardier’s chief executive Alain Bellemare said in a statement that the sale represents the completion of the company’s aerospace transformation – one that has seen the company ditch its costly efforts to compete in the commercial aviation space against giants such as Boeing Co. and Airbus SE.

“With our aerospace transformation now behind us, we have a clear path forward and a powerful vision for the future,” Bellemare said.

“Our focus is on two strong growth pillars: Bombardier Transportation, our global rail business, and Bombardier Aviation, a world-class business jet franchise with market-defining products and an unmatched customer experience.”

Bombardier, which is approaching the tail end of Bellemare’s turnaround plan, has been exiting the commercial aerospace segment over the last two years as it searches for sustainable growth and profitability. The CRJ – once representing the significant chunk of Bombardier’s revenues but now unprofitable – was the last remaining aircraft in its Commercial Aircraft division.

Bellemare, who joined Bombardier in 2015, is streamlining operations at the company to focus on its more profitable rail and private jet business, two areas he has said will create the most value for shareholders.

The first major divestment came in October 2017, when Airbus acquired a majority stake in the company’s beleaguered CSeries program. Since then, Bombardier has sold its Q400 program and announced that it is looking to sell its aerostructure businesses in Belfast and Morocco.

Bombardier has now transformed “from an aviation powerhouse to a much smaller and leaner player”, aviation analyst and Teal Group vice president Richard Aboulafia wrote in a note.

Story continues

“New management, brought in after things got desperate in 2015, quickly realized that they were running a ship that had set a course for the nearest iceberg,” he wrote.

“Selling off much of the company is a drastic measure, but it’s hard to see any other course that could have saved Bombardier, and they deserve a lot of credit.”

RBC Capital Markets Walter Spracklin called the deal “the end of an era” in a note to clients Tuesday.

“The net proceeds to BBD of $150MM is roughly in line with our expectations, and has no significant impact on our estimates, but overall we expect the deal to be a modest positive for valuation as the deal marks progress for the company towards its transformation strategy,” Spracklin wrote.

Altacorp Capital analyst Chris Murray wrote in a note Tuesday that he expects that the company’s aerostructures business will likely be the next divestment.

“We believe the next asset to be sold will be the company’s aerostructures unit as the company continues to refine its business lines to business aircraft and transportation,” Murray wrote Tuesday.

The CRJ deal will see Mitsubishi take over maintenance, support, refurbishment, marketing and sales for the aircraft, which includes its operations in Montreal, Toronto, as well as service centres in West Virginia and Arizona. The deal is expected to close in the first half of 2020.

Yahoo Finance Canada

Download the Yahoo Finance app, available for Apple and Android.