PARIS (Reuters) - Airbus has teamed up with the Quebec government to buy Bombardier’s 33.5% stake in the A220 passenger jet program, completing the Canadian firm’s exit from civil aviation and boosting Airbus’s position in a new battleground with Boeing.

FILE PHOTO: An Airbus A220-300 aircraft flies during its unveiling in Colomiers near Toulouse, France, July 10, 2018. Airbus A220 is the new brand for the small CSeries passenger jet acquired from Canada's Bombardier. REUTERS/Regis Duvignau/File Photo

Under the terms of Thursday's deal, Airbus's AIR.PA stake in the A220 program - known as Airbus Canada - increases to 75% from 50.1%, while Quebec's holding rises to 25%.

In taking the larger holdings, the European aerospace group and Canadian province will be assuming Bombardier’s BBDd.TO share of A220 ramp-up costs, while Bombardier will receive $591 million net of adjustments. The deal will secure more than 3,300 Airbus jobs in Quebec, the companies added.

The A220, previously known as the CSeries, is a 110-130 seater aircraft, targeted at regional aviation markets and a little smaller than Airbus’s mainstay A320 jet.

The European group's move into that smaller market has been mirrored by U.S. rival Boeing's BA.N planned tie-up with Brazilian regional jet manufacturer Embraer EMBR3.SA and opens a new front in the battle between the two planemaking giants.

Bombardier said the sale would help the company - which faced a cash crunch in 2015 - to improve its financial position. Bombardier on Thursday reported a quarterly loss.

“This transaction supports our efforts to address our capital structure and completes our strategic exit from commercial aerospace,” President and Chief Executive Alain Bellemare said.

The deal also postpones until 2026 the agreed date when Airbus can buy out Quebec’s stake in the A220 program, three years later than originally planned. The province increased its stake for “no cash consideration”, the companies said, in return for its bigger share of the funding burden.

Sources have told Reuters that Bombardier's rail unit may also be sold to French group Alstom ALSO.PA, although any deal has yet to be finalised.

Montreal-based Bombardier ceded control of the A220 program to Airbus in 2018 for a token C$1 as part of broader efforts to improve its finances.

Airbus announced the increase in its stake in the program alongside a hefty 2019 net loss due to one-off costs.