MONTREAL/WASHINGTON/PARIS (Reuters) - Bombardier (>> Bombardier, Inc.) is running out of options as the Canadian aircraft maker seeks to raise the cash for the new jet that potentially would allow it to challenge the supremacy of Boeing (>> Boeing Co) and Airbus (>> Airbus Group) in global jetliner sales, according to several sources with knowledge of the situation.

The sources said for Bombardier to persuade investors to provide more capital, the Bombardier-Beaudoin family will probably have to reduce its 53 percent voting control of a company which was founded by snowmobile inventor Joseph-Armand Bombardier in 1942 and moved into train and plane manufacturing through acquisitions made by his son-in-law Laurent Beaudoin.

The company recently failed to get Airbus to take on much of the future cost of the new plane, the CSeries. Airbus pulled out of discussions to buy a controlling stake in the program last week after they were first reported by Reuters.

Bombardier spokeswoman Isabelle Rondeau declined to comment on any specific discussions, saying that the company is “exploring initiatives such as a potential participation in industry consolidation, but we will not discuss our activities in this regard or speculate on potential outcomes.” Development costs for the CSeries program have soared to $5.4 billion, from an earlier projection of $3.2 billion and Bombardier is likely to continue burning through cash for some years even after it is expected to go into service next year, according to analysts and aerospace industry executives.

The family’s deep ties in Quebec – it is at the heart of the French-Canadian province’s political establishment – may not be as much help as it has been in the past.

While Quebec's government has said it will support Bombardier and its 18,000-strong workforce in the province, the Quebec public pension plan Caisse de depot et placement has been unwilling to increase its stake in Bombardier, according to a source at Caisse with knowledge of discussions. The fund, whose mandate includes contributing to local economic development, owns around 2.2 pct of the manufacturer’s class B shares and 1.8 pct of class A, making it a top five shareholder in both.

Another source said the relationship between Caisse and Bombardier “has been tense and confrontational” after Caisse requested early this year that the family agree to reduce the power of its 85 percent stake in the super-voting “A” shares so that they only have six times the number of votes as the “B” shares rather than the current ten times. That would have reduced the family’s voting stake to around 42 percent.

The family rejected that and in response Caisse declined to serve as the lead investor for a C$3.35 billion (US$2.59 billion) debt and equity capital raising in February, said this source, who has direct knowledge of Bombardier’s financial issues. "They lack negotiating power," said the Caisse source in reference to both Bombardier and the controlling family. "It’s like you lend money to a friend who says everything’s fine – only to come back a month later and ask for more money."

Caisse spokesman Maxime Chagnon said “we have a longstanding relationship with Bombardier and it continues.” He declined to comment on any request for a change in Bombardier’s voting structure.

STRATEGY QUESTIONED Some other major shareholders are also far from convinced by Bombardier’s plans. “There's a lot of confusion. I don't see a clear strategy. By now they should have one. So it's very concerning,” said a fund manager at another top shareholder, speaking on condition of anonymity.

Bombardier’s Rondeau said that the company has a “very good” relationship with Caisse. Asked about Caisse requesting a change in the voting structure, Rondeau said: “You’ll have to ask the Caisse about that.”

Bombardier’s Executive Chairman Pierre Beaudoin, who is the founder’s grandson, declined to comment. The family’s foundation, established by the founder’s widow in 1965 to continue his charitable works, referred queries to the company.

With Airbus out of the picture, a longer shot is that talks with a Chinese investor over the CSeries program can be revived and ushered through a Canadian foreign investment review. Discussions ended three to four weeks ago, one of the sources said, though it was unclear why. The source did not name the Chinese investor.

Getting a deal approved that involves the transfer of aerospace technology to the Chinese will be complicated, but it may not be impossible to get support from the Canadian and the Quebec governments. Bombardier does plan to raise cash from its rail unit, with plans to list a minority stake in Frankfurt. This is its most valuable asset and is expected to be much more attractive to investors than the aircraft arm.

The company had $3.1 billion in cash at the end of the second quarter, but faces additional costs of at least $1 billion to $2 billion to complete certification of the CSeries and cover early production losses in the first two to three years of delivery, according to Credit Suisse aerospace analyst Rob Spingarn.

The plane may not be profitable for four years or more, according to a source briefed on the company's current financial situation. The company’s debt burden has increased to $9 billion and its share price has dropped 58 percent since the beginning of the year, valuing the entire company at just C$3.76 billion.

"LONG PUTT"

The company was advised two years ago by Goldman Sachs, its longtime investment bank, to cancel the program because “continuing to fund the CSeries was a long putt,” one person familiar with those discussions said. Bombardier’s Rondeau denied that Goldman provided such advice.

The new jet will target the 110-130 seat market, competing directly against the next generation Airbus A319neo and Boeing’s 737 MAX family of jets. Until now, Bombardier’s biggest jet has been the CRJ, the largest of which has 104 seats.

Bombardier’s Vice President of Business Acquisition, Ross Mitchell, emphasized the company’s “100 percent” commitment to the jet in Berlin on Wednesday. While Bombardier has 243 firm orders for the jet, that is below its launch target of 300, according to company announcements, and it hasn’t announced a new firm order in more than a year.

At least one Bombardier CSeries customer, who has a firm order, plans to ask for a discount on options for additional aircraft. "Looking at the contract we signed, is the option price the price you would negotiate today, or is there room for improvement there?" said a top executive at the customer. Bombardier invited Airbus chiefs to see the plane at the Paris Airshow in June, in a standard industry courtesy. The chat was warm enough to encourage Bombardier officials to formally approach Airbus, said several sources familiar with the matter. Bombardier would have probably written off some of its development costs for the jet as part of any deal.

Bombardier, though, got a mixed reaction at Airbus, with some executives at the European plane maker open to expanding its portfolio for a minimal outlay but others wary of diluting both profit margins and attention to other projects. "The value for us wasn't clear enough," a source close to Airbus said.

(Additional reporting by Euan Rocha and John Tilak in Toronto, Mike Stone in New York, Benjamin Lim in Beijing; Writing by Allison Martell; Editing by Amran Abocar and Martin Howell)

By Allison Lampert, Andrea Shalal and Tim Hepher