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Bombardier delay may curb orders for new jet

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By Frederic Tomesco
Bloomberg News
Published:
MONTREAL -- Bombardier's six-month delay in the maiden flight of the CSeries jet threatens to curb orders for a plane already struggling to compete with single-aisle models from Boeing and Airbus.
That flight probably will occur by the end of June instead of this year after unspecified "issues" with some suppliers, Bombardier said in a statement Wednesday. The CS100, the smaller of the two versions of the plane, will probably enter service a year afterward, the Montreal-based company said.
Bombardier's shift less than two months before the first test jet was due to be airborne may add to the planemaker's difficulties in cracking the Airbus-Boeing duopoly. While those rivals sell scores or even hundreds of aircraft at a time, most CSeries purchases have been for only about 10 planes.
"Now that a formal delay has been announced, the question will be: How convincing can they be that they'll only be six months late?" Walter Spracklin, an analyst at RBC Capital Markets, said by telephone from Toronto. "What comfort will they be able to give investors that their new target is a realistic target?"
Bombardier will continue to give "regular" updates on the program, with a detailed review next quarter, Chief Executive Officer Pierre Beaudoin said in the statement. He told analysts on a conference call that he doesn't expect the postponement to damp orders.
"It seems unlikely that Bombardier will generate any CSeries orders before there is more certainty on the development timeline," Cameron Doerksen, a National Bank Financial analyst in Montreal, said in a note to clients. "Bombardier's credibility will take a hit and we believe that the market will be skeptical of the schedule until the plane actually flies."
Bombardier has booked 138 firm orders for the CSeries, plus commitments for 214 more. After saying last year the plane would cost about $3.5 billion to build, Beaudoin declined to give a figure for the program's expense beyond saying it was "unchanged." The delay shouldn't inflate the total, he said.
Beaudoin also wouldn't say whether Bombardier still plans to meet a previously announced target of 300 firm orders by the end of next year.
Analysts have been tracking the CSeries closely because Bombardier wants the plane to challenge the smallest Boeing and Airbus narrow-body jets. The CSeries will feature composite materials and a fuel-efficient engine from United Technologies Corp.'s Pratt & Whitney. The CS100 version will seat as many as 125 passengers, and the CS300 will handle as many as 145.
The last firm order came in January, a five-plane deal with Switzerland's PrivatAir. Bombardier announced a conditional sale to an unidentified buyer of 15 jets in July, along with a letter of intent for 20 aircraft from AirBaltic AS. Republic Airways Holdings is the biggest buyer, with 40 planes.
"Customers that have seen the level of advancement are very impressed," Beaudoin said on the conference call. "The confidence in the customers as they see our hardware is very good right now. I don't think it will delay any orders."
As recently as a mid-October interview, Beaudoin had said the CSeries might still make its first flight in December. He said Wednesday that "some areas require more time. Together with our suppliers, we have now fully harmonized all commitments to the program's schedule."
Beaudoin wouldn't say what caused the delay or identify the suppliers in question, saying only that "major" systems have influenced the production schedule and that software is "a big part of the challenge that we have."
Bombardier has 55 so-called Tier One suppliers working on the plane and more than 300 secondary suppliers. The company repatriated production of a fuselage section from China's Shenyang Aircraft Corp. to an in-house facility earlier this year, Spracklin and Doerksen said in research notes last month.
Bombardier on Wednesday maintained its projection that the CS300 will enter service at the end of 2014. The model represents a "significant" portion of the program's orders and commitments, the company said. Beaudoin said Bombardier will offer a "high- density," 160-seat version of the CS300, without elaborating.
Bombardier has said it expects the CSeries to be an important contributor in almost doubling revenue in the next decade, garnering $5 billion to $8 billion a year.
Boeing and Airbus have both failed to meet milestones on their own new planes. Boeing was more than three years late with its 787 Dreamliner. Airbus's A380 jumbo jet was almost three years late in initial deliveries, while its A350-900 model is already 18 months behind schedule.
Story tags » Aerospace

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