//
you're reading...
Airline Restructuring, Bombardier, Business Aviation, Canadian Operators, Commercial Airliners, Major Airlines, Other Aviation Issues, Regional Aircraft, Regional Airlines

ABSTRACT: Bombardier takes another credibility hit, stock drops 25% in one day as investor confidence is shaken and they are selling, another senior executive departs, the Learjet 85 is “paused” with a $US 1.4 billion write down, certifying 4 new jets at once costing $US 6.9 billion was “nuts”, the Q400 and CRJ’s programs are near their end, another 1,000 employees are to be laid off on top of 2,000 last year, corporate credit rating cut, talk of a Q400 and CRJ assembly line in China, only 243 firm orders for the CSeries after 78 months of effort, and probably 100+ will NOT take delivery, Alenia a major CSeries subcontractor sues for $US 121 million, CSeries EIS not till 2016, low fuel prices diminish the fuel efficiency argument for CSeries, while it’s launch customer is a secret ? sell Commercial Aircraft Division to China’s COMAC and create Combardier ? capital markets worried about liquidity and management, Business Aircraft Division now discounting some aircraft, Learjet cannot survive on only 33 Learjet 70/75 sales (+/- $US 335 million) a year, is it doomed ? sell it off ? with a cashflow of only $US 800 million in 2014 will Aerospace have the cash to complete certification and produce the $US 1 billion Global 7000/8000 business jets and the $US 4.5 billion CSeries ? time for an outsider as CEO – again ?

Bombardier, the world’s only plane and train manufacturer continues to disappoint shareholders, employees and customers, and on Wednesday, January 15th, we saw the wall crash down, when Bombardier stock (TSX:BBD.B) crashed downwards by 25.85% in one day ($US 1.8 billion in market capitalization) on volume of 57 million shares, to $CAD 3.07 from $CAD 4.14, ouch ! by Friday the 17th it went as low as $CDN 2.89 per share, investors are sending a strong message to Bombardier, shape up the Aerospace business before the stock hits bottom or stick with trains !

UBS Analyst said last week  “We continue to see BBD’s equity as over-valued, even after sell-off, given significant off-balance-sheet liabilities on top of also significant on-balance-sheet debt, pension deficit, and supplier/government advances. In all, we estimate BBD’s net debt to be greater than 8 x EBITDA, problematic given our forecast for another three years of free cash outflows and big upcoming debt maturity in 2016″.

Cs100-1CSeries-CS300-fsx1

Today is 69 weeks since the CSeries CS100 made its 1st flight (Sept 16, 2013), it took Airbus 69 weeks to deliver its newly certified A350-900 to Qatar Airways (on Dec 22,2014) from its 1st flight (June 14, 2013), and probably another 60+ weeks for CSeries CS100 certification (end of 1Q/2016 by my estimate), as they are only 1/3 of the way through the 2,400 hour certification program now. With 5 FTV ‘s (flight test vehicles) now flying up to 40 hours per month, they can get 200 flight hours a month in, which means 8 months to certification from now IF all goes perfect from here on, and they sadly never do.

Launched in July, 2008 the beautiful Bombardier CSeries airliner was suppose to be a “game changer” (which it is not) but the competition out maneuvered Bombardier, and with only 243 firm orders (63 x CS100’s and 180 x CS 300’s) in 78 months of marketing & sales it is struggling to sell, EIS (entry into service) is 1 year away in my opinion, 2H/2015 , still no formal launch customer announced, it is a ‘secret’ ?. The aircraft comes in two models, the $US 62 million CS100 with seating between 110-125 (ABOVE PHOTO LEFT) and the $US71 million CS300 with seating between 135 and 160 (ABOVE PHOTO RIGHT), its EIS (entry into service) is 6 months after CS100, therefore 3Q/2016 by my calculation.

Bombardier believed a clean sheet aircraft was the way to go, new airframe and new engine would produce a very economical aircraft, the incumbents Airbus, Boeing and Embraer decided that re-engining was the way to go, and airlines have voted, with Embraer having 270 firm orders after 18 months, while the Airbus and Boeing have 6,284 firm orders for the A320neo and B737Max line, but interestingly enough, only 109 A319neo’s and B737-Max7’s (both in the 100-149 seat segment) have been ordered (1.7% of all neo’s/Max’s), possibly indicating the up-gauging by airlines has made that segment a lot less interesting than it used to be.

The program MUST have a US customer, either American, Delta or United as it is a huge market and no commercial aircraft has gone on to be successful without doing well in the US market, please don’t count on Republic Airways order for 40 x CS-300’s, that was 5 years ago when it owned Frontier Airlines, there is no need for a CSeries now with a regional airline. Bombardier has now looking at $US 4.5 billion investment in the program, it will need orders of around 450 to break-even, and that is years out, not sure why they keep talking about a sales ‘target’ of 300, that has to be a 2008 number, today realistically it is 500+ units to break-even with much needed discounts and the extra $US 1 billion in investment it requires to finish it.

_ _ _

Sadly, another 1,000 employees are laid off on top of the 2,000 last year and 1 of the 4 new aircraft programs is “paused” (really it is cancelled), though the Lear 85 has been de facto “paused” since last summer anyway, it started in 2007 and in 8 years it has managed to do very little with it in that time, embarrassing for sure, almost a US equivalent of the COMAC ARJ-21-700 program. The Learjet 85 had its 1st flight April, 2014  and will require a $US 1.4 billion write down, emblematic of management’s “monumental incompetence” says Vice President of Teal Group, Richard Aboulafia.

The gamble to have the Lear 85 as the first Part 25 aircraft with carbon fiber fuselage and wing has gone bad, the history of composites in business aircraft is not good, the all composite  Beechcraft Starship was a $US 1 billion mistake, later Beechcraft’s focus was on the fuselage only, like the Premier 1A and the Hawker 4000, both were over budget, late to market and commercial failures, and contributed to the fall of Beechcraft.

The issue as I see it, is that it was a competitor the $US 24.9 million Challenger 300 both with 8 passenger seats, equal speed (470 kts vs 481 kts) and equal range (3,000 nm vs 3, 100 nm), so what heck was the plan for the Learjet 85 anyway ? it was the fact they had no plan and that is why it dragged on for 8 years ! The aircraft would have rejuvenated its languishing Learjet brand, now there is nothing new to come other than sub-contract work for the Global 7000 and 8000, the Learjet brand is dying a slow death.

For those that did not catch this one, Bombardier is being sued for $US 121 million in damages by Alenia Aermacchi (Italy) which builds the tail section of the CSeries, Alenia says it is due to the sharp reduction in the rate of production of the CSeries, and that the low production rate will lead to a drop in productivity which will result in higher than expected costs and a loss of earnings. This is worrying, a major Tier 1 sub-contractor seeking damages from the OEM, I would like to know what production rates Bombardier is now looking at, is optimism in the program dropping ? I have early planned production rates of 22 for 2016 (not going to happen as certification will be delayed to 1Q/2016 most likely), 48 in 2017, 75 in 2018, 90 in 2019 that is 235 in 4 years, which will not cover the current 243 orders before 2020.

In the meantime Raymond Jones, VP of Sales & Marketing left the company, another big departure at Bombardier, this one survived only a year, probably not the best choice for the role, but other good executives were good for the role, but decided to get out-never a good sign, especially when the biggest program in the company’s history, the CSeries is struggling and costing now $US 4.5 billion and certification is still far from complete, with only  800+/-  hours of 2,4000 hours needed for certification from Transport Canada, 2nd half of 2015 is not realistic, look for 2016 as being more realistic.

As a comparison of how slow certification is going on the CSeries, the Airbus A350-900 had its 1st flight June 14, 2013 and the 1st delivery to a customer, Qatar Airways was made on December 22, 2014, roughly 69 weeks after 1st flight, the CSeries made its 1st flight on September 16, 2013 which is 69 weeks ago today (January 20, 2015), and today Bombardier is at best 30% of the way to certification, yes they had engine problems, that is what happens in certification, the unknown happens, look at the Boeing B787 Dreamliner and the whole battery issues they had that delayed deliveries for months and months. Back in 2008 the program was estimated at $US 3.5 billlion and a breakeven of 300 units became the sales target, now it is a $US 4.5 billion program, but Bombardier keeps talking about 300 orders, it should be 400 now but Bombardier knows it will have to discount the price (something it said in the past it does not have to do with the CSeries) but just like Airbus and Boeing (will discuss in future blog) they will have to do so, and even a modest 25% off means a realistic breakeven of 500 at least !

The company says it has $US 3.8 billion in liquidity, enough to fund its 3 on going programs, but with stock and credit rating downgraded capital will be more expensive to come by as debt is $US 7.6 billion, and the cost to protect debt from default in the next 5 years has jumped to 481 basic points (4.81%) up by 125 basic points (1.25%) in the past week, making borrowing a whole lot more expensive for Bombardier. Capital expenditure for Bombardier Aerospace is estimated at $US 1.6 to 1.9 billion for 2014, and no let up for 2015 as CSeries, Global 7000 and 8000 will require lots of expenditure before their planned certifications in 2016 (CSeries, Global 7000) and 2017 (Global 8000), till then its all cash outflow, and the concerns about liquidity by capital markets.

The situation, is getting worst by the month, I have written several blogs on Bombardier (July 24, 2014) and the (June 10, 2014) blogs outlined the issues at Bombardier, and yes there is “something is seriously wrong in Montreal”, and it lies at the top. Yes, a reasonable 84 commercial aircraft and 204 business jets were delivered in 2014, but the problem is the sustainability of the Commercial Aircraft Division as the CRJ and Q400 products are slowly dying in the market, and the CSeries is in a coma, waiting to be awakened, while signs of trouble are merging in the Business Aircraft Division, poor Learjet sales, decrease in 300/350 orders as well as 605/650’s, with the high end still strong, though backlog is decreasing while competition is increasing and global economic storm clouds will bring trouble in 2015-2016 for the high end sector.

The mess was always going to come, as trying to certify 4 new jet aircraft costing $US 6.9 billion in development costs at the same time was too ambitious for any aerospace OEM, the $US 4.5 billion CSeries, $US 1.4 billion Lear 85, $US 1.0 billion Global 7000 and the Global 8000 all required massive amounts of resources (cash, human resources, engineering) and time, and required that the Business Division and the Q400 and CRJ line continue to sell and produce income, but that is not what is happening, the CRJ and Q400 sales are dying out and the CSeries is dragging out so you have less cash inflow and more cash outflow and no wonder investors are worried and selling their stock.

The fact Bombardier has not yet moved on ‘refreshing’ its sacred Global 5000 and 6000 aircraft when Dassault launched its Falcon 5X and 8X in the past year and Gulfstream launched its 500 and 600 at the NBAA in October, says a lot about the mind set at Bombardier, as the Global are where it margins are, a segment that has done well while the light and medium segments suffered reductions in demand from 2008. The French and Americans are going after the Global market, and Bombardier chose to ‘refresh’ the Challengers instead, 605 is now the 650 and the 300 is now the 350 (bigger windows, 145 nm more range for an extra $US 1 million) ? maybe too dependent on the eventual 7000 and 8000 to keep its dominance in the high end sector ? maybe.

It is time to point fingers at the CEO Mr. Pierre Beaudoin, as the National Post is the first to have the balls to write about the ever growing list of critics of the CEO at Bombardier. The stock value of Bombardier has gone from $CAD 8.90 when Mr. Pierre Beaudoing took the helm at the company on June 4, 2008 and since then it has gone down 66%, and right now there are no signs of it coming up anytime soon. With no major Canadian pension fund among its top 209 shareholders, the Canadian champion of aerospace has lost its way, investors are selling their Class B shares, and even local Caisse de depot et placement du Quebec, whose mandate is to contribute to Quebec’s economic investment, is absent. Time for a new CEO from the outside, a restructuring expert that can turn the Titanic around before it sinks ?

But the Class B shares traded on the stock market are outweighed by the Class A votes that carry 10 votes to each 1 vote for the Class B, in short, the Beaudoin family controls the company through its 64% of voting shares, so Bombardier is stuck with the 3rd generation Pierre Beaudoin at the top, no matter how bad the situation gets.

The Q400 sales are a fraction of ATR sales, the CRJ is holding on due to the scope clause of 76 seats in the US market, but very little anywhere else. The CSeries has 243 orders after 7 years, while Airbus with its A320neo has 3,621 firm orders after 4.1 years of sales and marketing and Boeing’s B737Max has 2,663 firm orders after 3.5 years of sales and marketing. Even newcomer Mitsubishi MRJ has 223 firm orders and Embraer’s E2’s have 270 orders having only launched sales & marketing in June, 2013, only 1.5 years ago.

AC 320Ryanair-2461675

CS100-2306145

E195MRJ-1Sukhoi-1

The above is the line up for the global commercial jet market between 80 passenger seats and 200 passenger seats till 2020. With 6 OEM’s in the group, all with good aircraft the big battle is going to be in the 80 to 135 seat segment with 4 OEM’s competing (Bombardier, Embraer, Mitsubishi and Sukhoi) , can they all survive ? that is the big question ! The Sukhoi is the weak link, mainly due to its Russian origin, while Embraer and MRJ will battle it out in the 76 to 90 seat segment and Embraer and Bombardier in the 100 to 135 seat market.

The battle in the 80-149 seat market has begun and at this point #1 is for now, is the early entry Sukhoi SSJ-100 with 84 delivered (296 orders)  #2 is Embraer (270 orders), #3 is Bombardier (243 orders) # 4 Mitsubishi (223 orders) , #5 is Boeing (60 orders) and #6 is Airbus (49 orders), in total 1,141 aircraft on order in this segment between 6 OEM’s.

It is again worth noting that the smallest segment that Airbus and Boeing compete is the 124 to 149 seat market where the Airbus A319neo has only received 49 orders to date, only 1.35% of all 320neo family orders to date and the Boeing B737Max7 has managed only 60 orders to date, only 2.2% of all Max orders, so a mere 109 orders in the market that the Bombardier CS300 will compete in, this will be interesting, is this lack of demand due to the market not being there or no optimized aircraft for that segment has yet to emerge ?

At the top end, is Airbus (TOP LEFT photo) with its neo (new engine option) line of 124 to 220 passenger seat A319’s, A320’s and A321’s with 3,621 current orders and Boeing (TOP RIGHT photo) with its Max line of 737Max7, 737Max8 and 737Max9 with 2,663 current orders.

In the middle is the Bombardier CS100 (MIDDLE photo) and CS 300 line of 108 to 160 passenger seat airliners, with 243 orders, it is still referred to as a “game changer“, yet clearly it is NOT, it is just another aircraft out there using the new generation of fuel efficient engines, the quicker Bombardier gets over its myopia and the fact it has been boxed in from the top and bottom, the better.

At the bottom end is the new Embraer line up of E2-175, E2-190 and E2-195 (BOTTOM LEFT photo) with current order book at 270 for the E2’s and 1,339 orders for the E-170, E-175, E-190 and E-195 line of regional airliners being replaced by the E2’s in 2018+. The Mitsubishi MRJ-90 (BOTTOM MIDDLE photo) is a new clean sheet aircraft for 78 to 90 passengers which currently has 223 orders. The Sukhoi SSJ-100 (BOTTOM RIGHT photo) is a 78 to 85 seat aircraft from Russia with 296 orders and a possible stretch to 115 seats.

_ _ _

As for the CSeries, with sales at 243 today with only 63 (26% of orders) for smaller CS100 while the larger CS300 has 180 orders (74% of orders), it is clear to me that the CS300 will be a much more attractive aircraft with 135 to 160 seats, its all about seat mile costs (CASK or ASM) today with airlines, and the 160 version could be interesting for some LCC (low cost carriers), Lion Air of Indonesia looked at it, but the huge discounts it got from Airbus and Boeing for ordering roughly 250 aircraft from each, surely priced the ordered A320neo’s and B737-Max8’s below the CS300 list price of $US 71 million, I would not be far of if Lion Air paid less than $US 60 million (+40% off) for each A320neo/B737Max8 in its deals somewhere in the range of $US 322,000 per passenger seat.

In short, the fingers need to be pointed at management or lack of. The situation has come down to a future where Bombardier may not be in the Commercial Aircraft business 5 years from now, the CRJ and Q400 line will be sold as it is becoming uneconomical and near the end of its life. The CSeries is struggling for orders, and one day China may take the whole thing from Bombardier.

The 100-149 seat market is NOT as big as Bombradier forecasted and hoped for, time shave changed, airlines are up gauging their fleets more seats equals better seat mile costs. The 4,800 aircraft in 2012 that were in the market will not increase to 8,700 as Bombardier hoped, no way will we see 6,900 deliveries in this segment in 20 years, 345 aircraft per year ? come on it won’t happen, at best 3,000 or 150 per year between Bombardier, Embraer, MRJ and a “stretched” SSJ (?).

B737-200DC-9md-82

Bombardier from the beginning of the CSeries was out to replace the 100-149 seat older B737-200s (LEFT photo), DC-9’s (CENTER photo) and MD-80’s (RIGHT photo), well that has not worked. The airlines like Westjet Airlines, SAS and American Airlines have moved on to bigger aircraft, they did not order same sized aircraft, because they want to grow capacity by available seats per aircraft as well as increased frequencies and  new routes. West Airlines has B737-800’s, while Airbus has moved to B737-800’s, A319, A320 and 30 x A320neos, American still holds on to 130 MD-80’s but has ordered 100 x B737Max8’s and 59 x B737-800’s to replace them. The trend out of the 100-149 seat market to the 150-200 seat market, so time to re-think and re-position how to sell the CSeries.

_ _ _

The order book for the Airbus A319neo is 49 while the Boeing Max7 order book stands at 60, that is 109 aircraft in this 100-149 seat market, or 1.7% of all A320neo’s and B737Max orders, that says a novels about this segment, and it has nothing to do with downsizing the aircraft, its about market demand, it is not there to the level forecast, simple. In the beginning Bombardier goal with the CSeries was to replace MD-80’s, DC-9’s and B737’s, they belived in their forecasts too much, did not study the aircraft order trends and see the changes in the industry, it is a whole lot different today than whent he CSeries was launched, LCC (low cost carriers) focus on seat costs and FSC (full service carriers) having to compete with them on seat mile costs, thus the trend to up-gauging aircraft and you see it, 6,900 narrowbodies (A320neo and B737Max) sales versus 249 CSeries orders.

Bombardier will have to re-position their thinking and honestly create a new Blue Ocean strategy on how they will compete from here on, because what they have been ‘selling’ (off peak flights, point to point, better economics, etc.) has NOT worked, the airlines are NOT buying it, the poor order book says it all ! add in low fuel prices that change the economics of older airliners, and the CSeries sell is going to be more difficult. The early Bombardier assertions that the CSeries will have: 15% lower cash operating costs, 20% lower maintenance costs and significant improvements in emissions and noise are passe, check mate from above and check mate from the bottom, the CSeries sadly is just another commercial airliner in the 100-200 seat market, and has to find its value proposition and compete on price, delivery, performance, economics, passenger appeal with the rest of the crowd (ie. Sukhoi, Mitsubishi, Embraer, Boring, Airbus and down the road COMAC and even maybe Irkut).

As low fuel prices reduce the value proposition of a new fuel efficient airliner, airlines are re-evaluating their life costs like the  A320ceo versus A320neo (classic versus new engine option), as airlines are looking at lower DOC (direct operating costs) where fuel has been around 30% to 35% of the total DOC cost, and the equation may show for some that the cost of ownership and DOC’s may have swung in favor of the existing aircraft versus new aircraft, and 2015 is looking to be a very profitable year for airlines in general due to low fuel costs.

Flightglobal Ascend has calculated that the fuel savings generated by a $US 103 million (list price)  Airbus A320neo (new engine option) outweighs its lease costs difference versus a used A320ceo until the price of oil falls to $US 55 per barrel. With oil in the $US 48 per barrel range, older, cheaper and less fuel efficient commercial aircraft like the classic A319, A320, B737-700, B737-800, E190/195, etc. may have better economics than new, more expensive and more fuel efficient commercial aircraft like the A320neo, B737-Max8, E2-190/195’s, for now anyway while oil is low, long term it is best to go with new aircraft.

Airlines may use this period to boost profits/cash, and there will be cases of aircraft deferral and possibly cancellations at the major OEM’s, which Bombardier does not want to see, as it was “hoping” (“Hope is NOT a Strategy”) that one competitive advantage it had was quicker aircraft delivery, as Airbus, Boeing and Embraer have long lead times for deliveries.

Not all airlines buy the idea that new fuel efficient aircraft are the best way to go, ULCC (ultra low cost carrier) Allegiant Air operates MD-80’s and A320’s and finds the $US 3.5 million MD-80 total operating costs plus DOC’s competitive with the second hand $US 40+/- million A320 (new A320ceo is $US 94 million and A320neo is $US 103 million, less discounts of course !), even though the MD-80 burns 250 USG per flight hour more JetA, and requires more maintenance, but the difference in ownership costs is greater than the DOC difference. DeltaAir Lines fleet strategy uses used aircraft, only 2 years ago it finally stopped using the DC-9 and now has a large fleet of Boeing B717’s as it believes in in minimizing capital costs as a priority when it can. Most recently, United Airlines was looking to acquire second hand B777-200’s, low fuel costs can lead to shifting retirement plans and deferring deliveries, as Air France-KLM did on Dec 19, 2014 when it deferred 10 x B777-300’s that were to replace its B747-400’s, low fuel prices changed the equation, plus AF-KLM poor financial situation where CAPEX (capital expenditures) need to be kept to a minimum right now.

Moving on, the revolving door of exiting aerospace executives says novels about the internal situation, it all started with the early departure of Gary Scott then President of Bombardier Commercial Aircraft on October 1, 2011, he was the man chosen to lead the CSeries, he was it’s champion, but he bailed out on his own accord, just as the CSeries program was getting started, very strange departure indeed, and raised lots of questions about the program, what scared him off ?

Some executives needed to go and some needed to stay, the politics of Bombardier is complicated, insiders say too many people were promoted to positions that they are not qualified for (see previous blogs on Bombardier). Putting people in positions they were not qualified for has been an ongoing problem at Bombardier as you can see from my previous blog contributions, but the departure of such high level executives after a short period, is worrying to prospects, customers, employees and investors.

In a July 2011 article in McKinsey Quarterly “Do you have the right leaders for your growth strategies ?” pointed out that leadership quality is critical to growth, most companies don’t have enough high quality executives. Excellent leaders are few and far between, I know that having worked with for and with 60 companies in my career as executive, adviser, employee and business owner. It is a challenge for growth oriented corporations because leaders with high competency scores make a big difference for the corporation.

I have recently worked with a Canadian company where the the shareholders and President wanted to grow the business, but had little competencies within its executive ranks how to pull it off, stuck for years doing the same old thing, keeping the ‘status-quo’ and expecting different results – does not work, with no idea of how to move forward. In order of importance your  leaders need:  1. market insight (looks beyond the present) 2. customer impact  (takes action to add value) 3. strategic orientation (defines strategy)  4. change leadership (advocates change) 5. developing organizational capability  (adding new competencies) 6. results oriented (uncompromisingly drives for higher performance)  7. team leadership  (involves team) 8. collaboration and influencing (motivates others), too many executives promoted to positions that they are not competent enough to get the job done properly. Promotion based on years of service does not work, a company needs to assemble a critical mass of talent, which requires attracting and retaining excellent leaders, not followers, ass-kissers or ‘golf buddies” but people with the right skills, competencies, attitude and energy to make positive things happen.

If something does not dramatically change soon, this world famous manufacturer of planes and trains, will be left with only trains !

In the past 14 months the long list of high level senior executive leaving Bombardier Aerospace has grown (rightly or wrongly):

  1. Chet Fuller, CSeries chief salesman, on December 3, 2013 replaced by Mr. Raymond Jones, as VP Sales
  2. Guy Hackey, CEO Bombardier Aerospace, “retires” July 2014 as 1,800 employees are laid off.
  3. Philippe Poutisson, VP of Commercial Aircraft Marketing, gone August 19, 2014.
  4. Raymond Jones, VP of Sales and Marketing at Bombardier Commercial Aircraft ‘departs”, after a year in the position on January 8, 2015 just a week before ‘hell breaks loose” on January 15, 2015.

The problem is not only in the Commercial Aircraft, it now is spreading to its Business Aircraft Division, which has been a strong performer till now, as the Learjet 85 already on hold since last summer and in slow development since 2007, now it been ‘suspended’ and most likely will NOT ever be certified. I fail to see what the hell Bombardier was thinking with the $US 17.2 million (2008 price) Learjet 85, today that would be around $US 20 million, and it would compete with the $US 24.9 million Challenger 300 and the $US 25.9 million Challenger 350 (which for an extra $US 1 million gives you bigger windows and 145 nm extra range ? wow.).

challnger 300

The Learjet 85 program has been ‘paused’ officially last week, though it has been in a ‘coma’ since last summer, and after 8 years of troubles it now requires a $US 1.4 billion writedown, one needs to ask why did they forward with it in the 1st place ? The Bombardier $US 24.9 million Challenger 300 specs (ABOVE photo) are very close to the Learjet 85 with the same number of passenger seats (8), 11 kts faster and 100 nm further range, so Bombardier knew there was going to be a problem between the two.

The $US 17.2 million (2010 price) Learjet 85 would be around $US 20 million today with inflation and it probably would compete and ‘cannibalize’ the Challenger 300 and the 2014 newer Challenger 350 (imagine $US 1 million more for slightly bigger windows and 145 nm in range !). Anyway, sad to see any program get canned, yes the Learjet 85 is dead, and Learjet in Wichita is left with only the $US 11.3 million Learjet 70 and $US 13.8 million Learjet 75, of which only 15 were delivered in the first 3 quarters of 2014, so on track for 20 deliveries worth around $US 240 million, no wonder 600+ are being laid off in Wichita, there is little work, and let’s face it the $US 10 million to $US 20 million market is tough, the Learjets can’t compete without big discounts these days-yes discounting is common at Bombardier, well known in the industry. My money is on the new $US 20 million Embraer Legacy 500 in that segment to be the best seller.

_ _ _

The Learjet 85 is 8 passenger with max. operating speed of 0.82 Mach or 470 kts and a range of 3,000 nm, the Challenger 300 is a 8 passenger jet, 0.83 Mach or 481 kts and a range of 3,100 nm, so what was its purpose in the product line ? Unless they thought they would keep it between the  $US 13.8 million Leajet 75 (without the discounts now offered) and $US 24.9 million Challenger 300, but then by my calculation is should be there are $20 million, but maybe too close to cannibalize Challenger 300/350 sales, which have not gone well in 2014, or the Challenger 605/650., thank god for big orders from the likes of NetJets and VistaJet (more on that in another blog, but it may not be what it seems).

As of 3Q/2014 Bombardier has delivered only 15 Learjet 70/75’s (5 per Quarter) on track to equal 2013, as that segment is struggling since 2007 when 80 Learjets were delivered and has been decreasing every year since to 21 in 2013. The Division cannot survive on 20 Learjet deliveries per year worth $US 240 million, so will it be shut down eventually, it cannot be a 1 product Division with the Learjet 70/75.

The Challenger line is also down in 2014, the Challenger 300/350 deliveries in 2013 were 55, only 35 delivered by 3Q/2014, same for the Challenger 605 where 32 were delivered in 2013 but only 20 delivered by 3Q/2014, so only the Global 5000/6000 are doing well with 55 deliveries by 3Q/2014 and surely will surpass the 62 deliveries in 2013, so 2014 will not be a great year for Bombardier Business Aircraft, and they have to be worried about the global economic slowdown affecting the sales of high end business jets, especially the new 7000 and 8000.

Gulfstream’s new $US 43.5 million G500 (5,000 nm range at 0.85 Mach) is due in 2018 and the $54.5 milllion G600 (6,200 nm, 0.85 Mach) due in 2019 will challenge Bombardier’s high end business jets, the $US 50.0 million Global 5000, the $62.0 million Global 6000, and the $US 60 million Global Express XRS, which have been excellent sellers with high margins, those days are coming to and end, as the backlog for the aircraft is decreasing, new competition equals lower margins and global economic slowdown means lower demand, the last slowdown did not affect billionaires too much, and sales stayed high, this time around it is different as oi and commodity prices are low, Europe is still economically struggling, China’s fast growth has slowed down and Russia is under EU/US sanctions and a Ruble fall of 50% with light at the end of the tunnel for higher oil prices ($US 70 per barrel) anytime soon.

Competition will intensify, margins will come down,as new aircraft are moving into the market like the $US 65.0 million G650ER and Dassault’s new $US 58.0 million Falcon 8X. The Global 7000 and 8000 must be a success for the future of Bombardier, they will be the bigger and have more range than any other business jet in production It is a gamble, the 7000 is priced at $US 75 million (2,637 ft3 cabin volume and 7,300 nm range) while the 8000 is priced at $US 71 million (2,236 ft3 cabin volume and 7,900 nm range). They need a booming global economy to be successful, and that is not what we are seeing right now, China is slowing down, Russia has many issues, and oil will not rise above $60 a barrel till 2017 at best, so things there will be issues to deal with at Business Aircraft in all segments.

Investors need to weigh everything, and right now Bombardier Aerospace at least is heading into a big storm, it may be the perfect storm, economic slow down, problems with certification, CSeries not attracting big airline orders, especially in North America and you have a crisis on your hands.

There are also lots of stories and questions in the market about the future viability of VistaJet which has ordered 56 Global Express (+86 options) and 20 Challenger 350’s (+20 options) dozens of business jets from Bombardier, but that is for another blog.

crj-700

Bombardier has done very well over the years with its CL-600 Challenger business jet stretch, creating the 50 seat CRJ-100/200, the 78 seat CRJ-700 (ABOVE photo), 90 seat CRJ-900 and 104 seat CRJ-1000 line of regional airliners. Embraer decided to create a new airframe with the E170/175 and E190/195 and slowly caught up to Bombardier with a better and more comfortable airliner. Still, 1,833 orders have been received for the CRJ line (as of Sept 30, 2014), with 1,746 delivered and a few orders here and there are coming as AA, DL, UA the big 3 airlines in the US replace their 50 seat regional jets with 76 seat regional jets (new pilot scope clause). With the arrival of the Embraer E2 line by 2018 the end of the road is not far off for the CRJ line, it will no longer be competitive, and surely by 2020 it may not be produced anymore.

_ _ _

A change of executives at Bombardier is surely needed, as they are just NOT getting things done, the CSeries sales are a disaster (242 orders, but 44% of those are questionable), the Q400 is a small side show to ATR (150+ orders in 2014) and the CRJ line is at the end of its product life cycle as it cannot compete with the current Embraer E-Jet and will be done when the new E2’s comes out. They stretched the Challenger from a 12 seat business jet into a 100 seat CRJ-1000 and can’t do much more with it anymore, all CRJ’s are the same CL-600 Type Certificate, just stretched.

AirFinance Journal rates 15 regional aircraft in based on 4 criteria (value for money, re-market potential, operational success, residual value) all very important variables when running an airline or an aircraft leasing company, in 2013 the rating was:

#1 E190

#2 E195

#3 ATR-72-600

#4 ATR-72-500

#5 E170,

#6 ATR-42-600

#7 ATR-42-500

#8 Q400

#9 ERJ-145

#10 CRJ-900

#11 CRJ-1000

#12 CRJ-700

#13 ERJ-140

#14 CRJ-705

#15 CRJ-200

The Survey also looked at the new E2’s from Embraer and while not in production yet, the E195-E2 will be #1, E190-E2 will be #2 and E175-E2 will be #4 after the E190, that in a nut shell spells out what the market thinks of various regional aircraft, the sign is on the wall for the CRJ’s.

The reality is and I have said this previously many times, the CSeries has been pinned in by the Airbus A320neo and the Boeing B737Max at the upper level of the 100-149 seat segment and at the bottom end the new Embraer E2 line and Mitsubishi MRJ.

Every OEM now is using either the new PW 1000G engine (A320neo, CSeries, Embraer E2’s, MC-21, MRJ) or the CFM International LEAP engine (A320neo, B737Max, C919). You have old proven airframes with new “tweeks” to the aerodynamics combined with new avionics and engines (ie. E2’s, A320neo, B737Max) more than able to compete economically with the new airframe and engine competitors (ie. MRJ, CSeries, C919, MC-21, SSJ-100).

So what Bombardier thought was going to be a big competitive advantage of 20% saving in fuel costs, has fizzled out and there is basically no competitive advantage, in fact I would say the advantage is with the incumbents with their vast number of existing well proven models in service around the globe. The airlines are voting with their orders, they are not buying what Bombardier is telling them, and with low oil prices the argument is getting harder.

The 100-149 seat market as discussed in my previous blogs is not what it once was or what Bombardier forecast or hoped for and they have to face a lot more competition than they thought they would, in short the 243 orders for the CSeries ( 63 x CS100 and 180 x CS300) after 6+ years of marketing is an absolute sales and marketing disaster! Note the fact that 74% of current orders are for the CS300 version, the larger aircraft will have more appealing economics, and will outsell the CS100 4 to 1 in the end.

The 14 current customers are an odd collection of great companies, current operators, unknown start-ups, speculators to questionable sustainable airlines, 9 look promising BUT 5 in my opinion are not going to happen.

I believe that of the 243 orders on the books, 107 will NOT happen, for various reason (below), and therefore I see only 136 “real” orders (56% of order book) at this time:

The CSeries customers who most likely will take delivery of their CSeries one day:

  1. airBaltic, of Latvia, state owned, made its 1st profit last year in years (only $US 1.4 million) after loses of $US 38 million in 2012 and $US 172 million in 2011 , and already talking about a IPO (initial public offering) as the government wants out, so not really the time to be changing to an all new fleet, and will anyone be interested ? It has 13 x CS300’s on order to replace its B737 Classics.
  2. SaudiGulf Airlines of Saudi Arabia, a new start-up with orders for A320’s and 16 x CS300’s, up-start versus Saudia ?
  3. Braathens Aviation/Malmo Aviation of Sweden, has 3 x CS 100’s and 5 x CS 300’s on order, already said it does NOT want to be the launch customer, too risky.
  4. Lufthansa, the German national flag carrier has been a launch customer for de Havilland/Bombardier on may aircraft types and models (from DHC-8’s to CRJ’s), it is the best airline in the list with 30 x CS 100’s on order, most likely heading to its Swiss European Air Lines subsidiary (though LH says it will not be the launch customer) to replace the 19 x 97 passenger Avro RJ 100’s and most likely its Austrian subsidiary to replace the 7 x Fokker F70’s and 15 x Fokker F-100’s, now that a deal with the pilots has been made.
  5. Falcon Aviation, a Abu Dhabi, UAE charter operator with 2 x CS100’s on order.
  6. Gulf Air, of Bahrain, the national carrier, once a large airline it is now a shadow of its past when Qatar, Abu Dhabi and Oman each owned 25%, it has 10 x CS100’s on order and present has 28 Airbus A320/A3210 and A330’s and is trying to find a role and ‘niche’ for itself between Emirates, Etihad and Qatar. I am not sold on the CS100 in the Middle East.
  7. Korean Air, this one I do not understand, with 159 jets, the smallest being 19 x B737-800’s (plus 22 x B737-900’s) why the 10 x CS300’s ?
  8. Macquarie AirFinance, of Dublin, 186 jets, 73 operators in 43 countries, this is a good lessor, the order came Sept 26, 2014 at a badly needed time, Farnborough was a ‘disaster’ for CSeries and high executives coming and going, so the order for 40 x CS-300’s worth $US 2.8 billion, we shall see – neutral on this one.
  9. PrivatAir, of Germany, flies 6 Boeing VIP/BBJ aircraft, why they want 5 x CS 100’s is beyond me, but like Comlux with the SSJ-100, maybe want to do the VIP completions.

The CSeries customers who most likely will NOT take delivery of their CSeries for various reasons:

  1. Odyssey Airlines, London, England planned start-up, trans-Atlantic London City to Toronto Island ? with a planned 10 x CS 100’s on order ? I don’t think so, I fail to get it, I guess.
  2. Republic Airways of the USA has had 40 x CS 300’s on order since Feb 28, 2010 when it owned Frontier Airlines, which it sold in December, 2013 to Indigo Partners and now surely has NO need for the aircraft as it is a ACMI provider to the BIG 3 (UA, DL and AA) with 241 regional aircraft below the 76 passenger pilot scope clause. This order is DEAD, but for now CEO/President Bryan Bedford won’t admit it. Presently operated 5 x Embraer 190’s (99 seats) for Caesars Entertainment Corp., which is now in financial trouble.
  3. Lease Corporation International, of Dublin, Ireland, it has only 15 aircraft in its portfolio (A320 to B747-400F) and yet has orders for 3 x CS100 and 17 x CS300’s, something just rubs me the wrong way with this one, professional intuition ?
  4. Iraqi Airways, has 5 x CS 100’s on order, with IS in control of a large area of Iraq, the Kurds doing most of the fighting against IS, Sunni versus Shia disagreements, Iraq is a failed state, whose future is not certain as one state, and then the oil price ? its all they have to finance things with.
  5. Ilyushin Finance of Russia, has 32 x CS300’s on order, forget it now, the Rostec deal to build Q400’s is off, and Russian banks and government are under EU/US sanctions, times are tough for Russia now with oil down 50% and the Ruble down just as much. Read my last 3 blogs on the Russian aerospace industry, it says it.

CS300

The 1st Bombardier CS300 (135 to 160 passenger seats) was seen outside its Mirabel hangar in early November, it is the 6th CSeries aircraft to enter final assembly, it is the biggest Bombardier aircraft ever built, and from the few early orders, it has 180 orders or 74% of total orders and it will be the $US 71 million CS300 that will make or break the CSeries program. The market segment which it occupies (125-149 seats) has been a disaster for Airbus and Boeing, as to date only 49 x Airbus A319neo’s and 60 x Boeing B737-Max7’s have been ordered or only 1.7% of all neo’s and Max’s ordered (6,284). The BIG question for Bombardier, is it the aircraft themselves, shortened versions of a successful airliner normally have not done well, DOC’s are really +/- the same, price is a little lower but seat economics not as good or is it the market itself ? Bombardier forecasts show 6,900 new aircraft in the 100-149 seat segment (345 per year average), which is highly optimistic and reality is showing its not a even quarter of that right now, BUT the CS300 could ignite that segment, it is up to Bombardier’s NEW sales & marketing executives to do a better job in selling its value proposition.

_ _ _

With the CSeries program now expected to cost around $US 4.5 billion and the decreasing prospects for Q400 and CRJ sales, it is no wonder that Bombardier is looking to have a final assembly line in China, especially since the Q400 line for Russia is off the table for good. According to Mike Arcamone, President of Bombardier Commercial Aircraft, the idea is being seriously considered in Montreal, as the reality is that the Q400 and CRJ have little future in them left, orders will not be there to justify production beyond 2017, as few new customers are coming to the table, only existing operators are topping up, not a good sign.

Yes, various manufacturing is underway in China on Q400 from the front, mid and aft fuselage at Shenyang Aircraft Corporation (AVIC) to the CSeries center fuselage, but Bombardier is waiting for orders to justify it, yet there is NO Q400 operator in China today, though a LOI exists for 30 x Q400’s from new start-up, Sutong Airlines, and the last ATR-72 from Hainan is long gone, so no ATR’s in China as well,  the Chinese impose a 24% import tax on aircraft below 90 seats, so they just have poor AVIC Xian MA60’s and MA600’s, and those were ‘copies’ based on the poor Antonov AN-26, so you have a poor version of a poor aircraft, and in this case two negatives do not equal a positive !

Now Bombardier and COMAC (Commercial Aircraft Corporation of China) already have some cooperative agreement on the new C919 (Chinese narrow body airliner in A320 category), the Chinese need help if they want to be the 3rd largest commercial aircraft producer in the world (their goal is to be #1, but they need to learn to walk before they can run), and for that they need Bombardier.

The four initiatives on which COMAC and Bombardier will be collaborating as part of this initial phase are commonality on: 1) the cockpit human-machine (crew) interfaces, 2) the electrical system, 3) the development of aluminum-lithium standards and specifications, and 4) areas of customer services in terms of technical publications and co-location of teams. All four projects are expected to be completed over the next 12 months and in conjunction with the C919 aircraft development schedule.

This first collaborative phase further reinforces the strategic long-term relationship between COMAC and Bombardier and demonstrates the complementary nature of the C919 and CSeries aircraft programs. Both parties will continue exploring other possibilities for cooperation with regards to aircraft program commonalities, joint procurement, synergies in development and customer services, as well as collaboration on Bombardier and COMAC programs.

Since COMAC cannot buy Boeing, Airbus or Embraer, it can possibly buy Bombardier’s Commercial Aircraft Division in a few years, when there is no CRJ and Q400 line and if the CSeries is not the winner Bombardier hoped for. Then like with Canadair, they can sell Downsview Airport for probably $US +1 billion to some developer, and focus on business jets in Montreal, maybe ? probably.

The current cooperation is about advancing commonalities between the CSeries and the C919, sales, marketing, customer service, technical publications, parts distribution, etc. so there is a lot of help from Bombardier to state owned COMAC (Commercial Aircraft Corporation of China), which just certified its 78 seat ARJ-21-700 (a modernized DC-9-15), and there is a plan to stretch it into the ARJ-21-900 a 98 seat version.

On top of the C919 the Chinese are planning the C929 a widebody airliner in cooperation with with Russia’s UAC (United Aircraft Corporation), and therefore it is not a big stretch to see some M&A (merger & acquisition) activity in the future between the two manufacturers, a future line up of C919 (vs A320, B737Max, MC-21), CSeries (vs Embraer E2 190/195, MRJ, SSJ) and the MA700 turboprop (vs ATR) would be a realistic line up for anyone considering the #3 position. Time will tell, but I do not think I am too far off with my prediction.

The CRJ-900 has been ordered by China Express Airlines for 25 units while LCC Loong Air has a LOI for 20 x CSeries. There is an opportunity in China for turboprops, the MA60 and eventually the Xian MA700, but imports have kept small regional equipment out of the market as anything below 25 tons pays 17% import tax, roughly $US 5.5 million for a Q400.

The problem is why would China be interested ? China just finally certified its ARJ-21-700 after 9 years behind schedule, it will seat 90 in a 1 class seating arrangement and competes with the CRJ-900/1000, the Chinese will have to learn how to support aircraft now, something new to them. The Chinese are working on their new 70 passenger fly by wire Xian MA700 regional turboprop which ‘should’ fly in 2017 and ‘should’ be certified by 2019, that will compete with the Q400, as it will be a ‘combination’ of the Q400’s speed and the ATR-72’s economics. China needs to learn about support, and now that the AR-21 is finally certified, it will look to other OEM’s for guidance and help.

One way to get the know-how is to buy and OEM, and it will never be Boeing, Airbus or Embraer, but a struggling Bombardier could be on the table, sell the Commercial Aircraft Division and keep the business jets-for now.

q400

The $US 34 million 78 passenger Bombardier Q400 has done very well, with 514 orders and 471 deliveries (as of September 30, 2014). Backlog now is around 1.7 years only (42 aircraft). It was designed to be a fast turboprop with 360 kt max. cruise speed and be able to compete with regional jets in the 300 nm to 500 nm sectors. Unfortunately it got squeezed in by regional jets at the top end and by the ATR-72 which has been constantly improved at the bottom end. Airlines have found that below 300 nm the ATR-72-500/600 is more economical than the Q400 and above 400 nm the regional jets are more economical. The aircraft has been discounted a great deal to compete with the $US 24 million ATR-72-600, with huge discounts in Canada to Porter Airlines and WestJet Encore, just to keep the ATR-72 out of Canadian airlines. Sadly, it never really penetrated the US market in any large numbers, presently there are only 2 operators (Horizon Air x 52 and Island Air x 2), Republic Airlines has swapped its Q400’s with FlyBE (UK) E170’s. In Canada there are 5 Q400 operators (Jazz/Chorus x 21, North Cariboo x 2, Porter x 26, SkyRegional x 5 and presently 16 at WestJet Encore for a Canadian total of 70, but Westjet Encore may take up to 29 more (for a total of 45). In the US market they did not use the aircraft for its speed, just capacity, as average block times are 60 minutes, the aircraft does best with block times of 90+ minutes to take advantage of its fast speed.

Sadly, the Q400 is not competitive with the new ATR-72-600 on economics, and while it struggles for a few orders, ATR sold 150+ aircraft this year, 90% were ATR-72-600’s and production is going to 100 a year (90 x 72’s and 10 x 42’s), since Bombardier left the DHC-8 turboprop market in 2009, ATR has solidified its position in that market, and doing very well, even parent Airbus is now taking note. Backlog of Q400 around 42 aircraft, ATR backlog 320+, says it all !

_ _ _

Bombardier needs to dump the CRJ and Q400 line in the next few years, it closed down the DHC-8-100 line 2005 and the DHC-8-300 line back in May 2009, now ATR has the whole 48 to 78 seat turboprop market to itself, and 2014 was a banner year for ATR, with 150+ orders and a backlog of 320 aircraft, with production heading for 100 per year by 2017.

We not hear much about the $74 million Global 7000 and 8000 business jet development and certification, it obviously is also draining cash from the company, and it was always a big risk launching the 2 programs, as the possible customer base  is very small and with the current political and economic situation around the world, you have Russians avoiding western business jets, China’s business aviation market is cooling down, and oil prices below $50/barrel will reduce the available cash to oil producing countries like Saudi Arabia, UAE, Kuwait, etc. and cause budget problems in Nigeria, Venezuela, Iran, etc.  and we will see that impact the high end of the business jet market, which has done so well since 2008 while the smaller jet segments struggled to recover.

The Global 7000 and 8000 have a very narrow market range, there are at present 1,645 billionaires in the world (1/3 inherited the wealth), and these airplanes are for billionaires and possibly the top 1,000 private and public corporations in the world, so at best 2,645 prospects of which some have Boeing BBJ’s, 787’s, 747’s, 777’s or Airbus ACJ’s, A340’s and even A380’s and some of these aircraft with VIP interiors can hit $US 500 million.  The world is now focusing on the income disparity, where last week Oxfam reported that the top 80 wealthiest individuals in the world, control the same wealth as the bottom 3.5 billion people, and that the top 1% control 50% of the wealth, the backlash against the ‘system’ is beginning, and the crony capitalism between big business and government, we are going to see a backlash against this inequality in the years to come and the high end of the business market may see signs of it first.

In the past 18 years, both Airbus and Boeing have done reasonably well with their ACJ (Airbus Corporate Jet) and BBJ (Boeing Business Jet) sales, with orders of 394 aircraft or roughly 22 aircraft per year between both OEM’s. This segment includes Government VIP aircraft as well and the aircraft order the breakdown (as of mid-2014) is :

Airbus with 178 orders or 45% of orders (19 x A318, 67 x A319, 17 x A320, 1 x A321, 3 x A300, 3 x A310, 41 x A330, 14 x A340, 1 x A350 and 1 x A380).

Boeing with 216 orders or 55% of orders (11 x B737, 159 x BBJ, 1 x BBJ Max, 5 x B757, 8 x B767, 6 x B777, 14 x B787, 3 x B747-400, 9 x B747-8).

SIDE NOTE: Yes, a $US 414 million (list price, airline configuration Airbus A380 with 5,930 ft2 of floorspace) has been ordered by His Royal Highness Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud who is the founder and chairman of one of the world most successful and diversified financial investment enterprises, Kingdom Holding Company (KHC), with total assets of around US$ 25 billion. and named by Forbes Magazine as one of the most creative investors in the world. Prince Alwaleed is the only private owner of a Boeing 747-400. The price of the A380 and the VIP completion is estimated at $US 600 million, which contains within its 3 floors a conference room, concert hall, elevator into the airplane, and even a garage.

THIS ABOVE MENTIONED A380 VIP ORDER, HAS BEEN CANCELLED, AND AIRBUS HAS GONE OUT OF ITS WAY TO LET EVERYONE KNOW THIS.

Lear_85_exterior

The Learjet 85 (ABOVE photo) has been in trouble a long time, for 8 years Bombardier worked on it with it’s 1st flight only in April, 2014 and now it needs a huge $US 1.4 billion writedown, an expensive project that most likely will not ever be certified, as Bombardier has too much on its plate right now. The Learjet 85 was to fill a hole between the Learjet 70/75 and the Challenger 300/350 and would have given new life to the Learjet brand which is sad shadow of its former days. The problem was as Bombardier had to realize that the Learjet 85 would have competed with the Challenger 300/350’s, with same performance, number of passenger seats but probably a lower price than the Challengers.

It was foolishness to go and certify 4 major jet programs at once (Lear 85, Global 7000, Global 8000 and the CSeries) and this was expected. What does the future of Learjet hold now ? only 20 Learjet 70/75 will be delivered in the 2014 year ($US 240 million in revenue), some sub-contract work on Global 7000 and 8000 but with 600+ lay offs now and no new Learjet, the brand is very uncertain future !

_ _ _

The Lear 85 has been in trouble for a long time, it was to fit between the $US 13 million Learjet 70/75 and the $US 21 million Challenger 350, it was not weak demand, as it was not certified and like the CSeries taking its time through certification, people get worried when they see turmoil in a company, they surely are not eager to buy from it. The departure of Raymond Jones, sure has not helped, I like Richard Aboulafia’s comments on this “Either top management is doing the classic, ‘Geez’ we’d better get rid of people to make it look like we’re not the problem, or it’s everyone around them saying, ‘I don’t want to down with the ship”.

The last thing Bombardier needs is a reduction in demand in the large business aircraft market, that is its bread and butter for the future, and we Canadians are proud of Bombardier, but sad to see it mismanaged and loosing ground to bad decisions and too much internal politics. Maybe, it is time to look for an outside CEO, they tried it in 2003 with Paul Tellier, but after 23 months into his 36 month contract he was out, something has to change, because things could be getting worst, and the market will decide what value to put on Bombardier. The company has lost its way, as you read in previous blogs, mismanagement is rampant in middle ranks, Quebecois nepotism has put ill-qualified people into positions that they should not be in, a poor corporate culture, and Canadian and UK tax payers have helped this company a great deal along the way, with $US 800 million in loans ($US 350 million from Federal government, $US 300 million from UK government and around $US 150 million from the Quebec government) which Bombardier says is within the WTO rules ?

This company exploded on to the global aerospace scene very quickly having bought Canadair in 1986, Short Brothers in 1989, Learjet in 1990 and de Havilland in 1992, in just 6 short years it went from zero to a major aerospace manufacturer, and if it is not careful in the next 3 years it can implode just as quickly !

Till next time, thank you.

 

 

COMAC and Bombardier Sign Definitive Agreement to Establish Commonality Opportunities Between C919 and CSeries Aircraft

March 21, 2012ShanghaiAerospace,  Press Release

Further to the framework agreement signed on March 24, 2011, Jin Zhuanglong, Chairman, Commercial Aircraft Corporation of China Ltd (COMAC) and Pierre Beaudoin, President and Chief Executive Officer, Bombardier Inc. signed today a definitive agreement covering program commonalities between the C919 and CSeries aircraft. More specifically, the two leading aircraft manufacturers have agreed to cooperate on four distinctive projects to be executed as part of the first phase of COMAC and Bombardier’s long-term collaboration on the C919 aircraft and the CSeries families of commercial airliners.

The four initiatives on which COMAC and Bombardier will be collaborating as part of this initial phase are commonality on: 1) the cockpit human-machine (crew) interfaces, 2) the electrical system, 3) the development of aluminum-lithium standards and specifications, and 4) areas of customer services in terms of technical publications and co-location of teams. All four projects are expected to be completed over the next 12 months and in conjunction with the C919 aircraft development schedule.

This first collaborative phase further reinforces the strategic long-term relationship between COMAC and Bombardier and demonstrates the complementary nature of the C919 and CSeries aircraft programs. Both parties will continue exploring other possibilities for cooperation with regards to aircraft program commonalities, joint procurement, synergies in development and customer services, as well as collaboration on Bombardier and COMAC programs.

“I am delighted that, leveraging on our corporations’ mutual strengths, synergies are being developed into mutually beneficial, tangible initiatives. This will certainly contribute to enhancing the competitiveness of not only the C919 andCSeries aircraft programs, but also of COMAC and Bombardier’s overall businesses,” said Mr. Jin, Chairman, COMAC.

“I am pleased to see the framework agreement signed in March last year reaching this important milestone,” said Mr. Beaudoin, President and Chief Executive Officer, Bombardier Inc. “We are confident these four initial projects will build on the complementary nature of our respective products and expertise while helping to maximize both parties’ cost savings and market shares.”

By signing this definitive agreement, Bombardier and COMAC are embarking on a first step to create opportunities for customers of the CSeries and C919 aircraft to realize cost benefits from the operation of both aircraft families.

Advertisements

About Aviation Doctor - Helping aviation companies to transform the present into a more profitable tomorrow

I am a Canadian and EU national with an MBA and 33+ years experience in aviation business development with 20 years overseas and work in 25+ countries. A former investment/merchant banker (mergers and acquisitions to corporate turnarounds). airline and OEM senior executive and past owner of 6 successful aviation companies in 3 countries (executive jet charter/management companies, aircraft sales, aircraft broker, airline/aerospace consulting to aircraft insurance). I have a very diverse aviation background with 75+ aviation companies (45+ airlines of all sizes, OEM's, airports, lessors, MRO to service providers) as consultant, executive management, business analyst and business development adviser. Excellent success track record in International Business Development. Most work with airlines is with new start-ups and restructuring of troubled carriers. I sold new business jets, turboprops and helicopters for Cessna, Raytheon, Gulfstream to Eurocopter as an ASR as well as undertaking sales and marketing of commercial aircraft for Boeing, de Havilland, Dornier, Saab and Beechcraft. Brokered everything from LET-410's to B747's and from piston PA31 to G550 business jets. I look beyond the headlines of the aviation news and analyze what the meaning and consequences of the new information really means. There is a story behind each headline that few go beyond. Picked the name Aviation Doctor, as much of my work has been with troubled companies or those that want and need to grow profitably. I fix problems be in the business, and help with restructuring for a better tomorrow. You can reach me with comments or suggestions at: Tomas.Aviation@gmail.com and I comment a lot on Google+, my Facebook and LinkedIN.

Discussion

Comments are closed.

%d bloggers like this: