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UPDATE: The Bombardier CSeries CS100 has received it’s Canadian Type Certificate, which is good news, and raised the stock by whole $0.19 a share, clearly showing investor apathy for the stock ! The BEST news is that it looks as if the man responsible for the chaos at Bombardier in the past 5 years, ex-CEO and now Chairman of Bombardier, Pierre Beaudoin will leave the company in early 2016. Certification is one hurdle, still many hurdles to jump through before the CSeries and Bombardier are in a good place, lots of things can still go wrong from entry into service, production ramp up to new technical issues (e.g. B787 battery problems). As for the 5 year transformation plan, there is NO WAY that Aerospace will reach its planned 2020 revenue of $14.9 billion with two planned “cash cows” (CSeries and G7000) that are a roll of the dice if they are to be successful in their respective markets. For surely, the current programs will not be competitive or even produced by 2020 (e.g. Learjet 70/75, Global G5000/6000, CRJ line, Q400 and possibly the Challenger 650) as these programs are in their declining product life cycle stage, and facing newer and better products in the next 4 years that will make them obsolete. Lastly, I am still not seeing a market in the 100-149 seat segment, where is it ? where does Bombardier see this BIG market ? as the 125 to 149 passenger B737Max7, A319neo have not found it (only 109 orders out of 7,270 Max and neo current orders, or 1.5% of orders), and Embraer’s 118 passenger E195-E1 and Bombardier’s 104 passenger CRJ1000 sales were the least of all their respective models (only 11% of total EJet sales and 8% of CRJ700/900/1000 sales), combining for only 233 deliveries of 100+ passenger aircraft in 10 years, so the large regional jets have also NOT found a market in the 100-150 passenger market either. Maybe the market has up gauged and moved into the 150+ seat segment ? and Bombardier’s forecasts were and are wrong based on old data (e.g. DC-9’s, Fokker F-100’s, MD-80’s, B737-200/300/500/600′, BAe 146-300’s, etc.) and not taking into account new trends in up-gauging of aircraft, de-hubbing and focus on lowering CASM’s. The CSeries is badly positioned and will struggle for orders, even ICF International believes the CSeries program is a 50 unit per year aircraft program !

Well finally the Bombardier CS100 has received its Transport Canada Type Certificate today, and the stock (TSX:BBD.B) has gone up $C 0.19 to $1.36 (as of this afternoon, Dec 18/2015) or 16.4%. This is good news, but even better news is that it looks as if Chairman of Bombardier, Pierre Beaudoin will step down some … Continue reading

UPDATE: An insider’s opinion on what went wrong at Bombardier. With the TSX:BBD.B stock at $1.19 (Dec 11, 2015), a drop of 75.2% from year ago today and a 13.7% drop from only a month ago, it is obvious that the investment community is not buying the 5 year transformation plan presented at the company’s Investor Day in New York on November 24th. The plan calls for revenue growth to $25 billion by 2020, with Business Aircraft to hit $9.1 billion with the G7000 alone ? as the G8000 is no longer mentioned by Bombardier and the Challenger 650 is fading while the Learjets are dying. Meanwhile Commercial Aircraft plans to hit $5.8 billion in revenue (with only CS100/300’s as the CRJ and Q400 sales have little life left and by 2020 they surely will not be in production). While Transportation (trains) goes to $9.4 billion and Aerostructure grows to $0.7 billion (70% from Bombardier). Already plans are in place to out source Q400 and CRJ work to Mexico and Morocco as those brands fade into history, as current backlog of Q400’s at 73 units (36 months of production) and CRJ line with 75+/- backlog (15 months of production), the company is now looking for it’s workers for labor concessions in Belfast and Toronto. The company plans to deliver anywhere between 255 and 315 CSeries by the end of 2020, when production should be 90-120 units annually, so it is estimating a net average unit (CS100 and CS300) price of between $64 million at 90 units or $48 million at 120 units, either way it won’t reach $5.8 billion (at BEST $4.8 billion) when the price will be at best $42 million for the CS 300 and $36 million for the CS100 due to heavy price discounting competition from Airbus, Boeing and by 2020 new entrants like Comac and Irkut on their respective narrowbody aircraft. As for business jets, hitting $9.1B that is a far stretch as well, The Challenger 650 (a 35+ year old Canadair CL-600) will not be competitive by then, the Learjet line is dying as I write this, while the current Global G5000/6000 (current “cash cow” for Aerospace) is finding it hard to compete today and accordingly production is being reduced to 50 and much lower, and by before 2018 the G5000/6000 will struggle for any orders, and will be done as the new Gulfstream G500/600/650ER and Dassault 8X take over that segment. The ultra long range segment above $75 million (Global 7000 is priced at $75 million) has delivered 161 Boeing 737 Business Jets (BBJ’s) in 17 years, Airbus has delivered 116 A320/319 Airbus Corporate Jets (ACJ’s) in that time, or 277 narrowbody business jets (or just 16.3 aircraft per year on average), show me where is this market for business jets over $75 million ? governments and a few billionaires, but realistically a small market that Bombardier once again over estimated, and will pay the price for entering into. The competition here is VIP versions of commercial airliners offering great prices and much more comfort with huge cabins, the $75 million G7000 has a cabin of 2,657 ft3 and will fly up to 7,900nm the $87 million (big discounts available as low as $50 million), while the new ACJ A319neo has a cabin of 5,843 ft3 (2.2 x larger than G7000) with a range of 6,500 nm, and it will be tough going for sure.The future of Bombardier Aerospace is down to the CSeries and G7000 programs, in highly questionable markets segments that are most likely not going to support the company’s ambitions of mass production and large sales goals, they rolled the nice and they just may end up losing the company in the end.

I will start with my usual lack of progress report on Bombardier and where it is heading, and then further below is the unedited opinion of a Bombardier insider on what the heck has been going on at the very troubled OEM. I can report on what I see for the point of view of … Continue reading

SUMMARY: The Latvian airline, airBaltic was recently a target of Russian ‘agents’ to sell it 5 x Sukhoi SSJ-100 SuperJets, though it has 13 x CS300 on order and 7 options. The Russians are desperate to open the Western market for the SSJ-100 even as they deliver only the 100th unit produced after 49 months of production (only 17 produced this year versus a planned 45 and only less than 60 in service ? yes that is right, 40 x SSJ-100’s sitting in Russia with no where to go ! it’s a fire sale now). President Putin is putting $US 2.0+ billion into the program to open the Western market for the SSJ-100 to be followed by the Irkut MC-21 narrowbody.The SSJ program is crucial to Russia’s “hopes” of becoming a major commercial aircraft producer. But right now Sukhoi is part of the Russian military industrial complex now under international sanctions, as is it’s parent company United Aircraft Corporation (UAC) and a therefore all risky suppliers. To sell the aircraft, the Russians have resorted to their well known Russian business practices and desperate measures. Recent scandals at the highest levels in Latvia and at airBaltic show how secretive and underhanded they are to make things happen. In this case a new “undesirable” and a “potential security risk” (according to Latvia’s ex-Transport Minister), German investor with very close ties to Russia’s aerospace industry and Russian ‘elites’ comes out of nowhere with $US 57 million and puts money into a desperate national airline (opposed by Latvia’s then Transport Minister who was fired for his opposition), gets 20% equity and a whole lot more. He gets the airline to change its Business Plan to include 5 x SSJ-100’s, and somehow gets exclusive rights to provide aircraft to the airline ? who agreed to that ? Thank god that whole “scheme” was torpedoed by the Latvian Prime Minister right away with the urging of his Minister for Defense. A special NO purchase/lease or utilization of Russian aircraft special clause was inserted into the Shareholders Agreement plus 20 controversial points were removed ? Where did CEO Martin Gauss stand on all of this is a big question. But this shows how Russians plan to sell the Sukhoi, use money from who knows where to invest in private small airlines, fund management buyouts, pay off executives, buy airlines from privatization, etc. Slovenia’s Bad Asset Management Company is now privatizing it’s national airline Adria Airways, with Intro Aviation in the running, a word of caution here is needed as the real Intro Aviation interest may have more to do with placing SSJ-100’s then anything else (Adria Airways has 6 x CRJ900’s and 3 x A319’s). In fact, Ireland based CityJet’s (owned by Intro Aviation and now lessee to 25 x SSJ-100’s ) Chief Executive calls the SSJ-100 a real “game changer”, seriously ? it’s a 9 year old design that faces obsolescence in the next 2-3 years as the new generation Embraer E175-E2, Mitsubishi MRJ90 and the Bombardier CS100 enter service. Some in the industry are greatly exaggerating the SSJ-100 capabilities. The fact is that till now, the only western customer was Interjet of Mexico, otherwise the rest of the customers are just Russian/CIS operators (not counting the failed operators in Indonesia, Laos and Armenia) who have no choice in Russia, but the SSJ-100. So why buy anything MADE IN RUSSIA ? does anyone buy anything Made in Russia today ? Any executive worth his salary knows that in business you must always minimize business risk where possible, when you buy a SSJ-100 you greatly increase your political risk. Tensions between NATO and Russia are heating up again after the annexation of Crimea and the provocations in Ukraine, and you put your company’s future at risk of bankruptcy if you operate SSJ-100’s. One only has to look at the fact that the vast majority of western airliners in Russia today (inc. national carrier Aeroflot) are on VP-B (Bermuda) or EI (Ireland) registration, as RU (Russian) registration is too “risky” for lessors, financiers, banks and aircraft investors. If relations with Russia deteriorate further in the future, a SSJ-100 operator will have to shut down, as new sanctions and any subsequent public and corporate boycotts/petitions against the your airline’s use of the SSJ will ground you, do not take political risk likely today. That is the world of economic sanctions, just ask the Cubans and Iranians how tough it is to keep old cars and planes operational in such an environment, so be smart, saving some money up front on a 20 year commitment to an aircraft does NOT mean that you have a great deal in the end.

In a major press announcement on December 2, 2015 in Latvia, the Prime Minister Laimdota Straujuma came out to say the government supports the inclusion of a cause in the Agreement of Shareholders that prohibits “ airBaltic and its affiliated companies are prohibited from purchasing, renting or otherwise utilizing equipment produced by the military industrial … Continue reading