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Airline Management, Bombardier, Business Aviation, Commercial Airliners, Regional Aircraft, UPDATES

UPDATE: Hold on to your wallets Canada ! Bombardier is seeking more money again for a another new aerospace project ! with the so-called “game changer” CSeries an absolute sales disaster with only 318 orders after +8 years of sales ? and right after announcing its 6th wave of layoffs (another 7,500 are to go by 2018) since January, 2014 (34 months ago) for a total of 21,450 jobs gone ! Meanwhile Bombardier’s CEO admits company nearly went bankrupt in 2015, and it now has $3.4 billion in cash, $2.5 billion (74%) came from the Government of Quebec this year (aka bailout money), without Quebec they would have only $900 million in cash today and be close to bankruptcy. Embraer and Boeing are taking the “illegal state aid” case to the WTO. With President-elect Trump coming in, he’s ready to “defend” US corporations from illegal and unfair state aid backed competitors, and don’t be surprised if he tears up NAFTA and hits the CSeries with new tariffs, a perfect scenario for his PR. Everything in decline at Bombardier Aerospace today, the CSeries has only 318 orders (of which 2 have been delivered), what happened to the existing Commercial Aircraft Market Forecast that claims 7,000 deliveries over 20 years (350 per year) ? all BS, in fact Ascend Consultancy forecasts only 1,340 CSeries deliveries over 20 years (67 per year), down 81% on Bombardier’s “fantasy” forecast. No one has noticed, but with only 34 x Q400 orders in backlog and only 60 CRJ’s in backlog, both programs will run out of orders at current production rates of 2.5 per month and 4.2 per month respectively by January, 2018, and with only 13 options for the Q400 and 18 for the CRJ, 2018 looks like the year the Downsview plant gets closed down and everything gets moved to Quebec, another Cartierville Airport deal in the works ? Business jets deliveries are down 25%, and the old Learjets and the 40 year old Challenger 650 (4th variation of Canadair CL-600, which also gave birth to the CRJ line) are down as well, along with the Global G5000/6000’s, NONE of the current products will be around by 2020, except the CSeries (maybe), the new G7000, and possibly still the Challenger 350, but it won’t be a $15 billion a year business, at best $5.5 billion, and I still believe Combardier is coming (China’s COMAC buying Bombardier Aerospace).

OMG, please NO more money for Bombardier’s projects ! Look the company is in deep trouble, just open your eyes and stop listening to the financial “experts” and Bombardier’s BS PR about being “on track” for recovery ? seriously its a disaster and read on to find out why.

The recent 7,500 announced layoffs which will take well into 2018 to complete is the 6th round of announced layoffs since January, 2014, for a total of 21,450 layoffs around the world ! This is NOT a company in a turnaround, everything is heading downwards.

Bombardier has $3.4 billion cash on hand (74% of that is the $2.5 billion Quebec taxpayers were suckered into), and without it they would be in trouble this year, note that this week CEO Alain Bellemare admitted that Bombardier was almost bankrupt in 2015, guess who bailed them out ?

None other than Quebec, and now Embraer and Boeing are going to the WTO on illegal state subsidies by Canada for the CSeries, while the WTO is slow, Boeing can get quick retaliation from President-elect Trump against Bombardier, and shut out the CSeries from the US market, and rightly so !

The struggling CSeries, 8+ years of sales of what was dubbed the “game changer” is a disaster, only 318 firm orders with 60+ questionable orders, and all orders are at a loss, with Delta Airlines order alone at $525 million loss on 75 x CS100’s, as they are selling below cost, no winner here.

I have always said the 100-150 seat market is a killer these days, it killed the A318 (81 deliveries), it killed the B737-600 (69 deliveries) soon it will kill the CRJ-1000 (46 deliveries) and its killing the CSeries as we speak. The segment peaked in 1991 at 330 deliveries, only 54 deliverie sin 2015, says it all, the market has up-gauged. With +8,000 A320neo and B737Max family aircraft orders (all after the launch of the CSeries), and sales are 25:1 versus the CSeries, says novels about the market no ?

cseries-cs100-bd-500-1a10_planespottersnet_618373

They created a phony forecast showing that the “game changer” will be a big hit, 7,000 deliveries over 20 years, or 350 deliveries per year, seriously ? they have 318 orders after 8 years, hello ? Recent forecast by Ascend Consultancy, was more accurate, showing only 1,340 deliveries over 20 years, yes only 67 per year, 81% below Bombardier’s “phony” forecast.

Next, lets look at the dying Q400 and CRJ programs, no one is talking about. The recent 3Q/2016 figures show a Q400 order backlog of only 34 aircraft + 13 options, which at the current production rate of 2.5 units per month equates to 14 months of production (January, 2018).

q400

Meanwhile the CRJ program has 60 orders in backlog (20 x CRJ1000’s questionable for Air Nostrum) + 18 options, at the current production rate of 4.2 units per month, this equates to also 14 months of production (January, 2018).

If the options do materialize they will only add 5 months of production to the Q400 (June, 2018) and 4 months to the CRJ line (May, 2018), and then its over for those programs and for the Downsview (Toronto) plant, and everything in late 2018 will go to Mirabel (Montreal), wake up people, its coming fast, but you won’t read about it or hear about from the newspapers or Bombardier until late 2017.

Another issue that is going to get ugly for Bombardier is the Residual Value Credit Guarantees (RVG) on the CRJ fleet, which Bombardier issued. Given the difficult times the CRJ is now facing, from phasing out of the CRJ-100/200’s from US airlines to to poor sales and Embraer’s domination of the RJ jet market, especially with the new E2 models on the horizon, the residual values are falling fast.

The RVG will be exercised more and more over the next few years, and Bombardier has to cover that-ouch. So far this year it has been only $41 million, but will escalate over the next 3 years dramatically.

crj1000-fuel-burn-fuel-consumption

Now, business jet deliveries are off 25% this year to only 150 deliveries, the Learjet brand is done, its now producing 1.4 aircraft per month and soon will be disposed off, ending the life of that brand name.

The 1970’s designed 4th version of the Canadair CL-600 Challenger (also the father to the whole stretched CRJ line), the Challenger 650 is struggling as well, with only 1.7 units per month delivery this year, and facing new and better competitors (Textron Aviation’s Longitude/Hemisphere,) its life is coming to an end after almost 40 years.

The Global G5000 and G6000 were the “cash cows” for Bombardier Aerospace back in 2014 with 80 deliveries and 42% of revenue at Aerospace. Now maybe 50 will be delivered this year, production will continue down as the line will be shut for an extended period next year, and the models face competition from new and better competitors (Gulfstream G500 and G600, Dassault Falcon 5X and 8X).

So Bombardier thinks it will have $10 billion in revenue from business jets in 2020 (from their Transformation Plan), more BS, all they will have is the G7000, CSeries and Challenger 350 to sell ?

The G7000 is the largest dedicated business jet todate and will face the Airbus ACJ and Boeing BBJ lines, which in the single aisle market have averaged only around 16 VIP aircraft per year in that ultra long range market for the past 15 years, questionable market success, given the G7000 has a cabin 40-50% smaller (ft2 and ft3) versus the ACJ and BBJ, meaning much less comfort on trips of up to 13 hours, where comfort (space) is a must, a top selling point that the G7000 lacks.

The CSeries will not be a success, and then surely never will Bombardier get the $63 million per unit they use in their forecast, lucky to get 1/2 of that in today’s competitive single aisle market.

So, in 2020 if they can do 67 x CS100/300’s at $33 million a piece, 20 x G7000’s at $73 million a piece and 40 x Challenger 350’s at $28 million a piece, I get at best $4.7 billion in revenue, yet they “say” they will do $10B in business jets (I say $2.5 billion) and they say $5.5 billion in commercial aircraft (CS100/300 only by 2020).

I get at best $2.2 billion in revenue for Commercial aircraft, so $4.7 billion vs $15 billion ? boy they better sell a lot of CSeries and G7000’s, but sadly they won’t, the current 318 will take production into early 2021, at a loss yet they offer the Chinese and JetBlue deliveries in 2018-2019, which probably means, as I have been saying for some time, they still have +/-60 firm orders that are “soft” (aka ruse orders).

In fact, Bombardier’s PR department still advertises 358 firm orders, somehow ignoring the 40 x CS300 order by Republic Airways from 2010, is no more, cancelled officially this summer after Chapter 11, but really done years ago when Frontier Airlines was sold by Republic Airways to Indigo Partners.

Sad when your own PR department keeps providing misleading information.

CSeries orders will be harder to come by as each year goes by as they face tough competitors (Airbus and Boeing), with the Chinese C919 and Russian MC-21 coming by 2020, that competition will be so tough that discounts of list will remain at +70% off for a long time, and Bombardier cannot and will not compete with that.

So forget about a “turnaround” the company is heading down and down in orders, backlogs, employees, cash on hand and reputation, so I see a “penny” stock again by early 2018.

Just as I predicted 2 years ago, and we had that $0.77 per share (TSE:BBD.B) just 9 months ago, yet it bounced back, but nothing has changed other than there are fewer employees, they got state aid ($2.5 billion) and they sold 120 CSeries to Air Canada and Delta Air Lines for a loss calculated around $7 million per aircraft ($840 million) and NOTHING since ! as competition is tough, as prices now are +65% off on List Price, and for Bombardier to win another BIG order, it will have to lose BIG money again to win the order, a good business ??

So why the upward stock movement ? people are ill-informed about the “reality” of their dying product line, and the extend of the damage caused by the incompetency of Pierre Beaudoin as CEO/President, and now CEO Alain Bellemare has to clean up a HUGE mess, and he may not save the “Titanic” from sinking either.

Sorry, been busy with various jobs throughout Caribbean and South America, but I promise to write regularly again, I use Google+ and Facebook to comment on aviation issues. Till next time thanks for reading my blog.

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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

3 thoughts on “UPDATE: Hold on to your wallets Canada ! Bombardier is seeking more money again for a another new aerospace project ! with the so-called “game changer” CSeries an absolute sales disaster with only 318 orders after +8 years of sales ? and right after announcing its 6th wave of layoffs (another 7,500 are to go by 2018) since January, 2014 (34 months ago) for a total of 21,450 jobs gone ! Meanwhile Bombardier’s CEO admits company nearly went bankrupt in 2015, and it now has $3.4 billion in cash, $2.5 billion (74%) came from the Government of Quebec this year (aka bailout money), without Quebec they would have only $900 million in cash today and be close to bankruptcy. Embraer and Boeing are taking the “illegal state aid” case to the WTO. With President-elect Trump coming in, he’s ready to “defend” US corporations from illegal and unfair state aid backed competitors, and don’t be surprised if he tears up NAFTA and hits the CSeries with new tariffs, a perfect scenario for his PR. Everything in decline at Bombardier Aerospace today, the CSeries has only 318 orders (of which 2 have been delivered), what happened to the existing Commercial Aircraft Market Forecast that claims 7,000 deliveries over 20 years (350 per year) ? all BS, in fact Ascend Consultancy forecasts only 1,340 CSeries deliveries over 20 years (67 per year), down 81% on Bombardier’s “fantasy” forecast. No one has noticed, but with only 34 x Q400 orders in backlog and only 60 CRJ’s in backlog, both programs will run out of orders at current production rates of 2.5 per month and 4.2 per month respectively by January, 2018, and with only 13 options for the Q400 and 18 for the CRJ, 2018 looks like the year the Downsview plant gets closed down and everything gets moved to Quebec, another Cartierville Airport deal in the works ? Business jets deliveries are down 25%, and the old Learjets and the 40 year old Challenger 650 (4th variation of Canadair CL-600, which also gave birth to the CRJ line) are down as well, along with the Global G5000/6000’s, NONE of the current products will be around by 2020, except the CSeries (maybe), the new G7000, and possibly still the Challenger 350, but it won’t be a $15 billion a year business, at best $5.5 billion, and I still believe Combardier is coming (China’s COMAC buying Bombardier Aerospace).

  1. With all this expert insight I hope you are “short” on Bombardier. That would teach you how effective your insights are.

    Like

    Posted by Paul Huffey | December 19, 2016, 7:05 pm
    • I called the “penny” stock (Feb, 2016) one year in advance, and the current price is really not reflective of the future.

      Like

      Posted by Aviation Doctor - Helping aviation companies to transform the present into a more profitable tomorrow | January 14, 2017, 5:03 pm
  2. It is look like you don’t like anything from Quebec with the help from Ottawa. You are not a ”Doctor” but you try to spread your own sickness.

    Liked by 1 person

    Posted by clbea | November 23, 2016, 2:39 am

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