Follow up to the January 4, 2017 Blog “Lots of Talk about Bombardier’s turnaround”
Bombardier is now looking for solutions to keep its CRJ line open for a couple of years as the backlog now dwindles to 14 months at current production rate of 4.2 per month and current order book. Now paying for having taken the easy route and just kept stretching the Canadair CL-600 Challenger (the Type Certificate)
With only +/- 48 CRJ orders in backlog at the end of 2016 (20 “questionable CRJ-1000 for Air Nostrum), with around 44 deliveries and only 19 orders in 2016, the CRJ line has been living off its backlog for several years now, as it finds it hard to compete with the EJet, which had 108 deliveries in 2016 (2.5 times the CRJ deliveries).
The issue on the table now is will Bombardier try and re-engine the CRJ-900 (currently the CF34 engines), after upgrading the cabin in 2016 (lavatory, bins), but as the 4 time stretch of the 1970’s Canadair CL-600 Challenger business jet is struggling for orders, is it too late and a waste of time as the new Embraer E2’s (E175/190) will surely dominate the RJ market between 76 and 100 seats in the coming years, as the MRJ struggles with certification and now even customer confidence is now starting to show.
New engines will cost a great deal and being a rear engine configuration, the added weight of the yet announced new engines will surely create C of G issues, will it make the CRJ competitive to the new E2’s from Embraer, no, the contest is lost, the “comfort” of the cabin cannot compete with the EJets, and that is why US regionals are taking on more and more EJets versus CRJ’s.
Bombardier chose years ago to just keep stretching the Challenger business jet, while Embraer after the ERJ145/135 went with a new design, that offers much better comfort and room for quality cabin configurations that now offer business class for seamless service to mainline carriers in the US, something they could not get with the CRJ-200 and even the CRJ-700/900 when compared to the EJets. The graph below shows clearly the FALL of Bombardier’s CRJ in the regional jet market and the RISE of Embraer, you can see that from 2003 things changed, Bombardier’s share was in decline and Embraer’s was rising as Embraer’s EJets were superior to the CRJ line.
With at best 48 orders in backlog as of Dec 31, 2016 and throw in the latest 10 orders from CityJet (6+4), they might have up to 58 orders in backlog (max) at this time, or 14 months of production, base don current 4.2 per month (till April, 2018) without a lot of new orders.
They “hope” to be delivering CRJ in their 2020 Transformation plan, yet that means that between now and say Dec 31, 2019, they will need another 33 months of production, which at current production rate means at least 139 new orders ? they had 19 orders in 2016, so not realistic, and that is with a 25 to 30% discount off list price, which is high for regional jets.
Oh, they can drop to 2.5 units per month production (same as Q400), then they will need just 83 new orders to keep production going through 2020, but even that is a “hope and a prayer” for a product that is in its declining product life cycle, with small orders from current operators keeping it alive.
The BIG trouble at Bombardier Aerospace that a large part of its current product life cycle is dying, from the Learjets, Challenger 650 and Globals as they face obsolescence and new competing products to the dying CRJ and Q400 while the CSeries struggles to win orders and then when it does, it has to take a major loss on each delivery, this cannot go on for too much longer.
The 100-150 seat market (covered in my blog) is NOT there, NOT anywhere near Bombardier’s fantasy forecast of 7,000 deliveries over the next 20 years, its an out right lie, as that market peaked at 330 units in 1991, and in 2015 had 54 deliveries and last year 84 deliveries by 4 OEM’s, nowhere near the 350 per year forecast !
It will take time, but at some point Bombardier will sadly realize it got it all wrong with positioning, and like Airbus with its A318 (80 deliveries) and Boeing with its B737-600 (69 deliveries), it too will realize it cannot make money in this segment where demand is low, competition is high and margins are negative, it all adds up to THE END at some point. Low demand, high competition, low to negative margins, all add up to a bad finish, and there is nothing Bombardier do about the competition, pricing and demand in a segment airlines have been abandoning since 2006 for larger aircraft and their lower unit costs (CASM), just hard reality in play.
Bombardier is just blind, they see it with their CRJ-1000 (104 passenger) airliner, with just 68 orders (20 questionable) and 48 deliveries as of Sept 30, 2016, its dying, and the company had to write down (impairment charge) of $243 million in late 2015 on the CRJ-1000 aircraft program, due to a lack of orders/backlog, it will be DEAD in 2017 at some point.
Lets take a quick look at the evolution of the Bombardier CRJ (Canadair Regional Jet) product line, and how a stretch of the 1978 Canadair CL-600 Challenger business jet with seating for 10+ VIP’s ended up becoming a 104 passenger regional jet, the disastrous CRJ-1000 airliner, after 4 stretches of the 8 feet and 11 inch (2.69 meters) diameter fuselage (8 feet and 5 inches inside), and as you see below that cross section is very un-competitive to the EJet cross section and height, no matter what they say, I as a former airline executive would NOT take a CRJ over a EJet.
We start with the 1978 Canadair CL-600 Challenger business jet, as the whole CRJ line is based on its Type Certificate, yes a 38 year old aircraft design.
The above is a CL-600 Challenger, 10-12 passenger VIP business jet, with a MTOW of 48,200 lbs and a length of 68 feet and 5 inches (20.85 meters). The aircraft has gone through several changes to engines, avionics and interior with the introduction of the Challenger 601, 604, 605 and now the latest 650, still a 38 year old design but with all the latest bells and whistles, and by the end of 2016, around 1,025 have been delivered since its entry on to the market in 1980, with only 15 deliveries in the first 9 months of 2016).
The above is a CRJ-200, a 50 seat passenger version of the CL-600 Challenger, which incorporated a 19 feet and 5 inch stretch (5.92 meters) of the CL-600 airframe for a overall length of 87 feet and 10 inches (26.77 meters) and 28% longer than the CL-600, with an increase in MTOW to 53,000 lbs. (+9.9% greater MTOW to CL-600).
The 50 passenger CRJ-100 and 200 were very successful in the 1990’s but have now fallen out of favor, but a total of 1,021 CRJ-100’s (226), 200’s (709) and 440’s (86) were ordered, with many still in service, but being retired in the USA very quickly in favor of 76 passenger regional jets.
Embraer delivered 808 competing ERJ-145/140’s.
The above is the $41.4 million CRJ-700, a 66-78 seat passenger version of the CL-600 Challenger, which incorporated a 18 feet and 3 inch stretch (5.53 meters) to the CRJ-200 airframe for an overall length of 106 feet and 1 inch (32.3 meters) and 55% longer than the original CL600 Challenger, with an increase in MTOW to 75,000 lbs (55% greater MTOW to CL-600).
The CRJ-700 did well, but sales have now gone to zero, after 343 deliveries (327 x 701’s and 16 x 705’s), with 9 questionable orders in backlog.
Embraer has 193 orders for the competing E170 with 3 in backlog.
The above is a $46.5 million CRJ-900, a 76-90 passenger version of the CL-600 Challenger, which incorporated a 12 feet and 10 inch stretch (3.9 meters) to the CRJ-700 airframe for an overall length of 118 feet and 11 inches (36.2 meters) and 73% longer than the original CL-600 Challenger, with an increase in MTOW to 84,500 lbs (75% greater MTOW to CL-600).
The CRJ-900 has done very well, it is the only CRJ now being bought (with 19 orders in 2016 with 43 deliveries) and with 31 in backlog as of Sept 30, 2016 and a recent order by CityJet (Ireland) for up to 10 (6+4), so backlog at best is 41 aircraft today. As of September 30, 2016 397 CRJ-900’s were delivered.
Embraer has 525 competing E175’s on order plus 104 in backlog, plus orders for 100 x E175-E2’s, as it has taken over this very important “artificial” (defined by pilot scope clause) market segment, which has to be very worrying for Bombardier, when Embraer is dominating this segment now with its E175, with 90 deliveries in 2016, plus 11 x E190’s and 7 x E195’s.
The above is a $49.5 million CRJ-1000, a 97-104 passenger version of the CL-600 Challenger, which incorporates a 9 feet and 6 inch stretch (2.9 meters) to the CRJ-900 airframe for an overall length of 128 feet and 5 inches (39.1 meters) and 88% longer than the original CL-600 Challenger, with an increase in MTOW to 91,800 (90% greater MTOW to CL-600).
The CRJ-1000 is sadly another BIG loser in the 100 to 150 seat segment, with just 68 orders since 2008 (8 years of sales) and only 48 deliveries and 20 in backlog (all for Air Nostrum and ‘highly’ questionable), and it is a “walking dead” program, that took a $243 million impairment charge in 2015 as its just a loser for Bombardier in the segment I call “black hole” the 100-150 passenger market where many have failed (e.g. BAe146-300, ARJ-100, F-100, B717, A318, B737-600) to e joined surely the CRJ-1000 anytime now, and the BIG billion dollar question, will the CSeries join the list ?
Embraer competes with the E190 in this segment and has 590 orders with 56 in backlog plus 93 orders for the E190-E2.
The 100-150 passenger segment has killed many programs and includes the Airbus A318 (only 80 deliveries) and the Boeing B737-600 (only 69 deliveries) as this segment peaked in 1991 with 330 deliveries and has been in decline for a decade, with only 54 deliveries in 2015 and at best 84 deliveries in 2016, nowhere near the Bombardier forecast of 7,000 over 20 years (350 pear), that is just pure “fantasy”, it even exceeds the peak of 1991, which is NOT going to happen, at best maybe 100 deliveries per year by Bombardier (CS100/300) and Embraer (E195/190-E2).
Even Embraer’s E195 has been struggling in this segment with just 166 orders and 12 in backlog, the worst performing of the EJet line but has a healthy E190-E2 order book for 90, with all E2’s now at 283 orders, close the Bombardier’s CSeries order book of just 320 (NO Republic order for 40-its a PR deferral never to be delivered).
Below Graphs show the sad story of the rise and all of the CRJ programs, note the dying orders, and then the increased deliveries which exceeded the orders by 2:1, as the deliveries have been living off the backlog for a long time with book to bill in the 0.5 range.
The only hope for Bombardier now is that the Embraer E175-E2 and the MRJ presently too big (MTOW wise) to fit into the current pilot labor contracts with US majors airlines that disallows the major carriers from outsourcing regional flying to aircraft with more than 76 passenger seats and a MTOW greater than 86,000 lbs (exceeded by E175-E2 and MRJ) while both can seat more than 76 passengers, but certified MTOW has to come down to 86,000 lbs, thus reducing payload range slightly.
Anyway, at current production of 4.2 CRJ’s per month, current backlog is good to April, 2018, and to keep producing till the end of 2020 (as per 5 year Transformation plan), at least 139 new orders will be needed between now and 2020, at 2.5 per month (the rate of the Q400), they will still need 83 new orders, given only 19 orders were received in 2016 (all CRJ-900’s), and with no new orders for CRj-700 or CRJ-1000, we are no talking only about the CRJ-900 and its only “HOPE” is the US regional market.
Sorry, bad graph to read (Red=CR-1000, Black= CRJ-900, Blue=CRJ-700, Yellow= Total CRJ Orders
Thank you for reading my blog, hope you learned something and keep those comments and questions coming, no one knows everything in this industry.
I just want to be the industry critic to point out the facts behind the headlines, as current media just reports the news, no analysis, no history and someone has to do it, and with my background I can cover airlines, OEM’s, business jets, helicopters and have something useful to say. I am out there still consulting airlines around the world, working with some OEM’s and I follow events like a Hawk, cheers.