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Well today Bombardier Inc. released its 1st half 2017 results, and and its not good, as revenue is down 6.7% to $7.668B on 2016, this company is NOT going to be a $25.0B a year company in 2020 as planned in its 5 year Transformation Plan 2020.
Last year its total revenue was just $16.339B down 18.7% from 2014, and to reach 25.0B in 2020, it means revenue would have to increase by 53% on last year’s revenue, so lets just forget that dream for now, Bombardier revenues are in decline for 3rd straight year, heading in the wrong direction.
How in the hell is BCA and BBA to come up with $15B in revenue in 2020 ? as BBA is to have $9.0B (equal to 125 G7000 ?) or BCA ‘s planned $6.0B (equal to +150 CSeries ?), as that is its product line going forward into the next decade Globals and CSeries.
Let’s start with BCA (Bombardier Commercial Aircraft), which so far this year has revenue of just $1.18B, down 14.4% on 1st half 2016, while just 35 deliveries are down 25.5% versus 47 in 2016, with EBIT loss of $143M so far this year.
Orders, are simply HORRIBLE this year across the board, Q400’s, CRJ’s and CSeries has NO sale in 2017, and only one sale for 2 x CS300’s in the past 15 months (Air Tanzania) ??
The $32.2M list price Q400 so far this year has just 13 x Q400’s (down from 14 1H/2016) delivered, which is a production rate of just 2.16 per month, down 21% on 2016 full year delivery of 33 x Q400’s or 2.75 per month.
Such a low production rate cannot be sustained profitably for too long, they are stretching out there production to prolong the program, as right of June 30, 2017 the Q400 has just 31 orders in backlog, at current production, that is 14.3 months (from end of June/2016) or to September, 2018, with no new orders. The Q400 has just 13 orders this year from Philippine Airlines (7) and Ethiopian Airlines (5) (down from 15 in 1H/2016), so the book to bill ratio is 1.0 at this point.
The CRJ line, is struggling as well with just 15 deliveries so far in 2017, 1 x $41.4M CRJ-700, 11 x $46.5M CRJ900’s and 3 x $49.5M CRJ-1000’s, which equates to a production rate of just 2.50 per month, down 35% on 2016 full year delivery of 45 x CRJ’s or 3.83 per month.
Again, Bombardier is slowing down production to drag it out, as of June 30, 2017 there were 47 orders in backlog (14 are ‘highly’ suspicious CRJ-1000 orders for Air Nostrum, that most in my opinion will not be delivered to the airline or Chorus, which is taking some and leasing them to Air Nostrum). The current rate of production means right now there is 18.8 months of production in backlog, which (from the end of June/2017) means up to January, 2019, with no new orders.
With only 10 x CRJ-900 orders in 1H/2017, all from CityJet of Ireland (a BIG Russian supporter of the Sukhoi SSJ-100-95 RJ), (down from 19 in 1H/2016), the book to bill ratio is 0.67 at this point, meaning its living off it backlog, which the Q400 and CRJ lines have been doing for the past 3 years.
The CSeries still has just a total order book of 360 aircraft (123 x CS100’s and 237 x CS300’s) after 9+ years of sales & marketing, its sad joke indeed. In, fact, its worst than that as 40 x CS300 orders from 2010 for Republic, are a deferred and in all reality will NEVER be delivered to the CPA US regional airline capped at 76 passenger jets, so 320 is the real number but still +20% are highly questionable (Odyssey, BRA, IFC, etc.), but on the books, so its still “official”, for now.
The market for 100-150 passenger aircraft is very soft, and sales will continue to be a struggle, in 2016 only 39 aircraft were delivered in the segment by 4 OEM’s, and Flight Ascend forecasts just 1,343 CSeries deliveries over 20 years (67 per year), so its hard to be an ‘optimist’ for sure.
NO new order in 2017, an just 2 x CS300’s in the past 15 months, its painful to watch. Anyway, 7 aircraft delivered in 1H/2017, (4 x $89.5M CS300’s and 3 x $79.5M CS100’s to Swiss and airBaltic), which bring total deliveries so far to just 14 (8 x CS100’s and 6 x CS300’s), with a backlog of 346. The company hopes to deliver 30-35 this year as planned, but that means 23-28 CSeries over the next 6 months (4.25 per month on average), we shall see.
A little number crunching on the 35 deliveries for far this year (3 x CS100, 4 x CS300, 1 x CRJ-700, 11 x CRJ-900, 3 x CRJ-1000 and 13 x Q400) which generated $1.18B in revenue. Well, when I take published list prices which I quote above on each model, I get a revenue of $1.716B, which is 45.4% higher than actual revenue.
Now, you know where I am going with this, so bare with me, look I get every OEM discounts heavily these days, Bombardier apparently sold Delta on 2016 its CS100’s at $19.6M (+/-72% off) according to Boeing, when it costs $33.2M to build or a loss per unit of $13.6M, for a new margin loss of 69% ? crazy ? or just desperation on the part of Bombardier no one is buying its aircraft ?
When even long time Bombardier customer Wideroe (Norway) selected the Embraer E190-E2 (3 + 12) over the CS100 this February, you know the aircraft is no “game changer” just another 100-150 seater in the segment of ‘doom’ (A318 cancelled after 80 deliveries, B737-600 cancelled after 69 deliveries, CRJ-1000 soon to be cancelled with just 54 deliveries, etc.).
So between my ‘list price’ revenue of $1.716B and Bombardier’s 1H/2017 revenue of $1.18B for the 35 deliveries, I have a ‘delta’ of $536M between list price and actual price, which is 31.2% off list price. Know I now from previous analysis Bombardier has been discounting lately in the 21% to 28% on average for the Q400/CRJ lines, when I use the 21% off for the Q400/CRJ line, I get discount of 50% on the 7 x CSeries delivered to get to the published $1.18B in revenue, makes sense to me Swiss is launch customer, in fact owner Lufthansa has been a launch customer for Bombardier CRJ/Q400 for many years, at fantastic discounts off course.
It is what it is, discounts today are huge and another reason Bombardier cannot play in this arena with Airbus, Boeing and now Russia (MC-21) and China (C919) coming to play as well, and it will be a buyers market with huge discounting, where little arrogant Quebecois boys cannot play and be competitive, just reality settling in now.
Now, to Bombardier Business Aircraft (BBA), which in 1H/2017 had $2.393B in revenue, down 13.8% on 1H/2016, as that segment continues to struggle from light jets now to the ulra-long range business jets.
For the 1H/2017 deliveries are 65 aircraft (just 8 x $11.3M & $13.8M Learjet 70/75′, 21 x $26.6M Challenger 350, 12 x $32.3 Challenger 650/605, 15 x $50.4M & $62.3M Global 5000 & 6000) down from 73 deliveries in 2016 (-11%), and based BCA equipped prices, revenue +/- should be $2.356B, so not too much discounting going on, though Learjets are deeply discounted and have been for some time as time has passed them by and most analyst expect Learjet to be sold off by Bombardier at some point, as without the cancelled Learjet 85, no future for the old Learjets.
As for the Global G7000/8000, I don’t expect it to be a big seller like the G5000/6000’s in 2014 (80 deliveries), that ultra long range market of 13,000+ km needs comfort, and that means cabin space (ft2) and cabin volume (ft3), and with 2,637 f3 (G7000) and 2,236 ft3 (G8000) versus ACJ319neo (5,843 ft2 and 12,500 km range) or BBJ (5,396 ft3 and 12,950 km range, every VIP should be concerned about the space on the G7000/8000 where on 13+ hour flights, there never is enough space.
Till next time, cheers, and thank you as always.
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