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Regional Airlines

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UPDATE: Bombardier Inc. ex-President & CEO, and as of today also ex-Executive Chairman, Pierre Beaudoin is out at least ! and so are 1st Quarter, 2017 financials. In the first 3 months of 2017, Bombardier’s revenue is down to $3.6B (-7.7% on 1Q/2016) continues its revenue slide (down $3.77B or -18.7% since 2014). Aircraft deliveries for 1Q/17 are down to just 44 aircraft (15 Commercial and 29 Business) , Q400 deliveries were 6 with just 26 orders in backlog (13 months), CRJ deliveries were 8 with just 54 orders in backlog (20 months), and only 1 CS300 delivered. Bombardier delivered 29 business jets, more skewed to light jets as the top end market is struggling these days, not good news for the new Global G7000. Meanwhile, only 2 x CS300’s orders in the past 11 months ? the program has a serious problem selling the aircraft, and two, selling above cost at some point is important, no ? Now, Boeing wants US Commerce Dept. to place a $13.4M “price dumping” tariff on the CSeries deal with Delta Air Lines and ban the aircraft from further US sales, meanwhile ATR and Embraer are complaining to the WTO of Canadian “illegal state aid” to Bombardier, criminal bribery investigation under way in Sweden and yet the top 5 executives wanted a 50% increase for an “Exceptional 2016” seriously ? One wonders what “planet” these executives live on ? and where is this “magical” 7,000 deliveries in 20 years in the 100 to 150 passenger market ? This CSeries program is still with just 320 orders (no 40 for Republic, just PR deferral till the end of time) after 9 years ? maybe they got the market positioning all wrong ? What happened to the “game changer” ? and the “dream team” ? that was suppose to sell lots of CSeries ? Those Top 5 executives need to go, 1 down 4 to go ? Lastly, Porter Airlines (Canada) placed a conditional order for 12 x CS100’s and 18 options in April, 2013, show the price offered to Porter and we will all know if they are “price dumping” in the US market or not, easy no ? Behind all the denials they know they are “price dumping” its sadly the only way they know how to sell the CSeries, yup all 340 orders below cost !

READ more on Bombardier on this Blog, just click Bombardier under Categories on the right side of menu.   The 1st Quarter results are out for Bombardier, but the most important news is that Executive Chairman, Pierre Beaudoin is stepping down after numerous problems and Revenue declines. The man I refer to as the “Destroyer” … Continue reading

SUMMARY: A small airline in Thunder Bay, Ontario, North Star Air Ltd. has been bought for $C 31M ($US 23M) by Winnipeg based North West Company (NWC), a large Canadian grocery and retail company with +218 stores, many in remote and isolated communities across Canada’s North. The driver of this deal was to control its distribution by having its own cargo airline, and not being dependent on what is basically a air cargo monopoly by Calm Air in the Manitoba, Nunavut and Kivalliq regions, where NWC has many stores, and where the First Nations communities are totally dependent on aircraft for all their local needs for most of the year. The acquisition raises the problem of a lack of competition in many parts of the North, where communities and suppliers have all but one choice of airline in and out of many communities, which in many cases allows for high margin “monopoly” pricing. Canada has no Essential Air Service (EAS) like the USA, which subsidizes scheduled air services to 150 markets of which 44 are in remote parts of Alaska with single engine turboprops like the CE-208B to SF340’s and CRJ-200’s at a cost of $250M a year (President Trump looking to cut that). Canadian passengers and suppliers in the North have no choice but to pay the very high fares and freight rates demanded by air operators. Time for a new fresh look at affordable air access in the North ? if we are to develop the North as Ottawa says, then we cannot burden and punish the people there with high fares and freight rates, that make life their very expensive as everything in most communities goes by air, from groceries, lumber to even fuel for electric generators.

It has been pretty quite on the Canadian airline mergers and acquisition front since the late June, 2016 acquisition of Transwest Airlines (Prince Albert, Saskatchewan) by local rival West Wind Aviation (Saskatoon, Saskatchewan). That deal created another Provincial regional airline monopoly, just as EIC (Exchange Income Corporation) has in neighboring Manitoba, where it now owns … Continue reading

SUMMARY: Bombardier is looking into upgrading its CRJ line, which after +1,864 deliveries is now down to around +/-58 orders at best in backlog or 14 months of current production (April, 2018). The sad reality is that the CRJ is no longer very competitive against the current Embraer E175 and the new E175/190-E2’s will make the CRJ obsolete. After having upgraded the CRJ cabins in 2016, now the focus is on possible new engine (unknown at this time), but that is an expensive upgrade versus the current GE CF34 engines, and adds weight, which for a long fuselage aircraft like the 119 foot long CRJ-900, with rear mounted engines is not good for C of G issues. With only 19 CRJ orders in 2016, Bombardier has been milking and living off its backlog, but is there any life for the CRJ really ? even after +/-30% discounts off list price, sales are not impressive anymore. The CRJ is a 1970’s Canadair CL-600 Challenger (the Type Certificate for all CRJ’s), stretched 4 times with a tight cabin width of just 8 feet and 5 inches (2.69 meters) that has been become a 50 then 70 then 85 and finally 104 passenger airliner, while Embraer designed and built the EJets from scratch, and that is now paying off got Embraer and blowing up in Bombardier’s face. At a time when the CSeries is still struggling for orders, Bombardier Aerospace needs all of its products to sell and sell, yet the Learjets, Challenger 650, Global G5000/6000, Q400 and CRJ are sadly in the final decline phase of their product life cycle as new competing products are coming online across all segments..

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 … Continue reading

SUMMARY: Lots of talk about Bombardier’s Turnaround, 14,500 layoff announcements this year, or 21,450 in the past 3 years. The Global G7000 flew for the first time and Bombardier expects big things from it to boost Bombardier’s bottom line along with the struggling CSeries, which today still has only 320 orders (NO 40 x CS300’s for Republic Airways, just PR not wanting to reduce the meager order book) and still +/- 86 “questionable” orders (representing 26% of the current 320 orders). Lots of effort in reducing labor costs, yet no one is noticing that the top line (revenue) at Aerospace is a coming disaster, and unsustainable with an old product line (1970’s Learjets and Canadair CL-600/Challenger 650, plus the Global G5000/6000) that is facing new and better competition. The CRJ line has no more than 48 orders in backlog, only 18 orders this year (50% from Canada) good for 12 months of production (February, 2018) with no new orders. The Q400 is down to around 34 orders in backlog and only 25 orders this year (50% also from Canada), good for 14 months (March, 2018) with no new orders. The 2020 Turnaround Plan calls for Aerospace to generate $15 billion in revenue (60% of total revenue planned of $25 billion), with just 2 products ? The Plan requires $5 billion from Commercial aircraft, which by 2020 means only the CSeries (CS100/CS300) is left, and that will require at least 140 deliveries at the current highly competitive low prices to hit the “target”, really ? (2020 production is planned at 90-120 aircraft today). Meanwhile, Business jets are to generate $10 billion by 2020, and that will fall on the $75 million Global G7000 (NO Learjets, Challenger 650 and Global G5000/6000’s by 2020) and that means 133+ G7000 deliveries to hit their “target” ? seriously ? has anyone looked at single aisle ACJ and BBJ sales for the past 15 years ? (+/- 15 a year at best). Canada is providing “state aid” (aka taxpayers money) to Bombardier again ($2.5 billion in 2016 from Quebec), in fact of the $3.39 billion of cash on hand as of Sept 30, 2016, $2.5 billion (71% of cash on hand) came from the Government of Quebec, soon another $1.0 billion will most likely come from Ottawa (PM is from Quebec, and they always “help” Bombardier), and then Quebec and Ottawa will be 66.7% owners of the CSeries program (CSALP – CSeries Aircraft Limited Partnership, a separate company, spun off from Bombardier ??). How did we the Canadian taxpayers become “owners” again of a commercial aircraft program that NO commercial aircraft OEM wanted in 2015 when it was for sale for “a song” ? Especially after we the Canadian taxpayers “SOLD” Bombardier, our government owned Canadair in 1986 (for $120 million) and government owned de Havilland in 1992 (for $100 million) with the rights to the Challenger business jet, later stretched into the CRJ line, and the DHC-8 turboprop airliner later stretched into the DHC-8-Q400 line. Meanwhile, Embraer is going to the WTO again to complain about Bombardier’s “illegal state aid”, while Boeing may go to President-elect Donald Trump and get import tariffs applied on the CSeries and then ? Oh, it is going to be an interesting 2017 for sure, stay tuned to the never ending Bombardier/Quebec/Ottawa “gong show”, as they find new ways to screw Canadian taxpayers to keep Bombardier alive at any cost.

Bombardier has now delivered its first CS100 to Swiss and CS300 to airBaltic and talks confidently of a turnaround next year and a bright future in 2020 as per its 5 year Transformation Plan, that should see company become a $US 25 billion a year company by the end of 2020, with Aerospace to provide … Continue reading

UPDATE: Transwest Air is now a fully owned subsidiary of WestWind Aviation, now there is only 1 large regional airline in Saskatchewan, and 80% owned by 2 First Nations economic development corporations (EDC’s). These First Nations EDC’s now pretty much own ALL airlines in Canada’s north, usually through Aboriginal economic development corporations (EDC’s), with a few family and corporate hold outs in the Northwest Territories, especially at Yellowknife (Summit Air, Discovery Air-Air Tindi/Great Slave Helicopters, Buffalo Airways) and in Fort Smith Northwestern Air Lease Ltd. Is this a good thing or a bad thing where First Nations own all air services in Canada’s north ? Is this the only viable exit strategy available in the north or are there “pressures” to sell to local First Nations ? and Can the EDC’s create long term financially sustainable airlines ? First Air (Makivik Corp.) and Canadian North (IDA), have tried to merge several times but each time it has failed, even though it makes lots of economic sense to do it, or is more cooperation among the EDC’s needed, like the recent cooperation between Air North and First Air ?

As to my blog of August 21, 2016, the Transwest Air deal is done and it is now a fully owned subsidiary of WestWind Aviation, which itself is owned 55% by the Athabasca Basin Development (ABD) and 25% owned Prince Albert Development Corporation (PADC), in short 80% First Nation owned with 20% owned by the … Continue reading

UPDATE: Canadian regional airline consolidation continues as the once fragmented industry starts to consolidate around a single provincial operator. After 11 months under Canada’s CCAA (+/- Chapter 11 bankruptcy/reorganization), Quebec based regional airline, Pascan Aviation is acquired by 2 senior executives in a management buyout (MBO). Meanwhile Saskatchewan based WestWind Aviation, fresh from its acquisition of Osprey Wings last November, looks to takeover its main local competitor, Saab 340 operator Transwest Air, itself the product of two old local airlines and their pioneers (Athabasca Airways of Floyd Glass and La Ronge Aviation of Pat Campling) coming together in 2000, leaving WestWind Aviation a monopoly in Saskatchewan, much like Manitoba with Perimeter Airlines, Calm Air, Keewatin Air and Bearskin Airlines, all under one ownership. Times are changing for regional airlines in Canada, as the second generation of airline owners retire or sell of the businesses that their fathers and mothers built from scratch, usually with nothing more than a single Cessna 180 aircraft. Sad to see the old names disappear, it is the “circle of life”, but the legacies of our Canadian aviation pioneers will always remain with us.

UPDATE: As I wrote this, I found out that WestWind Aviation (80% First Nation owned) has bought Transwest Air for an undisclosed amount, now only 1 airline exists in Saskatchewan, like it or not.   This is my follow up to the January 5, 2016 article “Consolidation in the Canadian Regional Airline Industry”, as the … Continue reading

SUMMARY: Once infamous Wasaya Airways is out of bankruptcy proceedings after owing $35 million, and now looking to become the 1st commercial operator of the $US +/- 28 million Airbus C295W aircraft to serve the 12 First Nations of Northern Ontario that own 100% of the airline. Under new President and CEO Michael Rodyniuk, the once poorly run airline finally has potentially a ” bright” future ahead. But what does a Northern Ontario First Nations airline need 5 x C295W’s costing $US +/- 140 million ? there are much cheaper options, especially when cargo does not care what aircraft it flies in. Recent addition to Wasaya Airways Board is Stephen Smith, the once high flying airline executive at Air Toronto, WestJet and Air Canada, a much needed boost to the Board that oversaw lots of mismanagement and chaos over the past 10+ years. Why would any regional airline become the first and only commercial buyer of any aircraft ? What about support for a high utilization operation ? what about resale value one day ? what about certification ? the price ? military maintenance program ? especially when you can get good used ATR-72 freighters ? and when will Canada stop operating 40+ year old B737-200’s and HS 748’s ? as for a modern country we operate older aircraft fleets than many third world nations. Lastly, with only 9 x HS 748’s left in Canada and 15 at best in the world, it will be sad to see the old workhorse fade away after 55 years after production began.

In June, Airbus demonstrated its C295W transport plane to Northern Ontario based First Nation owned Wasaya Airways (“it is bright” in oji-cree), which comes just as the airline gets creditors approval for its $C 35 million debt restructuring plan, giving just 10% of unsecured debt value to its long list of creditors. The airline has … Continue reading

PRESENTATION: Finding the elusive sustainable airline business model in the Caribbean, a large graveyard for regional airlines for decades. The region has a great deal of potential, but government taxes (up to 100% of net ticket price) play havoc with passenger demand, poor intra regional connectivity and government protection for state subsidized airlines (LIAT, Caribbean Airlines, Bahamasair, Cayman Airways) limits any real competition. Time for real Open Skies, allowing freedom to serve any route by appropriately licensed carrier, and governments to get out of the airline business, and stop taxing airline tickets to the point where tourist traffic is 1/3 of what it was 10 years ago, the whole idea is to get tourist to the islands and then tax them, rather than tax them to death on airline tickets as they then chose other destinations to travel to, its all backwards. LIAT flies 35% of its routes on money losing “social routes” with ATR-72/42’s, time to get small regionals with 15-19 passenger turboprops to compliment and even replace LIAT services on money losing routes, frees up ATR capacity for money making routes and reduces or eliminates loses on “social routes”. Time for a more intelligent approach on air transport and air connectivity in the region, where tourism is still struggling after 8 years, and it is tourism that drives the economies in the Caribbean.

I attended the Carib Avia’s 1st annual Caribbean Aviation Meetup between June 14-16, 2016 in Roseau the capital city of the beautiful Commonwealth of Dominica, and attached is the 2 hour presentation from the Conference. The Presentation covers airlines that have gone bust, regional aircraft, multi-government owned airlines, airline business models, regional airline valuations to … Continue reading

UPDATE: Sukhoi’s SSJ100 is soon to enter service with Ireland’s CityJet, as that airline is sold by Intro Aviation to it’s pro-Russian CEO Pat Byrne and his “investors” . The airline will be leasing 21 of the aircraft and supporting the Russian Military Industrial Complex, as Sukhoi and its parent United Aircraft Corporation are under EU/US economic sanctions. At a time when the “Cold War” is back on in Europe it is repulsive for many Europeans as maybe the Irish don’t care or know what is happening in Eastern Europe and the Baltics between NATO and Russia, but most people who are in the know are nauseated by Russia’s never changing anti-western propaganda, the same narrative of the 1950’s to the 1980’s, just different faces, we are the western “imperialists”, the west is bad and Russia is good propaganda, and do you want to fly on a Russian airliner ? Say NYET to CityJet and its Russian jets and any other airline that wants to support Russia’s military by wet leasing the aircraft from CityJet. The program is a joke, this month its 5 years for the SS100 program, 102 delivered and only 66 as of these are in service today, and 36 sitting around waiting for a ‘home’, NOT GOOD, they are new aircraft, they need to fly not sit. The Russians need the SSJ100 to be a western success, to open doors to their 165+ passenger single aisle Irkut MC-21 which is due in 4 years. The “political risk” associated with operating the SSJ100 is huge given today’s political situation, and why any airline executive would risk the entire future of his airline on ‘political events’ is beyond my comprehension, it must be about money, as it cannot be about a long term sustainable business model with a “game changer”, which it surely is not, in fact it is outdated today as Embraer E2’s , MRJ’s and CS100’s are greatly superior in economics and passenger comfort. BUT the money is huge today for anyone wanting a Sukhoi ! as Russia is desperate, as the planned 45 units for production in 2015 became only 17 due to “low demand”.

Russia’s United Aircraft Corporation (UAC) subsidiary, Sukhoi Civil Aircraft (SCAC) is celebrating its its 5th anniversary for the Sukhoi SuperJet 100, and it sure has not been a smooth ride for the Russians. After 5 years (as of April, 2016) there are only 66 aircraft in out of 102 produced, leaving 36 aircraft in storage … Continue reading

UPDATE: VLM Airlines says NYET to the once planned 14 x Russian Sukhoi SSJ-100’s SuperJet’s, due to potential certification and geopolitical risks, which I have been talking about for some time. It took a new CEO Hamish Davidson to see things clearly, the SSJ-100 program is in BIG trouble, 102 manufactured and 35+ “white tails” sitting and waiting in the cold for a buyer or lessee, basically any airline with a pulse and in desperate need of 80-90 seat regional jets. The aircraft are going to Russian airlines off course and then to very financially weak and desperate airlines outside of Russia like Thailand’s Kan Air, which recently was one of 4 airlines in Thailand identified by it’s CAA as having safety concerns due to high debt loads. While another SSJ-100 customer, Bek Air (Kazakstan) sues it’s CAA because it does not want to undertake a compulsory IOSA (IATA Operational Safety Audit) ? Other than InterJet (Mexico) the foreign customers of the SSJ-100 have been very weak airlines most have gone bankrupt operating the SSJ100 or just waiting for the SSJ100 to arrive, not sure which is worst, either way, financial condition of the operating carrier is obviously not a major criteria at SuperJet International. The list of failed Sukhoi “customers” is pretty long for a 5 year old program, from Armavia (Armenia), Moskovia (Russia), Air Armenia, Sky Aviation (Indonesia), Lao Central Airlines (Laos) Kartika Airlines (Indonesia), while Blue Panorama (Italy) just cancelled it’s order. Airline executives should not take big risks with their airlines, the SSJ100 has many risks, political, economical, customer perception to operational. Finally, Russia’s Prime Minister Medvedev “wonders whether it is 2016 or 1962 ?” as the “New Cold War” is on according to him, meanwhile many Europeans wonder if it is not 1938-1941 all over again with 3 internationally recognized independent countries (Georgia, Moldova and Ukraine) now having had part of their territory annexed by force in the past 20 years by Russia, who is next ? Estonia ? Latvia ? Lithuania ? it is time for tougher economic sanctions on Russia that include Sukhoi and it’s commercial aircraft program, the SSJ-100, wake up Europe, because it is 1938 all over again, will history repeat itself ?

In a smart move, Begium’s VLM Airlines is backing away from its planned acquisition of 14 x Sukhoi SSJ-100-95LR Superjets (4 lease options + 10 purchase rights), due to certification concerns and geopolitical issues between the West and Russia. This is what I have been talking about in my previous articles on the SSJ-100, the … Continue reading

UPDATE: The French national airline, Air France is actually talking to Irish carrier CityJet (owned by Intro Aviation) about wet leasing it’s soon to arrive Russian made United Aircraft Corporation’s (UAC) Sukhoi SSJ-100-95 SuperJet, UAC is under EU/US sanctions as part of Russia’s military industrial complex. The strange thing is that after making headlines with it’s risky move to operate 25 x SSJ-100’s, CityJet will conveniently be sold before the first Sukhoi ever arrives, convenient for the seller and risky as hell for the buyer, this surely raises many “RED” flags ! This should create and outrage by many Europeans, as it benefits Russia’s emerging commercial aviation industry which seeks to compete with Airbus, and at a time when Russia and NATO relations are at their worst, and many EU nationals are suffering from the economic sanctions against Russia, as Moscow has retaliated back, especially against EU agricultural products. To have sanctions in place against Russia, while NATO is increasing it’s military budget and preparedness is a slap in the face for all EU nationals. The Dutch lost 189 nationals in the downing of MH17 in 2014, and the criminal investigation will be completed soon, and all evidence points to a Russian fired BUK within territory held by Russian supported separatist. This will require further sanctions, that must include the Russian commercial aviation industry. The Dutch and all other peace loving Europeans need to boycott and protest against Russian airliners in service with CityJet, Air France, Sky Greenland, VLM Airlines and any other western European operator. The SSJ100 is Putin’s ‘baby’ to crack open the western market for the Russian civilian aerospace industry, which till now had NOTHING to offer the west (except very good helicopters). The success of the new Irkut MC-21 greatly depends on how well the SSJ-100 opens up the western market, so far it is a disaster, +5 years 101 produced, 64 in service, 37 ‘white tails’ waiting for a home, 45 were to be built in 2015, only 17 were built, 56 were to be built in 2016 but only 20 will now be built yet 31 will be delivered (“white tails”). It is very cheap, they can’t move their product so they heavily discount it in price and state supported leases, but life cycle costs are more than just capital costs. So desperate for sales, that Russian airlines are ‘asked”Finmeccanica (Italy) through it’s Alenia Aermacchi subsidiary is obviously not happy with its 51% stake in SuperJet International the JV with Sukhoi as profitability outlook looks very bleak indeed. Time for Europeans to stand up to Russia, the annexation of Crimea was it’s 4th occupation of another sovereign state, eastern Ukraine is a mess, and short of war we need to send a message to Russia we don’t like it’s aggression, and time to say NYET to Russian products like the Sukhoi SSJ100.

Air France is negotiating with CityJet (Ireland) to wet lease several Russian Sukhoi SSJ-100’s come this summer, I find this totally unacceptable, and so should all citizens of the EU, I would urge Air France NOT to wet lease Sukhoi SSJ-100s from CityJet as it is part of the Russian Military Industrial Complex, that sees … Continue reading

SUMMARY: For the 3rd time in 32 years the Dornier Seastar amphibian is back (1st flight 1984), this time as Dornier Seawings GmbH (Germany), in a joint venture with 2 Chinese state owned companies in Wuxi, China, where the 2nd production line will be (really a 2nd line ?). After bailing out and failing to manufacture the aircraft and employ 250+ workers in Saint Jean-sur-Richelieu, Quebec as promised 4+ years ago when it was Dornier Seaplane Company of Florida, under CEO Joe Walker (ex-Adam Aircraft founder), not sure who takes the program seriously today, but the Chinese love to buy and bring home out of production aircraft, that then disappear into what I call the “Black Hole” and are never seen again. I don’t believe that much has has changed on the aircraft since I was Marketing Manager for Dornier Seastar GmbH in 1990-1991, except the 5 bladed prop versus the old 4 bladed prop, but have to give credit to Conrado Dornier for not giving up on his dream. There is a big market out there for regional seaplanes/amphibians but no aircraft, everyone makes do with costly, heavy, slow and inefficient land planes dragging big floats through the air. There has to be a better way, I have worked on several true amphibians like the Frakes G73T Turbo Mallard (Mallard Aircraft is looking for investors today) and the HU-16B/G-111, TPE-331-14 conversion, all good and usable aircraft but old designs. Diamond Aircraft (Canada) is going to build the composite airframe for Dornier, hopefully with newer composite material, and it is a boost to a Canadian OEM that has struggled since 2008 to regain it’s market position of 2007 when it delivered 471 aircraft and revenue of $185 million. Today, it’s output and revenue is +/-50% of what it did 8 years ago, it is another Canadian aircraft manufacturer trying to regain a lost market position, as it’s single engine jet VLJ, the D-JET program diverted money and attention from its core GA market, sounds familiar ? and I hear rumors that Wangfen, a Chinese company, is looking to buy Diamond Aircraft (Canada) ? Anyway, I look forward to one day seeing new amphibians that will fill a void that has not been filled since the days of flying boats, the market today is right for a revival, the Russian Beriev Be-200 has so much potential, but the Russians have NO idea how to sell a “concept” before you try and sell a “product”, that was Dornier Seastar’s problem back in 1991 when it stopped development of the Seastar, hope they have learned something the past 25 years that will make it a success this 3rd time around (3rd time around a charm ? or 3 strikes you’re out ?), we shall see.

  I read with great interest the latest news on the German 14 seat Dornier Seastar CD2 amphibious aircraft being built by Canadian based Diamond Aircraft for German based Dornier Seawings GmbH, as I was a young Marketing Manager for the program in 1990-1991 before it went it into liquidation after receiving German LBA VFR … Continue reading

UPDATE: The national airline of Slovenia, Adria Airways has been sold for a mere $US 1.2 million, the buyer is an unknown German/Luxembourg company, 4K Invest that has a nice web page but absolutely no information about the company, it’s executives or past deals. It’s one of many recent “funny” deals going on in Europe’s airline industry. We had a Sukhoi “agent” invest into airBaltic looking to sell SSJ-100 regional jets, we have Ireland’s City Jet buying up to 25 x SSJ-100’s the first in Western Europe and very risky for any airline these days, and yet as quickly as the ink was dry on the Sukhoi deal, the owner of City Jet, Germany based Intro Aviation (aka “turnaround specialist”) is negotiating to sell the airline and bail out before any SSJ-100 operations begins ? does that seem odd ? To go through all the “trouble” of putting in a new Russian airliner that no one has bought in Western Europe. They praise the SSJ “game changer” as if they found the holy grail, and then sell the airline once a SSJ deal is done ? It shows that they do NOT have confidence in the long term success of the SSJ’s and City Jet. Who is the new buyer ? well apparently they are new to the airline business but not aviation. I wonder if they realize what they are getting into ? or is it the Russians coming through the back door ? it is all possible these days. Intro Aviation once was known for turning around troubled airlines, now it has lost it’s touch as on top of City Jet’s loses it could not turn around it’s own InterSky (Austria) DHC8/ATR-72 operation either, and tried to sell it in September, but no takers, so it shut it down in November due to a debt of EUR 5.0 million ?, while it also sold money losing VLM Airline in 2014 in a MBO (management buy out) and surprise and behold, it wanted to buy/lease 12 x SSJ0100’s right away (makes one wonder who funded the MBO ?) , seems SSJ’s orders follow the company. Intro Aviation was also one of the 3 German companies in the running to buy Adria Airways, which is a perfect target for SSJ-100 sales as it operates 7 x CRJ700/900’s today, and surely had it won, SSJ’s would be flying in Adria Airways livery in 2016, and maybe still will given that so little was paid and so little is known about K4 Invest. Russia’s President recently declared NATO as major security threat, and therefore Western European airlines should NOT be buying Russian airliners or leasing them, as they are built by the Russian military complex, Sukhoi is a big Russian arms manufacturer and is currently on the EU/US economic sanctions list, time to put the SS-100 SuperJet on that list as well. We cannot support the Russian arms industry and Europeans should not buying, leasing or flying on Russian airliners (basically that was the Latvian Government’s addition to airBaltic’s shareholders agreement in November, to stop a “undesirable” new investor form making a SSJ-100 deal going forward).When Putin thinks we are the enemy and talks of the possibility of using tactical nuclear weapons in a limited engagement we have no choice but to say NYET to Russian aircraft. “Beware of false prophets, who come to you in the sheep’s clothing, but inwardly are ravenous wolves” (Matthew 7:15), as the Russians are doing everything and anything possible to sell the poor selling SSJ100 (40+/- current sitting “white tails”) to the West, if it fails, then the Irkut MC-21 will fail as well, and for Airbus, Boeing, Comac and Bombardier and the West, that is a good thing.

The Slovenian Government approved a capital injection plan of $US 3.3 million for national flag carrier, Adria Airways and simultaneously sold the airline to German investment group, 4K Invest (www.4k.ag), which is to inject only $1.1 million for the 91.58% owned by the government and pay Adria Airways another $US 100,000 ? The Slovenian Government … Continue reading

SUMMARY: Consolidation in the Canadian regional airline industry is slower than I expected, but recent acquisitions by West Wind Aviation of Osprey Wings and Harbour Air (aka “World’s Largest Seaplane Airline”) acquisition of Salt Spring Air on top of EIC acquiring Provincial Aerospace and Chorus Aviation acquiring Voyageur Airways earlier in 2015 gives me some hope for more mergers and acquisitions (M&A) activity in this sector over the next 1-3 years. In fact, Harbour Air itself has sold 49% of it’s equity to a Chinese investor in 2015, and is now planning to enter the highly questionable Chinese seaplane market , just as it solidifies it’s dominant market position in and around the Vancouver area having also acquired Whistler Air (in 2012) and West Coast Air (in 2010), and then divested itself off Prince Rupert based North Pacific Seaplanes (in 2013). There are 6 privately owned Canadian regional airlines that could be in play in the next 2-3 years, as several airlines are well into their 2nd generation of management by owners and most do not have a 3rd generation waiting to take control and few are actually growing and basically stuck in their traditional market. Publicly owned Exchange Income Corporation (EIC) with 5 airlines now has shown that you can make money with regional airlines as long as you have good management, a good market position/niche and financing behind you. The industry is changing, in the north, most airlines are now First Nation owned and the remaining privately owned airlines will find eager investors if they truly want to sell and are prepared for suitors before they need a buyer, as most small airlines are unprepared to generate interest with potential buyers, as they don’t even know how to value their business’s worth, what are its attributes and how to attract a broader pool of investors willing to pay more for the company. Last, I will discuss the growth of seaplane airlines around the world and the need for new aircraft beyond just old landplanes with bulky and heavy floats attached, for the industry to really grow.

I have previously discussed the Canadian regional airline market, and that consolidation is coming as family run airlines are looking to sell their airlines, as witnessed by Exchange Income Corporation (EIC) of Winnipeg (TSX:EIF), which has bought 5 Canadian private family regional airlines in the past 12 years, and surely eyeing more: Perimeter Aviation in … 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

UPDATE: What is the future for Porter Airlines without Bombardier CS100 jets out of CYTZ ? and Quebec’s new ownership of the Bombardier CSeries, will Ontario jobs go to Quebec ? Last week the Canadian Federal Government ruled that it will not change the ban on jet operation at Toronto’s Billy Bishop Toronto Island Airport (CYTZ), which leaves Porter Airlines in “limbo” about its future, as it has been in a “holding pattern” for 4 years now with 26 x Q400’s waiting to see what happens around it as Chorus (Air Canada’s CPA partner) and WestJet’s Encore, both Q400 operators grew their fleets and and are expanding their operations network in Eastern Canada. Is their a sustainable business model for Porter Airlines today ? The CSeries order was a ruze to get investors excited about another IPO for Porter Airlines, since the failed attempt in 2010, but it was always a questionable strategic move and now without the jets, and little growth in the past 4 years, an IPO now will NOT generate much interest from investors in an airline that has been stagnate and basically hit a “wall” in growth potential. I am sure the investors who forked out C$ 750 million for the CYTZ passenger terminal this past January in the “hope” the political decision will go in favor of lifting the jet band, are greatly disappointed as “hope” for a bright future at CYTZ is now greatly diminished, like the value of the terminal building and Porter’s debt thanks to the extremely generous price for the terminal (in the 2010 IPO documents it was valued at around $58 million ?). Meanwhile Chorus Aviation (Jazz) has a newly created position of VP for Strategic Investments and Mergers/Acquisitions, most likely looking to duplicate the Voyageur Airways acquisition to have low cost operators around Canada, and maybe Porter Airlines ? or go international though their PLUNA adventure in Uruguay was a disaster a few years back. Will Bombardier pull another Cartierville Airport (CYCV) deal (part of Canadair and then sold for a hefty profit, now a golf course and housing development) and sell Downsview Airport (CYZD) to developers and move everything to Quebec while pocketing $C 1.0+ billion from real estate developers ? with at best 25 months of Q400 and only 15 months of CRJ production in the backlog, be sure that all options are on the table at Bombardier today, as the Q400 and CRJ brands are in their final inning (less then 140 in backlog, and few new orders, in fact so far in 2015 only 7 new CRJ-900’s have been ordered vs 140+ Embraer regional jets), and lots of Q400 and surely CRJ work will soon go to Mexico before they stop the production line.

Porter Airlines, which just celebrated its 9th anniversary on October 22nd, has just receives the bad news from the new Liberal Government in Ottawa, that they will NOT re-open the tri-partite agreements between the City of Toronto, Toronto Port Authority and the Federal Government, which required unanimous consent to lift the current ban on jets … Continue reading

UPDATE: The end of Estonian Air, and airBaltic’s new capital and it’s “undesirable” and contentious new investor and Russia’s SSJ-100 SuperJet desperate and murky measures to sell into the Western European market: As predicted along time ago, Estonian Air will shut down its operation tomorrow November 8, 2015 after today’s EU Commission order to the Estonian Government to recover the Euro 85 million ($US 92 million) in “illegal” state aid given to the state owned airline the past 5 years. This is the 2nd airline this year (Cyprus Airways back in January was forced into liquidation) that had to close down after the EU ruled that the airlines received state aid beyond the “one time, last time” guidelines for restructuring aid. Estonian Air was a cash burning operation since 2010, going through Euro 87.6 million ($US 95 million) in 5 years, with a current fleet of just 3 x CRJ-900’s and 2 x CRJ-700’s, an inept underachiever for 5 years that even according to the EU Commission, did NOT have a credible restructuring plan that ensured it will not be going back to the trough of public taxpayers money to keep flying. The airline had NO sustainable business plan, other than “white label” flying (ACMI operations) for third party airlines, which are not a long term sustainable business. Realistically, Estonia with only 1.3 million people is a small country and aviation market (only 44nm from Helsinki, a big northern hub) and Europe’s 51 independent countries cannot ALL have their own national airlines, it is just not economically viable, and state aid is NOT an option, it distorts competition against private airlines. Malev’s closure in 2012 showed that when the home airline does close down, new airlines and routes are picked very quickly by other airlines. BUT the stubborn Estonians already have Plan B in place for weeks, the same day Estonian Air shuts down, Nordic Aviation starts up and ready to use Euro 40.7 million of taxpayers money and Adria Airways AOC and throw it all away again a few years down the road, as some people will just never learn from their mistakes ! Meanwhile next door in Latvia, the state owned airline, airBaltic is about to get a Euro 80 million ($US 87 million) state cash injection to shore up its negative Euro -75 million ($US -82 million) shareholder equity so it can borrow money to finance $US 1.3 billion for the 12 ordered and 7 optioned Bombardier CS300’s, again the EU Commission will have to investigate as this is state aid to bolster a national airline, and it does affect competition. Also again there is some ‘funny’ stuff going within the airline and government has a dubious new German investor (Ralf-Dieter Montag-Girmes), very close to the Russians and their aircraft industry, buys 20% of airBaltic for Euro 52 million (US$ 57 million) valuing the little airline at a ridiculous $US 285 million, and he has been called the “least bad option” and a “undesirable” investor with “potential security risks” by the recently fired Latvian Transport Minister, Mr. Matiss. The Russians are quietly targeting airlines like airBaltic, VLM, City Jet, Greenland Express, Adria Airways, etc. for the Sukhoi SSJ-100 SuperJets by buying into these airlines through intermediaries, investing in them or management buyouts or going to bed with their existing owners or investors as billions of dollars are going into the SSJ-100 program and its ultimate success lies in breaking into the western commercial aircraft market, and it must open the door for the Irkut MC-21 narrowbody airliner due in 5 years time as well. Russia it is ready to do ALL it can, huge lease and price reductions to bribes or buying “influence” in small European airlines to place its SSJ-100’s, which has had 7 airlines go bankrupt while 8 customers which ordered 77 SSJ-100’s with 29 options have not been heard from in a long time, its all murky with the Russians, just beware !

I have repeatedly said that Estonian Air will become the next European airline forced to shut down its operation because the airline repeatedly benefited from illegal state aid for its existence. (READ BLOG of JUNE 17, 2015) Well today, November 7, 2015 the European Commission ordered Estonia to recover the state aid given to Estonian Air … Continue reading

UPDATE: Latvia’s 98% government owned airline, airBaltic will review an offer from a unknown “Chinese” investor for 49% of the airline on October 20th (only 5 weeks after China’s CEFC buys 10% of Czech Republic’s Travel Service increasing to 49% shortly and with it gains 34% of Czech Airlines, which is also 44% owned by Korean Air), the Chinese are coming to invest in European aviation, a “white knight”, though NOT on par with Etihad, but better than nothing, surely 51 European countries CANNOT all have a national airline), but for some “lucky” European airlines (Hainan Airlines owns 48% of Aigle Azur and looking to buy minority in Air Europa soon, while HCNA owns 35% of Cargolux after Qatar Airways bailed out) it has worked. This comes at a crucial time for tiny airBaltic, which is sadly the launch customer for Bombardier’s CSeries, with the first aircraft due September, 2016 (11 months away), yet the barely profitable airline does not have the money or ability to finance the pre-delivery payments ? With a negative shareholder equity value after losing Euro 190 million since 2010 the airline needs the cash investment to be able to pay for and put into service the 13 + 7 optioned CS300’s worth $US1.45 billion at list (realistically $US 900+/- million at best). This is very sad, this tiny airline (25 aircraft) should never have been selected to be a launch customer for a new commercial airliner, too small, barely profitable, operating old B737’s, no equity, no ability to finance anything and far away in the Baltics with heavy competition from low cost carriers (LCC) and even a EU airline supported by state have taken their toll on local carriers, with many having gone bust or are just hanging on (e.g. Estonian Air which is most likely about to be declared bankrupt when the EU comes out and rules on a EUR 40.7 million state “loan” as illegal, and like Malev, Cyprus Airways, Olympic Airways, it will have to be declared bankrupt, sad but they were cheating other airlines of free competition). A long term sustainable business model seems elusive in the Baltic region, though airBaltic just may have the space and investment to make it happen, in time. It sadly shows the lack of quality in Bombardier’s CSeries order book which desperately also lacks quantity (“firm’ 243, “realistic ” 140), and I am seeing another major screw up, like the Sukhoi SSJ-100 launch customer Armavia of Armenia ? (Not Russia’s flag carrier Aeroflot but Armavia ?), which quickly went bust but there were few takers in Russia for the aircraft when it came out, only until Moscow ‘ordered’ its airlines to use them. Well again, Bombardier has to “hope” for another good outcome next week, otherwise its CS300 launch customer is going to be a problem, the last thing Bombardier needs now is another problem ! Lastly, airBaltic also wants assurances that Bombardier will still be supplying and building the CSeries aircraft in five years time ! after the Airbus ‘fiasco’ now everyone is nervous about the program from existing customers, prospects, employees to investors, and in this environment of “mistrust” how can you realistically sell more aircraft ?

The direction of CS300 launch customer airBaltic ( 8 x B737-300, 5 x B737-500 and 12 x Q400’s) will be decided on October 20th when the Latvian government (98% owner of the airline) review a bid for 49% of the airline from a possible Chinese buyer and there was also interest from a German investor … Continue reading

SUMMARY: Today the Dutch Safety Board came out with its investigation of the MH17 crash that killed 298 on board, mostly Dutch nationals and yes it was a SA-11 BUK that brought it down, most likely by Russian supported separatists in Eastern Ukraine. At the same time, German owned (Intro Aviation) and Irish based regional airline City Jet announces it will be the first ‘western’ European airline to operate the Russian Sukhoi SSJ-100 Superjet with a lease for 15 plus another 10 options starting next year. Very insensitive timing and a decision code sharing partners Air France and especially Dutch KLM will strongly object to. Normally no one buys anything “Made in Russia” ! they have no products of value to the west, so why buy or lease their SSJ-100 with all the risks attached to its operation ? when the E190/195 (E1/E2), CRJ-900/1000, MRJ, CS100 are far more competitive products, without the political, social, economic, public relations, customer perception and support risks, a business wants to minimize risk, with this aircraft an operator will increase business risk, as its a long 20 year commitment for an aircraft, so much can go wrong with your supplier in that time period. When EU/US/NATO-Russia relations are as bad as they are now, why does any airline think that European nationals will want to fly on a Russian airliner ? they won’t ! I hope that the citizens of Europe will and should boycott any airline operating the SSJ-100 the ‘only’ Russian airliner with any western appeal due to the fact it is now Putin’s baby, a show case with billions of Rubles being spent on it to sell it to the west through Russian state support for low prices, low lease rates and residual guarantees as Russia “hopes” it will ‘open’ doors for the eventual Irkut MC-21 narrow body airliner in the future. Air France and KLM should find a new regional partner, because their brand cannot be on a Russian airliner, that would be a PR disaster and they will loose customers doing so. In fact NO major western airline should accept the SSJ-100 on any ACMI deal either, this ‘white tail’ flying is big business and City Jet is now going to fly CRJ900’s for SAS, and Swedes should have lots of questions for City Jet as well. Has anyone noticed that the ‘Cold War’ is on again ? EU/US economic sanctions are in place on Russian individuals and companies (inc. United Aircraft Corporation) ? Russia for sure had a hand in the downing of MH17 ? Russia annexed its 4th territory (Crimea) last year ? Russia is talking and planning the possibility of ‘tactical nuclear’ warfare ? Wake up Europe, say Nyet/NO to Russia and to City Jet and any other EU airline operating the Russian SSJ-100. IF Russians want to fly on Russian airliners that is fine, they have to, but Europeans don’t have to, we have much better choices with Embraer, MRJ and Bombardier. Hopefully new economic sanctions over the MH17 downing will be aimed at the Russian civilian aerospace industry, then any operator of Russian aircraft will rightfully have huge problems. But right now we need Air France and especially Dutch KLM along with SAS to openly say something to City Jet about its poor aircraft choice, or many of their customers will take their business elsewhere, Europeans need to send a message to Russia. EU consumers have a choice NOT to fly on a Russian airliner, no need for it, and no need to support an aggressive expansionist Russia.

Irish regional airline City Jet has announced it will lease 15 Sukhoi Superjet airlines (SSJ-100) and has options on a further 10 to replace its 18 Avro RJ85 in 2016 and 2017 to become the first ‘western’ European airline to do so, hopefully its code share partners AF-KLM and SAS will have something to say … Continue reading

SUMMARY: Bombardier’s stock (TSE:BBD.B) hit a new 22 year low again today at $C 1.46 a share, a 62% drop from a year ago, market capitalization is now $C 3.25 billion (less than CAE and just above WestJet Airlines) for a $US 20 billion a year company, that is just unacceptable for any public company. The company just announced a 2 year delay in its new $US 75 million per unit Global 7000 business jet program (already behind by 2 years), right after it announced a 30% production reduction from 80 to 55 units per year of its “cash cow” Global 5000/6000 business jet brand due to a ‘softening’ market globally but also very much due to competition from the #1 OEM in the ultra-long range segment (+/- 48% market share), Gulfstream Aerospace, which is having a very strong sales year (book to bill ratio is 1.0+) with its new G500/600’s and existing G650/G650ER’s , and # 3 OEM (+/- 15% market share), Dassault, with its new Falcon 8X and 5X. Bombardier’s CEO Alain Bellemare is doing a great job keeping the “Titanic” afloat, but 1st half results are worrying, both Commercial and Business Aircraft did have slightly better revenues than last year, BUT most worrying are the Book to Bill ratios (orders/deliveries), Commercial had 0.67 (CRJ line only 0.26) while Business Aircraft had 0.29, in short, both Commercial and Business Jet divisions are seeing very few new firm orders, yet Embraer posted book to bill ratio of 2.64 for its E-Jets (124 firm orders, 47 deliveries) in the first half of this year, the 124 E-Jet orders vs 7 CRJ orders (7 x CRJ-900’s for Mesa) so far this year, says novels about the two products attractiveness, their marketing, promotion and sales, a very serious downward trend indeed for the CRJ brand. Now Bombardier will see deteriorating revenue and cash flow numbers from Commercial and Business aircraft divisions at a time it needs lots and lots of cash, as it “Burned” over $US 1.553 billion in free cash-flow (FCF) in the first 6 months of this year on the CSeries and G7000/8000 programs, and is on target to “Burn” another $US 1.5 billion by year’s end, which wipes away all the new equity and debt it raised in February of this year. An IPO (initial public offering) of Transportation division (trains) is set for the 4th quarter this year which will raise lots of cash (up to $US 5.0 billion for 100%, but only a minority will be sold, most likely to Siemens), so around $US 2.0+ billion is possible as debt is very high at almost $US 10 billion, so where is Bombardier heading ? Many analyst and investors believe there is NO clear path to recovery in sight, while Macquarie Financial lowers BBD.B target stock price to $C 1.00 and yet its own subsidiary, AirFinance (commercial aircraft lessor) has 40 CS300’s on order worth $US 3.14 billion ?? On the bright side, the CSeries is 3+/- months away from certification, and new orders will start coming in after that and the stock will rebound on any positive news. More liquidity is badly needed by 2017, but the Beaudoin family’s control 54% of Bombardier through special class shares, a situation many investors find unacceptable, and many of them may not be lining up next year when Bombardier will need to raise more equity and debt once again, and NOW is the best time for ex-CEO Pierre Beaudoin who created the current mess, and who is now Bombardier’s Executive Chairman of the Board, to go ! It is what is best for the future of the company, as many tough times are still ahead, and there should only be one ‘master’ at the helm at this time as the company’s future is at a crossroad.

Well I am back to writing about Bombardier, my last article was on July 16, 2015 when Bombardier’s stock (TSE:BBD.B) was at a 22 year low of $C 1.84 a share, and I thought it had hit rock bottom, having laid off up to 6,950 employees since January 2014 in 4 rounds and a 5th … Continue reading