Bombardier Aerospace

This tag is associated with 4 posts

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, in fact since 2003 it has been in decline and losing market share to Embraer for 14 years and the order backlog is now “critically” low. 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: Delta Air Lines (DAL) has ordered 75 x Bombardier CS100’s and optioned another 50, in a surprise and risky move by the airline. A surprise as it was expected to first replace the 116 x MD-88’s that have 149 passenger seats and the aircraft are 25.5 years old with CS300’s (130-160 seats), but the CS100 (108-130 seat) order means it is more intended to replace the 90 x B717-200s (110 seat) which are 14.4 years old. Risky, because this is a program that was for sale in October, 2015 ( 7 months ago) after a 8 year and $5.3 billion investment, and had only 250 firm orders till today (160 “real” orders) after 8 years of sales and marketing, and now that is up to 325 orders (+ 45 for Air Canada still LOI), but still a very small, and nothing to brag about. A $US 500 million “special charge” (very common these days in Bombardier accounting) will show up in Bombardier’s 2Q/2016 financials to cover the losses on 1st quarter 2016 CSeries sales to DAL (75 x CS100’s), Air Canada (45 x CS300’s) and airBaltic (7 x CS300’s), or $US 3.93 million per aircraft, as that will be the LOSS for those 127 aircraft sold and more losses will come from the 250 ‘firm’ orders it has today ! to sell 370 aircraft below cost takes Bombardier to the end of 2021 production capacity, when will it make money ? Bombardier claims the CSeries will break-even by 2020 ! how ? state subsidies for more “special charges” ? The company is still trying to spin off the CSeries program into a separate limited partnership with the governments of Quebec and Canada for $C 2.6 billion of taxpayers money for a 2/3 share of the new company, so that Bombardier can ‘clean’ up its accounting books and spread the risk, but there is no progress yet as the 2 controlling families do not want to give up majority control. The competition said NO to the CSeries but now Canadian taxpayers are being ‘suckered into investing in a program the commercial industries 3 leading manufacturers said NO to ! Then there still is the fact that even with 12 weeks to go to entry into service (EIS) with Swiss, the CS100 has no FAA or EASA Type Certificate ? certification cannot be left for the last minute, any delay in EIS/delivery will not be good for the CSeries as all eyes are on its EIS and production ramp-up this year, and Canadian Type Certification does not automatically mean an easy ride through FAA and EASA Certification, something to keep an eye on for sure. The DAL order is a major WIN for the CSeries order book which has not had a new order since September, 2014 and yet it is surely a LOSS for the financial books, as DAL surely got a “sweetheart deal” from a desperate Bombardier, which probably did not have to compete with either Airbus and Boeing for the smaller CS100 order, and only had to face Embraer’s E195/190-E2 program, but still I am sure +/-50% off the list price of $US 74 million per aircraft was negotiated way down (not a $5.6 billion but more closer to $2.8 billion deal) by DAL Chairman/CEO Richard Anderson, an excellent hard ball negotiator and airline executive, who in July, 2015 cancelled a big $US 4.0 billion aircraft deal for 40 x B737-900’s and 20 x E190’s, when his pilots rejected a tentative agreement ! With now 325 ‘firm’ orders (235 “real” orders), the production of the CSeries to the end of 2010 should be full, as Bombardier said it would have produced between 255 and 315 aircraft by the end of 2020. The problem is that some orders go back to 2009/2010 and surely most if not all current orders are money losing deals, with early big discounts (especially long time Bombardier customer Lufthansa), so when will Bombardier make money on the CSeries ? The answer maybe never ! as the market segment for 100-150 seat aircraft has been in decline for 9 years now (only 53 deliveries in 2015 by 4 OEM’s), from its peak in 1991 with 330 deliveries. The segment killed the A319 (81 deliveries), killed the B737-600 (69 deliveries) and presently killing the Bombardier CRJ-1000 with 46 deliveries after +6 years and a $243 million write down in 2015 due to “low demand”, off course ! Yet Bombardier keeps dreaming and believing in its forecast of 7,000 aircraft in the segment over 20 years (350 a year on average, a rate never yet achieved), they are just blind to the reality of the market. A market segment with low demand and low to negative margins is a recipe for disaster, and with Airbus and Boeing out to kill the CSeries for entering their market segment (130+ seats), pricing will be very low, so even when the CSeries does WIN an order, it will LOSE financially, and it is 100% concentrated in the worst market segment at the worst possible time, as airlines are up-gauging fast, and the Airbus and Boeing 150-240 seat single aisle market (A320/321neo and B737Max8/9) today outsells the 100-150 seat market by a ratio of 67:1 ! (7,223 orders vs 110), says a lot about where the market is and more importantly where the market is not ! Boeing starts on its “new” B737Max7.5 to counter the CS300 and to move out of the 100-150 seat market, a shrunk version of the Max8 with 150 seats in 2 class configuration, the battle is on, by 2020 there will be 5 manufacturers in the single aisle market, not everyone will win.

READ: Blog article on Delta Air Lines and Bombardier CSeries of January 21, 2016 plus many articles on the CSeries in past articles It is official, after months of rumors, Delta Air Lines (DAL) has ordered 75 CS100’s from Bombardier with 50 options, the deal could be valued at $US 5.6 billion ($US 74.6 million … Continue reading

UPDATE: Bombardier (TSE:BBD.B) stock closes at $0.89 today after breaking the $1.00 barrier yesterday, now institutional investors, mutual funds, ETF’s will start selling the stock as they do not hold “penny” stocks and there is a risk of the shares being delisted from Canada’s TSX stock index in the next 3-6 months if things do not change. Look the company is in BIG trouble, the CSeries will be it’s Achilles heel and predatory pricing by Airbus and Boeing is the arrow that will ultimately kill it. The CSeries is just not selling, it is positioned for a poor market segment, it faces the might of Airbus and Boeing pricing supremacy, it’s small order book of 243 “firm orders” of which +/- 90 are actually “limp/doughy/non-existing” orders that go back to 2009-2011 that surely will NOT happen, entry into service (EIS) is still 5 months away, production ramp up is just starting and Chairman of the Board, and ex-CEO Pierre Beaudoin is still there. New aircraft orders in 2015 were off by 65% while current backlog may have as little as 324 aircraft or 15 months of production at past rates. CSeries will be face Airbus and Boeing at every opportunity for a sale, and pricing will win out and even if Bombardier does win a deal here and there, the price will be so low that it may be a money losing deal, and here is no way to recoup any losses as sales of Q400’s, CRJ, Learjets and Globals continue to decrease rapidly, and the future Global G7000 “cash cow” looks as if they may have another “cash bleeder” on their hands instead. These are dark times for the future of Bombardier and the future of the Canadian aerospace industry, most likely we are going to lose a major industry within the next 4 years.

Well I have said it months ago that Bombardier’s stock (TSE:BBD.B) will become a “penny stock” by year’s end, and I missed it by 27 days, when January 27th, it hit $C 0.99 a share that is a market capitalization of only $US 2.11 billion, and I as expected today, the stock went further down … Continue reading

ABSTRACT: Bombardier announces its 4th round of lay-offs in 17 months, another 1,750 employees are let go on top of 5,200 laid-off already. The sacred “CASH COW” of Bombardier Aerospace, the high margin Ultra-Long Range Global brand is facing a softening in its market segment. The Bombardier Global brand (the $52M G5000 and $62M G6000) keeps Bombardier Aerospace alive, generating $4.5B (on 80 deliveries) in revenue in 2014 (43% of Aerospace revenue, 60% of Business Jet revenue with only 27% of deliveries). New competition from the Gulfstream’s G500/G600 and the Dassault Falcon 8X is threatening Global sales and margins at a time when Bombardier is bleeding cash certifying the CSeries and its new Globals ($75M G7000 and $71M G8000). Presently Bombardier Commercial has only 90 CRJ’s in backlog (18 months of production) and only 52 Q400’s in backlog (26 months of production), while the CSeries with $5.3B in deferred program costs and big price discounting by Airbus, Boeing and Embraer, will see every CSeries sold at a HUGE loss for many years to come. Now Bombardier is looking to sell its rail unit to raise cash, and in all seriousness all of this leaves the new Global 7000 and 8000 as the only hope for a brighter future at Bombardier Aerospace, and the possibility of a future Chinese acquisition of Bombardier Commercial (aka “Combardier”) is very real.

Once again Bombardier has acknowledged that things are not well with the world’s only plane and train manufacturer, and will lay-off another 1,750 employees on top of the 5,200 already announced since January 21, 2014. The big hit will be in Montreal (completions) with 1,000 employees, Toronto (assembly) with 480 employees and Belfast, Ireland with … Continue reading