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CS100

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UPDATE: Bombardier, the Canadian Government and 49.5% owner of the CSeries program (through CSALP) the Quebec Government are together discounting Boeing’s claim that Bombardier is “price dumping” the struggling CSeries program on the US market (Delta Air Lines order for 75 x CS100’s in April, 2016). In short, “price dumping” means much lower prices on the export market than in a home market. Most likely its true that Bombardier is offering +60% discounts on the CSeries, which means selling below cost and at a loss. Having just 320 orders after 9 years, the company is desperate for orders, and purchase price is the #1 determinant these days by all airlines. Now, Boeing is seeking an order against the sale of the CSeries aircraft in the US market. That would be a severe blow to Bombardier and the CSeries as no commercial aircraft has gone on to be a success, without major sales in the US market (e.g. Viscounts, BAC 1-11, VC-10, Concorde, Saab 2000, Fokker F50, Fokker F-70, Dornier 328/328Jet, etc.), though the US market is not as dominant as it once was, it is still crucial for every commercial aircraft OEM. This is the stuff, President Trump loves, big announcements that he is saving the US workers jobs against foreign companies that don’t play by the rules, for Bombardier the timing could not be any worst. But they wanted “state aid” and with it comes the perception of “illegal state aid”, and Boeing is not the only one to complain against Bombardier, as Airbus and ATR have made moves to go to the WTO (World trade Organization) to investigate Canadian state aid to Bombardier. Now, most Canadians know that “state aid” or “corporate welfare” is going to the company from our pockets, this has been on going for 50+ years and sadly its all a “state secret” even though its public money going to a private company. Canadians have no idea how much taxpayers money was given or returned by Bombardier, for it is THE symbol of Quebec’s industrial capabilities, and always treated “special” here in Canada by most governments in power since the 1970’s. It was then that Quebec started to contemplate breaking away from Canada and becoming its own independent state, and that is why it has been given so much money and cheap deals on privatization of Canadair $120M in 1986 and de Havilland $100M in 1992 from which the whole Challenger, CRJ, Global,DHC-8 and Q400 aircraft products all came from.

The Canadian Government off course is standing by Bombardier on this, but as I have been on this issues since the Delta Air lines deal, I know through contacts and Boeing knows even better what the price to Delta Air Lines (DAL) was. Now comes a lot of trouble, which was expected as the CSeries … 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

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 stock (TSE:BBD.B) has been at $1.00 all day today, and late this afternoon it went south of that “psychological” barrier and became a “penny” stock, as it closed at a 25 year low of $0.99 on the Toronto Stock Exchange. Investors are dumping their shares for good reasons. No new CSeries order since September, 2014, lost United deal to Boeing, 3 of the 4 first CSeries orders from 2009-2011 are NOT happening (Lease Corp. International, Odyssey, Republic add up to 53 ‘firm’ orders and 57 options) and the 4th is Gulf Air (2011 order for 10 x CS100’s and 6 options) that last week ordered 19 x A320/321 with 10 x A320 already on order, and their CEO Maher Salman Al Musallam comments on the CSeries are not optimistic “I don’t know, as a small airline, whether we are able to operate a third type or not”, “whether it’s going to be viable for Gulf Air to continue to renegotiate a delivery date with Bombardier or something else”, also today, the CEO of Gulf Air offered his resignation, no reason given. Meanwhile, Bombardier eyes Iran, but Iran will order 127 Airbus airliners this week, meanwhile Delta Air Lines order that Bombardier wants so badly, will not be any time soon and then will require a very good price, that will have to compete with Embraer, Boeing and maybe Airbus. Bombardier wants Federal government to buy 50% of CSeries, yet Quebec’s Mayors block East pipeline that western Canada desperately needs for its oil. If Bombardier gets money from the Feds, western Canada will NOT be happy with Ottawa. I say NO to any funding until current special voting shares by which 60% control is still in the hands of the 2 families, eliminated and then some sizable injection of capital by the 2 families that today control Bombardier and who orchestrated the current fiasco, otherwise I say NO to Federal money for Bombardier, too many other needs in Canada. Lastly, Bombardier needs to just stop talking about all the deals they are working on, it is bad PR when they lose and it is un-professional, when you sold something then brag about it but don’t brag about being in this or that campaign, because the sad reality is they will lose +85% of the campaigns when competing with the duopoly of Airbus and Boeing, it is just sad they are so “desperate” for any good news.

This is the event few would have expected at Bombardier a few years ago, but today the Bombardier shares (TSE:BBD.B) went to $0.99 a share, the lowest in +25 years (since 1991), and it is a “penny” stock today, this is how bad the company is now perceive don the market, a total mess from … Continue reading

SUMMARY: Bombardier finally sees that “aggressive” pricing for the CSeries is a must, as the “game changer” has no new order since September, 2014 and it is now perfectly clear to all that the fuel efficiency of the CSeries will be closely matched by Airbus, Boeing, Embraer, Comac and Irkut as they will all incorporate new generation fuel efficient engines in their new aircraft programs. This year, 2016, is the make it or break it year for Bombardier, all eyes are on sales, EIS (entry into service) and production ramp up, 12 months from now the future of the company will be clearer, one way or the other. The CSeries has now lost its main competitive advantage, its value proposition (most fuel efficient airliner) and like all the others it will have to seriously discount it’s price to win any new order, and it is not prepared or capable of waging a price war. A major price war is looming as the duopoly of Airbus and Boeing, will not only have to deal with Bombardier’s CS100/300 and Embraer’s E195-E2 at the low end, but head on competition from China’s Comac C919 and Russia’s Irkut MC-21narrow-body airliners as well within the next 5 years. It is going to get ugly for Bombardier, as surely it “hopes” that Airbus and Boeing will not continue with the slow selling A319neo or Boeing the Max7 programs (a segment that is NOT very big, and was overestimated by many), but the duopoly will stay in the segment, for if anything, just to make sure Bombardier does not get a foothold in the BIG league of commercial aircraft. A price war with the likes of Airbus, Boeing and the Chinese and Russian Governments spells disaster for Bombardier in the long run, it cannot sustain regular discounts of +40% and continue as a going concern, they just cannot compete on price at this level, where even today before the new entrants arrive, discounts of 50% from List Price are ‘common’ from Airbus and Boeing on large orders . The current United Airlines requirement for 30 new 100+ seat jets will be an example of what is to come, as United is a huge Boeing customer, with 310 x B737’s (700/800/900’s) in service today and another 100 B737Max9’s on order, there is NO way hell, Boeing will allow Bombardier to win over this customer, and the deal will probably go for $US 40+/- million per unit (50% off List Price) for the B737-700 as the NG line still needs to be filled before the MAX line takes over,. To win with United Airlines, Bombardier will be required to offer a huge discount on the $US 71.8 million CS100 and the $US 82.0 million CS300, that it would create a huge loss for the company, as it has no way of getting that loss back from its product line (unlike Airbus & Boeing that delivered 1,397 aircraft in 2015) yet a major North American order for the future success of the CSeries is a MUST if the program is to have a future. Bombardier unlike the duopoly, will have a low production rate of 10 units per month by 2020, not enough to spread its costs/losses, while the duopoly is planning on producing 122+ A320/B737’s per month by 2018, a greatly reducing unit costs, and they will fight to keep Bombardier out of it’s “turf”, especially after it announced it may go with the larger CS500 (165+ seat) jet down the road, a direct challenge to the A320/B737. Anyway, Airbus believes the CSeries will become an “orphan” aircraft, “a nice little plane”, that was probably forever doomed to be a poor seller, and Airbus should know, they were the first OEM Bombardier went to, in their attempt to sell the program last year ! All the indications are there that the market is not there, up-gauging of aircraft, low sales in the 100-150 segment by all to a lack of interest from lessors. Lastly, while the CSeries will have to deal with the duopoly, the $75 million a piece Global G7000 business jet will also have to deal with the duopoly if it plans on selling a lot, as the ACJ319/320 (Airbus Corporate Jets) and the BBJ (Boeing Business Jets) are in the same segment, a segment that has averaged only 16 units a year for the past 18 years, so the G7000 may sadly not be the “game changer” either.

I have been quiet for awhile on Bombardier, watching what will unfold, with a heavy heart, seems that the new year is not going to be much better than last year, when Bombardier’s stock (TSX:BBD.B) lost 60.9% of its value, ROI (return on investment) was -44.0% and market capitalization is down to $2.51 billion, cash … Continue reading

UPDATE: Another exciting week at Bombardier, as stock surged upwards ($1.86 per share) on the news that Beijing Infrastructure (China) wants to buy Bombardier Transportation (Trains) division for $8.0 billion (valuation 60% higher than expected), which will have an IPO latter this year to provide liquidity for cash burning CSeries program. Still no new good news, and Bombardier stock (TSX:BBD.B) risks being a “penny” stock in a few weeks, as Macquarie sets target price of stock at $1.00 and recommends selling the stock now before it plunges, even though it’s AirFinance leasing division (165 aircraft, of which 94% are A320’s/B737’s) has 40 + 10 CS300 on order ? Another CSeries lessor, LCI says Bombardier needs to “start turning interest into orders from market leading airlines”, also that “two marquee customers that will each take in excess of 25 aircraft” is a must, as otherwise “LCI could abandon its 20 x CS100/300 orders”. Off course the CSeries order book lacks breath and quality (e.g. little known and struggling airBaltic of Latvia is it’s launch customer for the CS300 ?) and Bombardier needs a big new order soon to revive confidence in the program, as it is becoming clear that the current 243 orders are realistically only 150 at best while the A320neo line has 4,193 firm orders and the Boeing B737Max line has 2,869 orders, is the 100-149 seat market even viable for 2 OEM’s (Embraer and Bombardier) ? Lastly, Russian Ilyushin Finance (IFC) is talking about keeping its CSeries orders after cancelling this summer, yet EU/US/Canadian sanctions are in place (for Russia’s annexation of Crimea last year, its 4th occupation of another state’s territory since 1992) against Russian government majority owned banks, oil companies, several Putin’s close “friends/oligarchs” and current sanctions do include United Aircraft Corporation (UAC) the holding company for most of Russia’s aviation/aerospace industry, including the Sukhoi SSJ-100 SuperJet program) which also owns Ilyushin Finance (IFC), therefore any CSeries deal would be in violation of existing sanctions, and surely Canadian will stand by its obligations to STOP such a deal as NATO is facing renewed Russian aggression and a new “Cold War” is on, and no ‘western’ airline should order the Sukhoi SSJ-100 airliner as it would be a PR disaster these days one that could face a customer backlash/boycott. A Canadian election is set for next month and many Ukrainian and Eastern European citizens expect the Canadian Government to hold a ‘tough’ line on Russian expansion and aggression.

Well another exciting week at Bombardier has passed, as the stock (TSX:BBD.B) as its stock climbed to $1.37 on September 9th and then on Friday September 11th it hit $1.86, having hit a new bottom at $1.11 on August 24. ——————————————————————————————————————————————————————————————- The struggling CSeries still has only 243 ‘firm’ (53 x CS100 and 190 x … Continue reading

UPDATE: Bombardier stock (TSX:BBD.B) hit a low of $1.19 on Wednesday (today it “rallied” and closed at $1.29) as it continues its spiral towards becoming a penny stock, if it was listed on the NYSE (New York Stock Exchange), it would mean possible de-listing of the stock, as Vancouver’s CHC Group (global helicopter company) is now facing for its NYSE:HELI stock that is now hovering at around $0.30 a share (-90% YTD). After my many warnings about the many questionable and poor quality of airline orders for its CSeries, investors and aviation experts are now finally starting to take notice that after 7 years of sales the current minuscule 243 CS100/300 ‘firm’ orders are in fact a whole lot smaller, with many questionable airline orders possibly as low as 130 ‘real’ orders (53% of what is on the books today). Bombardier desperately needs a NEW CS100/300 brand name airline order in the next 30-45 days to prevent the slide of its stock below $C 1.00, as that is the only way in the short term it can gain some investor confidence to stop the stock’s downward spiral. The CS100 is going to be certified in the next 3-5 months, but by then the stock will be a penny stock if no quality new order or some new un-predicted good news is forthcoming soon from Bombardier. The planned IPO of Transportation division in 4th Quarter will raise up to $US 2.5 billion for a 49% sale, but it will most likely impact BBD.B stock negatively, as the trains are 50% of Bombardier’s business, these are desperate times at Bombardier and most Canadians want to see a bright future for this promising company. With 54% of the special voting shares in the hands of the Beaudoin family, new investors are reluctant to be subordinated and a possible hostile takeover is not yet possible. But with the company at a historic crossroad, the possibility of “Combardier” (China’s Comac buying Bombardier), is a real possibility in the next 18-24 months, as this is the only major aircraft OEM the Chinese can possibly buy today, to help them achieve their global aerospace ambitions of being #3 behind Airbus and Boeing, and they are surely watching events in Montreal with great interest.

A week ago (August 14, 2015) I wrote my last blog on Bombardier when its stock price (TSX:BBD.B) was at $C1.46, since then it has dropped to $1.19 on August 19th, followed by a jump to $1.27 in a flurry of 8.17 million trades, as investors were thinking it has reached its bottom, yet without … 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

SUMMARY: Paris Air Show 2015 is done, the winners were again the duopoly of Airbus and Boeing with 752 orders ($US 107.2 billion at “list price”) out of a total of 958 orders. The BIG loser was surely Bombardier which finally after 7 years from its launch, made its debut with both the CS100 and CS300 airliners, but left the show with 0 (zero) in new orders for their CSeries, Q400 and CRJ’s brands, which should be worrying, but after the show Bombardier said it was “absolutely satisfied”, with what ? The fact it had to choose the little known, barely profitable, Latvian government owned airBaltic as its launch customer for the CS300 (13 x CS300’s on order and 7 options) says novels about the poor quality of its order book. The airline’s order has a “list price” value of $US 1.44 billion, yet this airline has made a profit of only $US 11 million in the past 5 years on revenues of $US 688 million (1.6% net profit margin) ? unfortunately they have no “better” airline for such an important role. Meanwhile Bombardier now seriously talks of a stretched 160-180 seat CS500 to challenge Boeing and Airbus ? really ? it’s stock price keeps dropping, (TSE:BBD/B) is at $C 2.25 today down 45.8% YTD (year to date) and the corresponding drop in market capitalization to only $US 5.11 billion, investors are worried and Bombardier wants to spend more money on a CS500 to take on the big duopoly of Boeing and Airbus head on in the most lucrative market, the single-aisle/narrow-body segment ? Individual losers were the A380, A350-1000 and the MRJ, with no new orders, while little known Viking Air of Canada announces 50 “orders” from China for its pricey $US +7.5 million Series 400 Twin Otter even though the Chinese have a similar, good performing, FAA certified and cheaper Y-12E ? Embraer celebrated its 2 year anniversary at Paris of its E2 launch, booked 25 E2 orders at the show and now has 325 firm orders, while the CSeries is now 7 years past its launch (July 18, 2008) with only 243 firm orders, but realistically it is only 130 orders at best. ATR books 46 orders and 35 options at the show, as it solidifies its market dominance in the large turboprop market segment after 160 firm orders in 2014. Sukhoi’s SSJ-100/95 gets an order for 3 as shamefully up to 33 “white tails” (out of 85 delivered, or 39% of delivered aircraft) await customers even with price discounts of 56%, while the program struggles with production, sales, marketing, corporate governance and politics, as 51% partner Finmeccanica (Italy) is restructuring and understandably contemplating its exit from the Italian-Russian joint venture and surprisingly it also has doubts on its future with the very successful ATR program where its fully owned subsidiary Alenia-Aermacchi is a 50% partner with Airbus Group. Airbus and Boeing want to increase production of single aisle/narrow-body airliners (B737Max now has 2,773 orders and A320neo has 3,854 orders) to a possible 115 per month (Boeing to 52, Airbus to 63) by 2018 ! is that over optimism in this unprecedented period of growth ? can the already over extended supply chain even handle the extra work ? With an average monthly delivery of 112 aircraft in 2014 of all sized aircraft by both OEM’s (1,349 units), the latest Boeing 20 year forecast of 35,560 aircraft would translate to an average of 148 aircraft per month for all sized aircraft by both OEM’s, an increase of 32% on 2014 delivery numbers, with new orders in 1st half of 2015 already down on 2014 ? What role do speculative orders play in this order frenzy ? Deals at Paris are always quoted in List Prices but who is getting a good deal ? are you getting a good deal ? how do you know you got a good deal when almost everyone gets a discount, no one pays List Price and it is all so secretive, so how low can Boeing and Airbus go ? how about 64% off on big orders ? yup, enough to make sure that new competitors like the CS500, C919 and MC-21 do not win orders based on price. Lastly, Russia’s aggressive stand against NATO is seriously raising tensions in European countries on the Russian border, since 2008 Russia has annexed and integrated 4 Russian speaking enclaves/territories from 3 of its neighbors (Georgia, Moldova and Ukraine), now open conflict is a real possibility, and Russia’s military thinks a small tactical nuclear response today is possible without triggering a WW III ! in this political environment it is time for tough economic sanctions on Russia and especially its aerospace industry, the Sukhoi SSJ-100 is getting lots of financial support from President Putin, as it is the only Russian commercial aircraft ever built with any western appeal. It is time to stop buying Russian aircraft and stop ALL support for Russia’s aerospace industry, as any military conflict with Russia will make corporate profits absolutely irrelevant anyway !

With the 2015 Paris Air Show now behind us, it is worth to look at the final results of the big aerospace event and analyze the winners and the losers as it gives a pulse on which OEM’s are on top of their game and those that are not. —————————————————————————————————————————————————————————————– The battle in the narrowbody … Continue reading

ABSTRACT: Bombardier may have its CSeries launch customer in newly re-branded Lufthansa Group owned Swiss Global Air Lines which ‘should’ get the aircraft by 1Q/2016 ? at the earliest, while Bombardier desperately tries to ‘re-position’ the Q400 as a viable ATR-72-600 competitor with a “secret new technique” of slowing it down for better fuel economy and trip costs ?? the Q400 is $10 million more expensive, it uses 104% more power (shp), therefore it burns 40% more block fuel, engine maintenance is more expensive on PW150 than PW127 so how can it be economically close to the ATR which out sells the Q400 by a wide margin even with deep discounting on the Q400, meanwhile experts say the CSeries needs to be discounted by 50% to get the needed BIG airline orders as that is what BIG airlines expect, welcome to the BIG league Bombardier where huge discounts (30% to 50%) by Airbus and Boeing are the norm rather than the exception which can be up to 65%, and you can’t win a price war against Boeing or Airbus, can Bombardier even afford to heavily discount now that break-even has to be 580+ units as the CSeries program cost grows to $5.4 billion from an initial $3.4 billion and production is planned at only 10 per month ? break-even is now 6 years of production, can it afford NOT to discount with sales still stuck at a scant 243 “firm” orders (some highly questionable) after 6 years and NO major US airline order in sight ? meanwhile Lufthansa Group’s Austrian Airlines takes 17 x E195’s over CS100’s just like Air Canada kept its 25 x E190’s instead of buying the CSeries last summer, both after a thorough cost evaluation, so what gives with the economics of the CSeries ? Learjet without the Learjet 85 has little to offer, a sale of that company should be considered, the ‘good’ news is that Bombardier successfully raised $C 868 million in new equity and $C 2.25 billion in high yield debt to bolster its liquidity problem.

The news at Bombardier Inc. keeps getting worst, as this past week China’s locomotive manufacturers China CNR Corp. was acquired by China CSR Corp. in a $US 26 billion merger, creating a large state owned enterprise (SOE) that will surely give the 3 other large train manufacturers Siemens (Germany), Bombardier (Canada) and Alstom (France) lots … Continue reading

ABSTRACT: UPDATE – Bombardier plans first flight of the $72 million, 135 seat CS300 any day now, the future of Commercial Aircraft Division rides on this model, which today has 74% of the CSeries 243 meager orders, the company has just sold 424.4 million newly issued shares (TSX:BBD.B) at $C 2.21 per share (10% discount) and raised $C 938 million in equity with another $C 1.2+ billion in debt financing needed in 1H/2015 to raise liquidity, as cost of the CSeries program is now $5.4 billion (up by $2.0 billion), the Government of Quebec is prepared to “bail out” Bombardier Inc. if it needs it, for now it does not need it, the company is “too big to fail” ? 2015 is a BIG year for the company, get CS100 certification, and new orders will come, which will drive confidence and stock price upwards, miss the planned 2015 certification and the stock will plummet, already confidence among investors, customers, prospects and employees is very low, new President/CEO Alain Bellemare has the potential to turn it all around, but cannot due it alone, needs good people to implement the changes needed, any good executives left ? the problem is not the products but the poor leadership and bad corporate culture that has been allowed to permeate throughout the company under the previous CEO.

As it looks now, the Bombardier CS300 is set for its 1st flight tomorrow, Thursday, February 26th, as it now has the approval from Transport Canada to test fly the aircraft. The Bombardier CS300 is in the 135 to 160 market, so it will compete with the Airbus A319neo and Boeing B737-Max7, a tough duo … Continue reading

ABSTRACT: Bombardier has gone outside the company and family for its new President/CEO, Mr. Alain Bellemare from UTC, his main task has to be the radical turnaround of the $10.49 B a year Aerospace Division, as the $US 3.4 B CSeries program is now $US 5.4 B ! and EIS is NOT until 2016, in 2014 Aerospace lost $995 M, free cash flow was a $ -1.059 B, Commercial Aircraft’s CRJ and Q400 sales slowly fading even with +30% discounts (only 27% of revenue) while business jet orders are down 59% in 2014 from 2013 with a disappointing Order to Bill Ratio of only 0.6 (sold less than it delivered), Business Aircraft has always been strong (72% of revenue) now facing new competing aircraft programs that are going to challenge it’s sacred high margin ‘Cash Cow’ Global brand ($4.5 B in sales on 80 delivered and 43% of total revenue), off course more liquidity is needed to finish the CSeries and Global 7000/8000’s, so $US 2.1 B in new in debt and equity will be raised, while the struggling CSeries order book of 243 units now needs at least 550 orders to break-even, it is time to fix Bombardier Aerospace from the top down and possibly JV with China’s Comac (aka “Combardier”)

Following up my blog article on Bombardier Aerospace on January 20th, where I dared to ask the question if it was time for Bombardier to look outside Bombardier and the family for a new CEO, like they did back in 2002, the answer came Feb 11th, when Mr. Alain Bellemare was hired as the new … Continue reading

This year’s Farnborough Air Show was all about the new Airbus A350 and A330neo and almost everything in the industry looks good, increasing orders, backlogs, airline profits, production, low interest rates and yet several of the regional aircraft manufacturers like Bombardier are struggling to get new orders.

The 2014 Farnborough Air Show is over and once again Airbus and Boeing dominated the show with big deals worth $US 115.5 billion in orders for 697 out of roughly 900 aircraft orders ! for comparison, last year’s Le Bourget Air Show had 1,450 orders worth $295 billion. This year the show was all about … Continue reading

Bombardier counters criticism of its “sluggish” CSeries sales by claiming the “CSeries dominates the 100 -149 seat category” SERIOUSLY ? Let’s look at this Public Relations ‘spin’ on what is clearly a dismal sales performance for the CSeries program with only 203 orders since 2009 and examine where the problem really lies with the CSeries.

According to Mr. Fred Morais, Marketing Director at Bombardier Commercial Aircraft, the description of CSeries as “sluggish” is not correct, in fact according to Bombardier it “dominates” (verb: like controls, commands) the 100-149 seat market” with its 203 orders from 12 customers and 1 undisclosed since 2009, apparently “these sales figures speak for themselves” says Mr. … Continue reading

Is There a Sustainable Business Model for Porter Airlines ? IPO, CSeries or WestJet in its Future ?

Porter Airlines started in 2006 with two 70 seat Bombardier Q400 turboprops and is the brain child of one of Canada’s most famous and successful aviation entrepreneur, Mr. Robert Deluce, CEO and President of Porter Airlines. The Deluce family is one of Canada’s premier aviation entrepreneurs, with Mr. Stanley Deluce having started White River Air … Continue reading

Mega Canadian Airline Merger in the Works as Canadian North and First Air Start Discussions

It was announced yesterday that Makivik Corporation, the owner of First Air and NorTerra Inc. the owner of Canadian North started to talk about merging the two northern Canadian airlines, which will create a single airline entity that builds on the strengths and identities of the two airlines. They say no lay offs are planned, … Continue reading