Bombardier Jet Is Poised for Upbeat Performance
Jun. 12, 2015
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Bombardier Inc. is poised to unveil better-than-expected performance for its CSeries jet at the Paris International Air Show, in what may be the Canadian manufacturer's best shot at resuscitating orders for its new flagship aircraft.
The model will compete with the smallest single-aisle passenger jets offered by Airbus Group SE and Boeing Co.
Bombardier, which has struggled to keep CSeries development on track, is expected to announce that its jet will be able to take off 5,000 pounds heavier than first planned, according to two people familiar with the program. That means it can carry more revenue-generating cargo or with the added fuel load that it can fly 200 to 350 nautical miles farther than the original estimate of 2,950 miles,
The new jet also weighs more than initially planned, which is common for a new model, but will still be at least 1.5% more fuel-efficient than first anticipated, according to these people. The company also plans another 4% fuel improvement by 2018, they said.
Even with oil prices depressed, airlines treasure every ounce of fuel savings. The ability to travel farther also offers greater flexibility to open new routes or load less fuel in favor of lucrative cargo.
Strong test-flight results would give new Chief Executive Alain Bellemare an opportunity to win over a skeptical industry and convince airlines that the much-delayed CSeries is a ready challenger to Airbus and Boeing passenger jets, say analysts and customers.
Mr. Bellemare, a United Technologies Corp. veteran who took over at Bombardier in February from family scion Pierre Beaudoin, is facing the most expansive set of challenges of any established civil-aircraft maker. While the CSeries is taking the company into new territory, it has long been a major producer of regional commuter and business jets.
Bombardier also makes rail equipment, and ballooning costs for the 100- to 160-seat CSeries are pushing the company toward selling a minority stake in its transportation unit in an initial public offering. Many analysts and industry officials question whether the CSeries -- US$2 billion over budget and 2½ years behind schedule -- can deliver a return on its investment. The Montreal-based company's share price had dropped nearly 40% this year.
Bombardier has recorded 243 orders for the CSeries, winning a majority of the sales for smaller single-aisle jets, with 100 to 150 seats. For higher-capacity single-aisle airliners, Airbus and Boeing have used their industrial scale and lower development costs to elbow Bombardier out of many competitions and secure orders for more than 6,600 updated jets now under development.
Bombardier declined to comment on details of the CSeries jet's performance, but said it would meet or exceed expectations.
The Paris air show offers a fresh start for the program and the company's new leadership, said Nico Buchholz, executive vice president of fleet management and chief aircraft buyer for Deutsche Lufthansa AG, which has reason to cheer on the CSeries. The German company includes Swiss International Air Lines, which gave the program its first order.
Showcasing the CSeries away from Bombardier's home base shows confidence in the aircraft, said Mr. Buchholz, who had long urged a shift in sales strategy. "This is not a mock-up, not a PowerPoint [presentation], but real 3-D."
Making the program pay off is Mr. Bellemare's main concern, but he is also juggling development of a pair of globe-spanning business jets.
The future is murky for Bombardier's Global line of business jets, the biggest contributor to its aerospace revenue. Demand in once-hot emerging markets has slackened, forcing a cut in production and 1,750 positions. The retreat threatens to exacerbate the company's cash crunch as it faces an ambiguous schedule for two bigger business-jet models, dubbed the Global 7000 and 8000.
In an interview on Monday, Mr. Bellemare said that he "is launching a transformation process" to reduce the company's costs and generate cash across the enterprise, but said he wasn't ready to discuss details.
The high cost of early serial production of the CSeries will weigh on Bombardier's cash flow, Mr. Bellemare said. He estimated it could take until 2020 for the program to contribute positively to its earnings.
To shore up sales, Bombardier's new leadership has shifted its strategy from chasing after a diverse group of airlines to focusing on large established buyers. Bombardier won't "jump on every airline that wants to buy airplanes," said Henri Coupron, a former leasing executive serving as a strategic adviser. "You want to pick the right one that will send an endorsement message to the market."
One way to boost the profitability of the CSeries would be to add a third model. While developing such a model could cost as much as US$1 billion, according to analysts, it would also generate more sales and potentially command a higher profit margin. Fred Cromer, the newly appointed chief of Bombardier's commercial aircraft business, said in an interview last month that it was considering a model that seats up to 180 passengers and would compete directly with the most popular single-aisle models from Boeing and Airbus.
Mr. Bellemare played down the idea of a third member of the CSeries family to bolster its sales, saying only two models are available for order. Yet, Bombardier's leadership recently re-registered a trademark for 'CS500', a likely name for a jet to follow its CS100 and CS300 after the previous leadership allowed it to lapse in 2014, a person familiar with the filing said.
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