Bet­ter sales mov­ing for­ward

Egyp­tair or­der, air­bus takeover put wind in bom­bardier sails

North Bay Nugget - - BUSINESS - Alicja siekierska

the block­buster part­ner­ship that will see air­bus se take full con­trol of bom­bardier Inc.’s Cseries pro­gram has yet to kick­start dis­cus­sions with new po­ten­tial cus­tomers, but ex­ec­u­tives say it has al­ready brought wide­spread con­fi­dence in the pre­vi­ously be­lea­guered pro­gram.

the mon­treal-based com­pany signed a let­ter of in­tent with egyp­tair hold­ing Co. on tues­day for an or­der of up to 24 Cseries air­craft, its sec­ond or­der since air­bus took 50.01 per cent con­trol of the pro­gram last month fol­low­ing an 18-month sales drought.

Chief ex­ec­u­tive alain belle­mare said tues­day that both agree­ments were not in­flu­enced by the air­bus deal, which is not ex­pected to be fi­nal­ized un­til next year.

how­ever, he added that air­lines around the world have re­sponded pos­i­tively to the pend­ing part­ner­ship.

“some al­ready ex­ist­ing cus­tomers and many new po­ten­tial cus­tomers, (in­clud­ing) very large air­lines, are see­ing the ben­e­fit of adding air­bus into the pro­gram,” belle­mare said at a goldman sachs con­fer­ence in bos­ton, adding that he re­ceived calls from “very key air­lines” laud­ing the part­ner­ship within hours of the an­nounce­ment last month.

“that’s the rea­son why I’m con­vinced that we are go­ing to see much bet­ter sales mov­ing for­ward be­cause of that. some of these cus­tomers to­day are air­bus op­er­a­tors. I think they see po­ten­tial syn­er­gies.”

egyp­tair, which has both air­bus and boe­ing air­craft in its fleet, has agreed to pur­chase 12 Cs300 jets and has the pur­chase rights for an ad­di­tional 12 air­craft. based on the list price of the Cs300 jet, a firm or­der con­tract would be val­ued at ap­prox­i­mately us $1.1 bil­lion, bom­bardier said.

ear­lier this month, bom­bardier said an uniden­ti­fied euro­pean cus­tomer signed a let­ter of in­tent for a firm or­der of 31 Cseries jets and an op­tion for 30 more.

Fred Cromer, bom­bardier’s pres­i­dent of com­mer­cial air­craft, said on a con­fer­ence call from dubai that he ex­pects the pur­chase agree­ments for both or­ders to be fi­nal­ized by the end of the year.

Colin bole, bom­bardier’s vice pres­i­dent of com­mer­cial air­craft, said there has been “re­newed con­fi­dence” from po­ten­tial cus­tomers and that the air­bus deal has helped “some­what” in­crease the pace of dis­cus­sions.

the agree­ments come as bom­bardier faces the prospect of per­ma­nent 300-per-cent du­ties on its largest Cseries or­der of at least 75 jets to delta air Lines Ltd., due to a trade com­plaint filed by ri­val boe­ing Co.

While the com­pany was sched­uled to be­gin de­liv­er­ies of the jet next year, Cromer said bom­bardier is de­vel­op­ing contin­gency plans in the event that the final rul­ing goes in boe­ing’s favour.

“We have not dis­closed what those plans are or the po­ten­tial cus­tomers are, but it’s im­por­tant to note that we con­tinue on the ram­pup and we will find homes for those air­craft,” Cromer said.

“In terms of the num­bers of de­liv­er­ies out of our fa­cil­ity next year, we do not ex­pect our guid­ance to change.”

how­ever, some an­a­lysts say the Cseries pro­gram will still face ma­jor hur­dles, even un­der air­bus’ lead­er­ship.

moody’s In­vestor ser­vice re­leased a re­port last week writ­ten by sev­eral an­a­lysts that said de­mand for the Cseries jet “is likely to re­main mod­est due to in­dus­try pres­sures that are fuelling in­ter­est in larger, not smaller, nar­row­body pas­sen­ger jets.”

the an­a­lysts wrote that in or­der for the Cseries to be con­sid­ered a suc­cess, the or­der back­log would need to reach 1,000 air­craft. While the pro­gram’s vis­i­bil­ity could im­prove un­der air­bus con­trol, the an­a­lysts said they do not be­lieve the Cseries will reach 1,000 air­craft in sales in five years.

“at this level of de­mand, we would ques­tion whether the pro­gram would be prof­itable given its es­ti­mated de­vel­op­ment costs of more than $6 bil­lion to date,” the re­port said.

While air­bus has said the 100- to 150-seat mar­ket will rep­re­sent more than 6,000 new air­craft over the next 20 years, moody’s said the es­ti­mate “may be am­bi­tious due to in­dus­try op­er­at­ing con­straints and eco­nomic fun­da­men­tals that will cause op­er­a­tors and lessors to con­tinue to favour larger nar­row­body vari­ants with more than 150 seats.”

Handout Photo

Bom­bardier’s pres­i­dent of com­mer­cial air­craft, said on a con­fer­ence call from Dubai that he ex­pects the pur­chase agree­ments for both or­ders to be fi­nal­ized by the end of the year.

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