Bombardier signs second CS300 deal
MONTREAL — Bombardier Inc. said its deal with Airbus has yet to ignite new sales discussions, but existing efforts have yielded results as the manufacturer announced back-to-back potential orders including one with Africa’s largest airline.
Chief executive Alain Bellemare told an investor conference Tuesday that he fielded upbeat calls from some large airlines – including Airbus customers – hours after the deal was announced.
“That’s the reason why I’m convinced that we are going to see much better sales moving forward,” he said at the Goldman Sachs Industrials Conference in Boston.
Bombardier (TSX:BBD.B) has signed its second potential C Series order in less than two weeks after EgyptAir Holding Co. announced plans to purchase up to 24 aircraft.
The agreement announced at the Dubai Airshow includes 12 CS300 aircraft with purchase rights for an additional 12 aircraft.
Bellemare acknowledged that the orders had nothing to do with Airbus even though the partnership gave customers added comfort that the European giant will put its full weight behind the C Series.
“This is very good but it’s the work our team was doing with airline customers,” he told analysts. “It keeps on building the momentum up.”
Bombardier said that based on the list price of the CS300, a firm order for 12 aircraft would be valued at about US$1.4 billion. That would double if the airline exercises the 12 purchase rights. However, airlines typically receive large discounts.
“It would be difficult to wish for a better carrier to establish our presence in the region,” Colin Bole, Bombardier senior vice president commercial aerospace, said in a conference call with reporters from Dubai.
“It’s a great template and it is something that will be followed extremely closely by the other carriers in the regions and the sub regions in the area.”
The C Series has also been ordered by Iraqi Airways, Saudi Gulf and Gulf Air.
The national airline of Egypt told reporters in Dubai that while it has been studying the C Series for a long time, Airbus’ involvement makes them feel better about the program, Bombardier commercial aircraft president Fred Cromer added on the conference call.
EgyptAir chairman and CEO Safwat Musallam said the planes will help the airline to modernize its fleet and better serve destinations in the Middle East and Europe.
Analyst Richard Aboulafia of the Teal Group says Airbus’ involvement will assuage fears that the C Series will be an “orphan” airplane because it will have the support of the European aerospace giant.
“I would argue that the Airbus effect will be fairly profound,” he said in an interview.
Aboulafia said the C Series is a great plane but Bombardier has had major financial issues.
“That is no longer a problem. You remove that, you now have just a great jet people want.”
The EgyptAir letter of intent and a deal for 31 planes plus options for 30 announced Nov. 2 with an undisclosed customer are expected to be firmed up by the end of the year. That would raise the number of firm C Series orders to more than 400.
Bombardier said it remains confident that Boeing won’t be able to prove in its trade complaint that it has been damaged by the C Series since it doesn’t make a plane the size of the CS100 and wasn’t invited to bid on the Delta order.
Nonetheless, Cromer said Bombardier is developing contingency plans if high tariffs continue to be applied on aircraft manufactured in Canada and delivered to the U.S.
“We have opportunities to place some of those early Delta positions with other airlines,” he said.
Cromer declined to say if the second assembly line in Alabama estimated by the company to be built at a cost of more than US$300 million would be affected by the maintenance of high U.S. duties.
Bellemare added that Bombardier was never seeking to use the C Series to compete with Boeing or Airbus. Rather, its competitor for the 100- to 150seat aircraft will remain Brazil’s Embraer.
“There were two (competitors) yesterday and there will be two tomorrow,” he said.
Bellemare added that Boeing has underestimated the response to its trade action, with support for Bombardier coming from companies and governments such as Canada and Britain.
On the Toronto Stock Exchange, Bombardier’s shares gained nearly 1.6 per cent at C$3.11 in afternoon trading.
The Bombardier CS300 performs its demonstration flight at the 2015 Paris Air Show in Le Bourget, north of Paris. Bombardier Inc. has signed a letter of intent to sell up to 24 CS300 aircraft to EgyptAir Holding Co.