Rumoured order could lift ailing Bombardier

Bombardier Inc.’ s depressed regional-jet division may receive a much-needed tonic this month from airline Garudaindonesia, whichappears about to order between 18 and 25 planes, likely the CRJ1000 96-seater.

The long-rumoured order would inject some life in the Mirabel division, which recorded seven CRJ orders for all of 2011.

Its backlog at Oct. 31 was only 62 planes.

Rumours of cutbacks have dogged the Mirabel RJ division for two years amid the biggest slump in its 20-year history. In September, Bombardier announced a production cutback, but added that the 350 people affected would be redeployed rather than laid off.

At the Downsview facility outside Toronto, which makes the q400 turbo props and some business aircraft components, the company has cut about 100 employees. It also registered a meagre seven orders in 2011 and its backlog is even worse at 39 aircraft.

Bombardier Aerospace president Guy Hachey said in August that the Mirabel division would need to get more orders this year to avoid more cutbacks.

Bombardier rival Empresa Brasileira de Aeronautica SA (Embraer) has been selling its RJS briskly during that time. Hachey attributed the disparity in performance to a stumble by his company in exploiting emerging markets, adding that Bombardier is in the process of fixing that by hiring people to drum up business in those regions. The possible Garuda deal would signal progress on that score as Bombardier’s competition for the deal was Embraer’s ERJ-190 96-seater.

Bombardier is “in desperate need of an (RJ) order,” said analyst David Tyerman of Toronto brokerage Canaccord Genuity, who called the likely 18-plane order (it could rise to 25 with options or other provisions) “decent-sized.”

But he speculated that assuming the order is confirmed, “Garuda would have gotten a fantastic price.”

“What the division needs is a flow of orders” rather than the occasional deal, he added.

The order “might keep jobs in Montreal, but it still won’t help (Bombardier’s aerospace profit) margin,” which the company wants to boost.

At list price for 18 aircraft, the deal would be valued at roughly $800 million US, but discounts could be up to 40 per cent or 50 per cent.

Bloomberg reported from Indonesia that Elisa Lumbantoruan, the chief financial officer of PT Garuda Indonesia, the country’s largest airline, told the news agency that the deal would be announced at the Singapore Air Show, which runs from Feb. 14 to 19.