CSeries needs new orders from Paris debut
Needs new orders for its oft-delayed CSeries program
This could prove to be a “bad week” for Bombardier Inc. if it doesn’t announce new orders for its CSeries jetliner at the Paris Air Show, although the aircraft’s presence in Paris and updated performance data should at least help the company renew some buzz around the beleaguered program, analysts say.
Bombardier’s CEO has been downplaying the importance of the air show and hinting that new orders may not be forthcoming.
“People will want to make a big deal out of the fact that we might not announce very large orders,” Alain Bellemare said in an interview with the Financial Post last week.
“It’s just an event. People often make a big milestone out of this, when in fact it’s just a great opportunity to meet with customers and talk about the business.”
But Paris — and the U.K.’s Farnborough International Airshow, with which it alternates years — is widely considered one of the most important industry events for commercial aircraft manufacturers. This will be the first time Bombardier has displayed the CSeries at a major air show, after it missed Farnborough last year following an engine prob- lem that grounded the aircraft.
“I maintain that, without an order (this) week, it’s a bad week for them,” said Rolland Vincent, former director of international airline analysis at Bombardier who now runs aviation consultancy Rolland Vincent Associates.
“The best thing they could be doing right now is keeping an ace up their sleeve and pull out a nice big order in Paris. Even 20 airplanes plus 20 (options) would be a really nice vote of confidence.”
But it’s likely that any news from Bombardier this week will be more low-key, such as the conversion of existing commitments into firm orders.
Currently, Bombardier has 243 firm orders for the CSeries and another 360 commitments. Its goal is to reach 300 firm orders by the time the aircraft begins commercial flights in the first half of next year.
“While management has tempered order expectations heading into Paris, we think Bombardier could announce a couple of order conversions,” RBC analyst Walter Spracklin wrote in a recent note to clients, adding that one possible conversion could come from CSeries launch customer Swiss International Air Lines, a division of Deutsche Lufthansa AG.
A reversal of firm orders is also possible, with Russia’s Ilyushin Finance Co. currently “re-evaluating” its order for up to 49 of the aircraft because of mounting delays and a lack of available financing.
“We believe anything other than a slight order modification (from Ilyushin) would set a bad precedent for a relatively weak CSeries order book,” Macquarie analyst Konark Gupta wrote in a recent analysis.
But the fact that the CSeries is making its international debut in Paris — with a static display of the smaller CS100 and a flight display of the larger CS300 — could help sales, even if the response isn’t immediate, Spracklin said.
“Having the CSeries aircraft physically in Paris should help drive deeper sales conversations with potential customers,” he said.
In addition, Bombardier has said it will release updated performance specs for the aircraft in Paris and it’s thought that they will come in better than advertised. (In its marketing material, the CSeries is said to offer “a 20 per cent fuel-burn advantage and a 15 per cent cash operating-cost advantage over in-production aircraft in its class.”)
For investors, that could mean “a boost in sentiment and a nice positive catalyst in the near term,” even if the company doesn’t announce many new orders, Spracklin said.
Ultimately, though, potential customers and investors aren’t going to get excited about anything less than a big new order, Vincent said.
“Converting a conditional order or something, it’s OK, but it just doesn’t have the buzz of a new carrier coming along and saying, ‘You know what? We’ve done our homework and this is the airplane of the future for us,’ ” he said.
“That’s what you really want to hear and you really want to hear it from a substantial branded carrier because that really validates the program.”
Even 20 airplanes plus 20 (options) would be a really nice vote of confidence