Interest in Bombardier’s CSeries taking off
Company says they are seeing more confidence from airlines now that the jets have been seen flying and the company is delivering on targets
Bombardier Inc. says it is working aggressively with a half-dozen potential customers that have shown interest in the all-new CSeries jet, but warned these types of sales can take time.
“It’s not going to happen overnight,” said president and CEO Alain Bellemare, during a conference call with analysts on Thursday, after Bombardier reported its second-quarter earnings.
He said about a half-dozen customers have shown interest since last month’s Paris Air Show, where the CS100 and CS300 jets both debuted for the first time. The larger CS300 plane flew each day.
At the show, the company revised the performance metrics of the jet, touted to be quieter and more fuel efficient than other planes.
Bellemare sees more confidence in the aircraft now because it is flying, and delivering on promised targets, with 2,000 flight test hours completed.
“Airlines want to see the aircraft flying. They want to see that the aircraft’s performance is there, the reliability of the aircraft is there,” Bellemare said, noting that a new executive team at Bombardier Commercial Aircraft led by Fred Cromer and Colin Bole is pushing sales.
“We want to make sure the orders that we secure moving forward are going to be win-win, meaning good for the airlines and also good for us,” he said.
The potential customers include small and large carriers that operate in North America, Europe, Asia and the Middle East. “It’s just a typical customer base that we are targeting,” he added.
The beleaguered Montreal-based company desperately needs to win some key orders to build a backlog for the all-new aircraft, which is now slated to enter commercial service next year.
Shares in Bombardier continue to slide on Thurs- day, falling 12 per cent at the opening. It closed at $1.76 (U.S.), down 19 cents. The share price is down almost 60 per cent so far this year.
That’s because the company has been struggling with the cost of developing the CSeries, now estimated at $5.4 billion, up $2 billion from initial estimates.
It also announced Thursday that it would push back the launch of the Global 7000 business jet until 2018, two years later than planned. It had already put development plans for the Learjet 85 on hold.
Bombardier noted demand for business jets was weaker in the second quarter, especially in Russia, China and Latin America, but hoped the third quarter would be stronger.
In the second quarter, Bombardier had a net profit of $125 million, or six cents earnings per share, compared with $155 million, or eight cents earnings per share, in the corresponding period last year.
Revenues totalled $4.6 billion, compared with $4.9 billion in the same quarter a year earlier, though when adjusted for foreign exchange, revenue was up 2 per cent.
Earlier this year, Bombardier raised more than $1 billion by selling more shares and $2.25 billion in a bond sale to boost its liquidity position.
The company reported its cash usage in the second quarter was $808 million, though its liquidity stands at $4.4 billion.
It plans to raise even more money with an initial public offering for a stake in Bombardier Transportation in the fourth-quarter, though Bellemare emphasized again that it was only a minority stake, and the division itself was not up for sale.
The Toronto Transit Commission is al- so frustrated with Bombardier over repeated delivery delays for its new streetcars, and might ban the company from bidding on future contracts.
The CSeries program has been plagued with cost overruns and delays that included an engine fire year that grounded the plane for months. It is now expected to win certification later this year, and deliver the first plane to Swiss International Air Lines in the first half of next year.
The company has 243 firm CSeries orders and 360 other commitments or options, which the sales team is trying to convert.
Officials have always insisted that its target was getting 300 firm orders by entry into service, though Bellemare was less definitive when asked by reporters if the goal still stands.
“That was a target. I think it was a good target,” he said, adding it was good to align the sales organization at the start.
“But I think we have now reached a point in time where I’m not sure it matters much to be honest with you,” Bellemare said. “We are in a good place. We can start with what we have got for a few years, and we are regaining momentum on the sales side.”
He dismissed any suggestion that CSeries sales were being slowed by falling oil prices, which would make fuel efficiency less of a priority. He argued lower fuel prices actually help airlines that are looking to refresh fleets, because of the added fuel savings.
“It does help airlines to buy aircraft, and airlines will continue to buy aircraft that are better performing because it will help them to be more profitable,” Bellemare said.