peekay4
You raise some very good points to consider. I would like to comment for your consideration and I can assure you, I am NOT trying to insult your intelligence or anyone else's for that matter.
Airbus can undercut the CSeries by offering the A319/320/neo at "very deep discounts" (read: loss) as part of a "package" deal with other aircraft.
I don’t know if you realize it or not, but you’re suggesting Airbus is playing a dangerous game. I’ve read this kind of comment many times before.
The CS100 has NO direct competition. The A319, A320 and Neo are used by you and others for argument sake and nothing more. So, there’s no other practical reason for even mentioning A or B in comparison to the CSeries without differentiating.
If I may differentiate, Airbus used to have the A318 for direct competition but that was before the first C series test vehicle had even been assembled, which as of 3 years ago, the A318 is no longer produced. I’ll take that for direct competition any day.
As for the Boeing 737. CSeries used to have the B737-600 for direct competition but that aircraft too is no longer produced. Boeing sold a grand total of 69 600s, so neither Boeing or Airbus compete “directly” with Bombardier in this 110-130 seat market segment. Something many pundits seem to be oblivious to. There is some overlap when talking about aircraft types and seat segments. That may be pedantic but I’d also have to acknowledge CSeries has overlap with A&B products. Sorry, but to me, that overlap isn’t totally direct competition as many seem to think. It’s just competition and BBD simply isn’t going to dominate the industry.
Airbus have already “shrunk” their A320 twice just to get to the A318. Sold a grand total of 81 aircraft (to date) before finally tapping out. So I’d ask (I don’t any more) whether the lack of A318 sales is due primarily to the possibility no airline wants 110-130 seat aircraft OR whether the A318 was just too uneconomical to operate in that segment of the market. I could ask the same about the 600 series B737.
What this means for the CS100 is that it has (competitors, but) no direct competitor. Only Embraer E2 and MRJ are close. Since both are Regional Jets and both are outside scope they are unlikely to be sold in large numbers.
(By "very deep discount", let's say, 66% off Airbus published list price)
In my estimation, this is where the dangerous part comes into play for A&B. Bombardier got the jump on both A&B with the CSeries as evidenced by their response to the perceived threat BBD posed by possibly cutting into their duopoly. Re-engine successful models, throw in some new avionics and you have ‘new and improved’ solutions for about the same price. Easy.
Deep discount the product and you get it off the shelves. The problem is, in 5-10 years, depreciation and market values for yesterday and today’s NGs, etc. go into the toilet and those customers won’t be happy when they realize their treasured assets aren’t worth very much as a result of ordering nothing more than an old product with new paint, new engines and an updated avionics suite. We’ll see. That’s not genius on my part it's what I've read elsewhere.
BBD doesn’t have huge numbers of C series aircraft laying around Mirabel or in the desert, so they aren’t exactly in a position to offer anyone a “very deep discount” on the most modern aircraft, most fuel efficient, most environmentally friendly, quietest, longest range in its class airliner. Why would they? I’m confident in saying if BBD haven’t got the C series price point right by now, they soon will have.
Bombardier’s “previous management” insisted selling the CSeries at a typical 50% discount, since the profit margin is already tight at this level
I have no idea what their previous or present management will, won’t or might do.
The "previous management" couldn't make sales at these prices and were let go.
I think if you looked at the resumes and experience of the “previous management” team, you’d find most couldn’t have been further away from aviation before joining BBD than they were. Which I would guess has more to do with why they were let go than anything else. Today the management team are mostly experienced aviation professionals, well connected, who’ve been executives in closely and somewhat inter-related businesses.
"New management" was brought in and given a mandate to be "more flexible" with pricing, to meet 300 firm orders sales target
I don’t know where anyone would get a gem like that but I know I’m certainly not in any position to agree or disagree with any statement like that.
“New management” still couldn’t sell the CSeries at this “super-thin” margin. They had no takers at Le Bourget and closed zero sales to date.
Unfortunately, you are using a rather lame example here. No one sells aeroplanes at an airshow, or very few do at least. Aircraft sales are made months in advance of airshows and airshows used as merely a forum to ‘announce’ sales. Good for the OEM, good for the buyer and great for the airshow sponsor. BBD knew well in advance for LeBourget they would not reveal ANY new aircraft orders. For them it was about getting the C series there and putting up a demo flight for prospective (cautious?) buyers.
What airline customer arrives at any Airshow, shakes hands with an aircraft sales team in the morning and by mid-afternoon announces the purchase of a fleet of brand new A320s or B777s??? I seriously doubt that would happen. (Qatar Airways excepted)
Republic has had a change in strategy and may not take delivery of their 40 firm orders. They’ve bought E175s and have dumped their Q400s to Flybe.
Republic are still holding these aircraft positions according to the last thing I read on it. Seems to me they could get a decent price on their white tails or even on aircraft leases. Don’t assume Republic will automatically cancel their order just because they no longer own Frontier. There’s money to be made here NOT just the payment of penalties to BBD for their order cancellation. That sledge hammer has two sides.
IFC (Ilyushin) might not take delivery of their 32 firm orders, since the ruble has tanked
IFC also has difficulties getting financing other than from the Chinese due to sanctions on Russia
It may surprise you to learn that after LeBourget, European bankers were so impressed with the CSeries that they approached IFC with a new business proposition for financing their CSeries purchases. That deal is no longer in jeopardy. I guess you haven’t read that yet, eh?
Suddenly Bombardier potentially has to sign (40+32) = 72 new firm orders just to tread water. Remember, they’ve signed zero sales so far on super-thin margins.
You might also add to that, with 243 C series sold, any new customer will have to wait till probably 2018-19 maybe even 2020 before they see their aircraft. Sales could be made at any time and as long as BBD have a sales team, I’m sure they’re out there humping their butts to sell. As for super thin margins, I’m guessing the discount margins ARE thin. They are financially strapped and need the cash. It would make sense to me, but then I’m neither a salesman or a financial whiz. Ask my wife.
And that’s before this failed deal with Airbus which has everyone spooked. No one wants to risk buying an “orphaned” aircraft.
This was surprising to me. But, if you’re going out to industry for a backer, why wouldn’t you go to any of your closest competitors? Makes a lot of sense. Why Airbus would walk away should come as no surprise to anyone. A320 or Neo aircraft sold for future delivery is great but it is not money in the bank today (as BBD well know). The A380 sales are holding at 317 and not likely to increase with only about two airlines even remotely interested in buying. The A350 just recently started deliveries. The A400 troop transport grossly overpriced, grossly delayed, etc. it certainly comes as no surprise to me that they walked away from the idea probably more due to the asking price than anything. But, good game just the same. Who’s next?
And meanwhile the price of oil has dropped to $50/barrel making the CSeries ROI difficult
But, the price of oil will go back up. Right? Greed will see to that. Any comment about the price of oil today is nothing more than a red herring.
thanks for taking the time to read this. I always appreciate contrary opinion. It keeps me thinking and sometimes changes my thoughts and opinions.
Cheers,
Willie
