Bombardier offers majority stake in C Series to Airbus

[twochai]

The Canadian press reports that Bombardier has offered a majority stake in the C Series programme to Airbus:

Bombardier pitched majority CSeries stake to Airbus: report - Business - CBC News (http://www.cbc.ca/news/business/bombardier-pitched-majority-cseries-stake-to-airbus-report-1.3259280)

[peekay4]

Well there was a report last week suggesting Bombardier will need a huge infusion of cash next year, much earlier than thought.

And that their plans to IPO their rail business this fall won't come even close to covering their financial shortfall.

So basically, they are in a fight for survival at this point.

[striker26]

A few other forums point out this desperation of Bombardier. The C-Series is a fail, ill say it again, not an airplane that fits the market, nor allows Bombardier any future potential. This has nothing to do with "being Canadian" and support our companies, it has to do with dumb vision. I heard on the radio this morning from an industry analyst Airbus shrugged off the offer, im sure their scratching their heads...if im Airbus, why settle to compromise any a320 sales, let them sink. #Embraer

[er340790]

Personally, I don't think the CSeries is going to be sold to any interested foreign party anytime soon. Rarely is it mentioned the mega bucks Bombardier will receive when the Global Express jets and Challenger corporate aeroplanes are delivered to operators like Vistajet, Net Jets, TAG, etc.. Those sales from two and three years ago provide a sizeable income for Bombardier at present so, try not to focus on one number. Take in the complete picture.
Like Airbus and the A380, whose total sales sit at 317 and are not likely to increase much further. I wonder what the break even is for that program? The CSeries sits at 243 and it hasn't even been certified yet.


Willie Everlearn???

No, you know, I don't think he ever will...

[twochai]

The C-Series is a fail

Don't be so certain. At the time of first flight of the prototype CRJ in 1991 Bombardier had one firm order (from LH) for thirteen aircraft. They are now closing on 2,000 units produced as the CRJ created a new segment by filling a hole in the market.

The same will happen with the C Series - it will fill a significant gap between 100 seats and 150 seats.

[Torquelink]

The same will happen with the C Series - it will fill a significant gap between 100 seats and 150 seats.

100 - 130 seats will be fought over by Bombardier with the CRJ1000, CS100 and CS300, by Embraer with the E190-E2 and E195-E2, Mitsubishi with the MRJ90 and, eventually, MRJ100, and Sukhoi with the SSJ100. From 130 seats up there's the Airbus A319neo and Boeing 737-7MAX. There is no gap. Airbus were stringing Bombardier along and now know everything they need to know about the C Series. The C Series is, technically, a fine aircraft but Bombardier will never be able to compete on price with Airbus or Boeing. Already deals are being done where the A320 - never mind the A319 - is being priced less than the C Series.

If they'd launched a "CS500" variant with 150 two class seats from day one they might have picked up some volume orders and gained economies of scale but it's too late now.

[Rwy in Sight]

If they'd launched a "CS500" variant with 150 two class seats from day one they might have picked up some volume orders and gained economies of scale but it's too late now

Would it be technically feasible to make such an aircraft or it would be too long? Also I feel the combination A321/320 seems more attractive than the product line you describe.

[FLEXJET]

The potential issue I see with Bombardier is the reduced cash flow and a growing debt due to:
the failure of the Learjet 85, the two-years delay of the 7000/8000, the smaller amount of Global 5000/6000 orders, the rather slow sales progress of the Learjet 70/75 and overall the high cost of the CSeries program, with, to date, no new orders in 2015.

Probably nothing lethal in the short term but still worrisome.

[ExDubai]

Cashflow is the name of the problem. Bombardier burned to much money on different playgrounds. The Company is a perfect takeover candidate. China is looking to strengthen their Aviation industrie....

[D Bru]

Excellent planes at the time, lost view of real competition and market, no real means to invest, too late too little. That was Fokker and it could be Bombardier aviation too.... I hope not

[striker26]

yup, and just to add about the CRJ having 1 order back in the 90's, well that's right it was the 90's. The CRJ was a huge success because the market demanded an alternative to short haul routes that didn't require high seat capacities. If it wasn't for the Q400 and rail, this company would be under already. I really hope they don't sell to a foreigner but Bombardier needs some serious downsizing.

[Longtimer]

And then there was lot of Canadian Taxpayer $$$ that also helped. But let's not forget they are not just aircraft and seem to be successful in selling their trains.

[ettore]

Fyi

Bombardier, Airbus Say Talks Over ‘Business Opportunities’ Have Ended

Bombardier, Airbus Say Talks Over ‘Business Opportunities’ Have Ended
Companies confirmed they were exploring strategic initiatives but didn’t provide details
By Ben Dummett
Updated Oct. 7, 2015 1:01 a.m. ET


Source : The Wall Street Journal (http://www.wsj.com/articles/bombardier-in-talks-to-sell-cseries-stake-to-airbus-1444170103)

[peekay4]

Don't be so certain. At the time of first flight of the prototype CRJ in 1991 Bombardier had one firm order (from LH) for thirteen aircraft. They are now closing on 2,000 units produced as the CRJ created a new segment by filling a hole in the market.

The same will happen with the C Series - it will fill a significant gap between 100 seats and 150 seats.
One of Bombardier's problems focusing on the C Series is that they've effectively neglected the CRJ, conceding the regional market to Embraer and newcomer Mitsubishi.

In fact, Bombardier is likely losing money on both the CRJ and Q400 at current manufacturing levels, according to Bank of Montreal analysis. Firm orders mean nothing if they are selling at a loss!

Bombardier has talked about "re-investing" in the regional market, but frankly: 1) they don't have the money; 2) at this point, that might be throwing good money after bad. They might need drastic restructuring instead.

Bombardier created the C Series with an economic assumption of oil at $150/barrel. It's now at $50/barrel and could stay near this level for years.

Is Bombardier dead? No, but they're not likely to survive unscathed.

[Lonewolf_50]

In fact, Bombardier is likely losing money on both the CRJ and Q400 at current manufacturing levels, according to Bank of Montreal analysis. Firm orders mean nothing if they are selling at a loss! Unless you can recover with various service and support contracts in the longer term ... but as I have no idea what the strategic planning at Bombardier looks like ...

[_Phoenix]

That was Fokker and it could be Bombardier aviation too.... I hope not
I really hope they don't sell to a foreigner
Fokker history was different, they invested in a smaller version: F-100 sales were good, then Fokker begun development of the Fokker 70, a smaller version of the F100. But sales of the F70 were below expectations and the F100 had strong competition from Boeing and Airbus.
But today, Boeing and Airbus have tons of orders (over 4100 of A319 to A321). Their real fear is that the waiting line for delivery is too long then some costumers might have a closer look to Bombardier offer, because the numbers ($$) do not lie:
Airbus A319neo: First Flight 2015. seats 144, Fuel efficiency per seat 2.04 L/100 km (115 mpg-US)
Boeing 737 MAX 7: First Flight (?) 2017, seats 144, Fuel efficiency per seat(?) 2.04 L/100 km (115 mpg-US)
Bombardier CSeries 100: First Flight 2013, seats 115, Fuel efficiency per seat 2.14 L/100 km (110 mpg-US)
Bombardier CSeries 300: First Flight 2015, seats 140, Fuel efficiency per seat 1.92 L/100 km (123 mpg-US)
Hang on Bombardier for another 4-6 months and you'll get the big slice of pie!

[peekay4]

The big problem with that _Phoenix, as discussed in another thread, at current oil prices the competition for CSeries is not only from the new MAX/neo but from older leases:

Bombardier Inc?s CSeries a tough sell as cheap oil revives used jet market | Financial Post (http://business.financialpost.com/news/transportation/bombardier-incs-cseries-a-tough-sell-as-cheap-oil-revives-used-jet-market)

You're just not going to save enough $$$ from fuel efficiency to justify the total cost.

For many operators (especially if they already operate smaller craft from brand "A" or "B") the ROI for the CSeries is a very tough sell today vs. when oil was approaching $150/barrel.

[_Phoenix]

Peekay4,

Oil barrel price spikes should not influence too much the investment in an airplane, especially if that airplane beats the brochure. In my opinion is just matter of time and money turn back at long term

[Grizzz]

Bombardier has been divesting itself of many divisions for quite awhile, so nothing really new about this tact. The company has had losses on many fronts and splitting off divisions (Bombardier recreational products aka BRP, sea-doo, ski-doo, can-am etc) and the light rail division has been in flux for years (big chunk sold to SNC Lavalin, one of the worst corporate entities in Canada). The current atmosphere in Canadian political circles is to stop subsidies to business regardless of who and where, something A & B get to capitalize on in their respective operations. Federal election in less than 2 weeks here may change some of these options going forward, but I suppose most political options will be somewhat afraid of corporate subsidies, given the new pacific rim trade agreement and the anti-protectionist mechanisms sure to be a part of it. CS is a calculated gamble and i for one hope it succeeds, albeit without government parachutes.

[West Coast]

One of Bombardier's problems focusing on the C Series is that they've effectively neglected the CRJ, conceding the regional market to Embraer and newcomer Mitsubishi.

They've ceded the upper end of the market, 70-76 seats. In other words the one artificially limited by scope in many of the larger markets.
SkyWest has made no bones about it that refleeting is a priority. They've also made it clear that the 50 seat market isn't as dead as others have predicted. This evidenced by them pulling cheap 50 seat CRJ-200s out of the desert.

Not implying BA is going to build more CRJ 50 seaters, but that replacement is going to have to come from somewhere. Where I don't think is the solution will be larger aircraft with lesser frequency as predicted, though it will be a player.

Maybe a new new NG Q?

[peekay4]

They've also made it clear that the 50 seat market isn't as dead as others have predicted. This evidenced by them pulling cheap 50 seat CRJ-200s out of the desert.
Old CRJ-200's are anything but "cheap". They are very expensive to maintain, much more than originally forecasted by Bombardier.

And actually SkyWest has been clear that they want to trim down the 50 seat and below category.

This year, SkyWest has already cut their CRJ-200 flight hours by around 7% as compared to last year, and further reductions are planned through the rest of the year.

They are of course contractually obligated to fly certain routes with certain equipment -- even if such routes are currently operating at loss.

Yes in the long term there is a question for replacement of the 50-seat class. But I don't see SkyWest buying new 50-seat jets from Bombardier or anyone else. At least not anytime soon.

So I think from the manufacturer's perspective, the business case for 50 seat jets is just not there.

[West Coast]

SkyWesg INC is cutting 50 seat aircraft, of both varieties. SkyWest airlines is still bringing aircraft out of the desert when they can find cheap leases, i flew a couple of them out of IGM. Yes, the more expensive leases are coming off contract and the total -200 fleet is downsizing, but its not going away anytime soon. Mostly as there's no real replacement on the horizon.

They are of course contractually obligated to fly certain routes with certain equipment -- even if such routes are currently operating at loss.

About the only type of flying that falls into that category is at risk flying. SGU has shown little patience at maintaining routes after local seed money has been spent and the route not earning its keep.

And actually SkyWest has been clear that they want to trim down the 50 seat and below category.

Already happened in the sub 50 seat category, at least at airlines. Perhaps INC still has some 37 seat ERJs. Kinda doubt it though.

Yes in the long term there is a question for replacement of the 50-seat class. But I don't see SkyWest buying new 50-seat jets from Bombardier or anyone else. At least not anytime soon.

Someone is going to. That market won't go away like the 19 seat market did and I doubt it will be under served by cutting 6 flights spread out over the day for one guppy. SkyWest tried something similar already, sending the EMB-175 into markets that were served by the multiple -200 flights They have returned to flying -200s again.

[Torquelink]

[QUOTE]Would it be technically feasible to make such an aircraft or it would be too long? Also I feel the combination A321/320 seems more attractive than the product line you describe.[/QUOTE

Naively, Bombardier hoped to escape a major reaction from Airbus and Boeing by limiting the C Series to 130 two class seats but A and B responded anyway with the neo and MAX. Many, many carriers told them that they needed 150 two class seats and, given how much larger the 150 seat+ market is than the 100 seat+, Bombardier would have picked up at least a part of this market with a CS500: it would have been the only all new offering in the space with new technology airframe and systems as well as engines. Why design an all-new 5 abreast cross-section cabin which they admit could easily be stretched and then limit it to 130 two class seats? When was the last successful narrowbody with only two variants (oh, all right - apart from the 757)?

Could have made a real dent in A's and B's market but, sadly, unlikely to happen now unless a well-heeled investor steps in: COMAC?

[ZFT]

Have a glance at the CAE financial situation.

Sooner or later their Canadian tax funded existence will cease.

Maybe Airbus will get another offer?

[twochai]

More speculation on pending orders:


Bombardier in talks with North American airlines on C Series jet orders

Allison Martell and Tim Hepher
20:13 EST Friday, Oct 09, 2015
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TORONTO/PARIS — Canada’s Bombardier Inc. said on Friday it is in advanced discussions to sell its new C Series jet to airlines in North America, without identifying the prospective buyers.

Montreal-based Bombardier has redoubled efforts to win a landmark order for the C Series after failing to sell the program to rival Airbus, and is pitching the jets hard to airlines in North America, said two sources familiar with the matter.

The sources said Bombardier was pitching Southwest Airlines Co. and American Airlines Group Inc., as well as similar airlines. One source said Bombardier was also pushing to sell the jets in China.

“We are in some pretty advanced discussions,” said Bombardier spokeswoman Marianella de la Barrera. “Our senior leaders are engaged.”

Air Canada, Canada’s biggest airline, is seen by many as an obvious potential customer for the C Series. The company declined to comment on Friday. American Airlines also declined to comment.

“We have nothing in the works that would have our customers expecting to see anything but a Boeing bird when they walk up to a Southwest gate,” said a Southwest spokesman.

A new order from a major U.S. airline would help restore confidence in the C Series program, which has not won a new firm order in more than a year.

But Bombardier may need to offer steep discounts to lure mainline carriers from Airbus and Boeing Co., which have deep relationships with those airlines, and have also cut prices to protect their market share.

Talks between Airbus and Bombardier ended abruptly on Tuesday after Reuters reported the discussions.

[peekay4]

More speculation on pending orders:

Bombardier in talks with North American airlines on C Series jet orders
I love the attempt at damage control.

Aside from Air Canada, it's no secret that Bombardier is hoping to sign United, which may be in the market pending union negotiations.

But even if an airline is seriously considering the CSeries, it would be crazy to sign at this point, unless they can get some deep concessions from Bombardier.

Plus there are still questions on what will happen to the orders placed by Republic and IFC?

At this point, Bombardier is likely offering the CSeries at a loss.

The word is that Bombardier hopes that Airbus will come back to table, and that they had also approached Boeing, ATR and COMAC. Not an enviable negotiation position to be in.

Yesterday the Quebec government signaled that they'd be "ok" if a foreign company acquires majority stake in Bombardier. Unthinkable just a month ago!

[Una Due Tfc]

Don't Airbus own ATR?

[_Phoenix]

Peekay4,
Do you have any references to confirm your last 4 sentences?

Probable the very next large order will have best concessions, but why to sell at a loss one of the finest aircraft in the air? Soon CSeries100 will be certified then production is ensured for 2-3 years, which is close to ideal ratio between enough backlog vs. delivery date.

[ZFT]

Don't Airbus own ATR?EADS and Alenia jointly own ATR. (Although the latest ATR signage at TLS gives a different impression!).

[oldchina]

... it's called Airbus group

[ZFT]

I stand corrected

[peekay4]

@Una Due Tfc

As mentioned above, ATR is a 50-50 JV between Airbus and Alenia -- but it is a separate company from Airbus.

Alenia itself is a major supplier to the Bombardier (they make the CSeries tail section). So they already have a lot in stake in the CSeries. Not very widely reported, last year Alenia played hardball by suing Bombardier for loss of income due the CSeries continuing delays.

@_Phoenix

No one is going to go on record that they're selling at a loss...

But FWIW, here's a point-by-point narrative for speculation:


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.
(By "very deep discount", let's say, 66% off Airbus published list price)
Bombardier's "previous management" insisted selling the CSeries at a typical 50% discount, since the profit margin is already tight at this level
That means the discounted price of a CS300 might be more than a discounted A320
The "previous management" couldn't make sales at these prices and were let go.
"New management" was brought in and given a mandate to be "more flexible" with pricing, to meet 300 firm orders sales target
"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.
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.
I guess more clarity and maybe formal announcement after Republic's union voting happening now.
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
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.
And that's before this failed deal with Airbus which has everyone spooked. No one wants to risk buying an "orphaned" aircraft.
And meanwhile the price of oil has dropped to $50/barrel making the CSeries ROI difficult
Given all this, as the article posted above by twochai mentions, now it looks like Bombardier will need to offer the CSeries at "steep discounts" (read: at a loss)


Best option for Bombardier might be to enter "performance" contracts.

I.e., they would sell at a loss, but if the CSeries performance is as advertised, saving the airline money vs. competitor's projections (from better operational efficiency, fuel savings, reduced maintenance, etc.), Bombardier would get a percentage of that savings. Hopefully over the contract period they would at least break even, but this additional money isn't guaranteed.

[Grizzz]

There is a new free trade agreement Canada is about to enter into called the "Trans-Pacific Partnership". There may be new partnership opportunities for Bombardier arising from this deal. I've not seen specific details and have no clue how they may apply to Bombardier. However someone in the Pacific rim may now come to the rescue of Bombardier. Just my sixth sense setting off alarms as to how this new free trade alliance may end up affecting the C-Series.

[Willie Everlearn]

It is apparent to everyone that BBD are experiencing serious financial strain. It could well mean the end of the CSeries program and/or the company. At this point in time, I wouldn't know.
I do however, chose to consider the positives about this company along with the ever increasing number of negatives. Despite the financial demands on a company like BBD I still hold the opinion the aircraft will be a success.
When the Grown-up Airlines finally clue in to the potential this aircraft has of all but eliminating the regional airlines (reduced CRJ production and sales), how ideally suited it is for EU ops, what it can do to relieve Hub ATC pressures by developing secondary Hubs, how ideally suited it is for VIP and Corporate ops, sales figures should improve.
They still have options financially. I'm sure they are likely to approach a variety of potential investors, you'd expect that from any financially imperilled company. Despite all the speculation about success or failure, BBD responded with this:
"The company is 100% committed to the C Series aircraft, and we have the resources and liquidity to see the program through."

...I, for one, hope so.
Willie :ok:

[evansb]

Just for clarification, the TPP is not a "free trade" agreement, it is another "managed trade" pact involving reduced tariffs and reduced mandatory content legislation. "Free trade" or "balanced trade" will never be achieved until all participating nations have comparable standards of living, worker safety legislation, identical government subsidies and identical environmental regulations.

Meanwhile back to the C series programme, I too, hope for the best, even if further government support is required.

http://i1047.photobucket.com/albums/b477/gumpjr_bucket/bombardier-cseries-20130916.jpg

[Willie Everlearn]

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 :ok:

[ExDubai]

Bombardier to Delay New Global 7000 Business Jet | | Aircraft Completion News (http://aircraft-completion.com/aircraft-news/bombardier-to-delay-new-global-7000-business-jet/)

Again a delay....... That's one of the biggest issues with BBD during the last years. The Global 7000/8000 should have been already in the market for 2 years in order to "fight" against Gulfstreams G650

[peekay4]

@ExDubai

Today they also killed the iconic CL-415 water bomber with the closure of their North Bay facility (https://www.baytoday.ca/local-news/bombardier-pulls-out-68724), citing no sales and production activity.

We're also hearing today that Bombardier now intends to pitch the CSeries to Embraer. :bored:

@Willie Everlearn

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.
The CS100 is a big loser right now. With just 53 orders, it accounts for only 20% of the CSeries order book. Bombardier is not going to survive on the bottom-priced 20%. The vast majority of CSeries orders are for the CS300 which competes with products from "A" and "B".

Hence the comparison is appropriate.

The CS100 made sense when it was first pitched in 2004. It was supposed to be the size to "fill the gap". But the market has changed since then. Now the CS100 is in "no man's land". It's too big for the regionals, yet too small for the mainline carriers which want larger planes.

Aircraft sales are made months in advance of airshows and airshows used as merely a forum to ‘announce’ sales.
I've walked the grounds of Le Bourget by invitation of the French government, so I know how these shows work. The bottom line is, they announced zero sales -- and have not announced any sales for the past year.

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.
All of Republic's orders are for the CS300, which they cannot fly for the mainlines due to current union contracts.

So about the only way they can fly those CS300s is if they create a brand new LCC to replace Frontier. At this point, that's a long shot.

Republic has no incentive to cancel their orders right away. Remember that we're already past Republic's original delivery start date. Each new delay from Bombardier plays into Republic's hands in terms of any cancelation fees.

And if it is Bombardier which ends up canceling the CSeries, then not only Republic doesn't have to pay anything, they will get their deposit back.

So they're just going to wait it out until the last moment. It doesn't mean they intend to take any deliveries.

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?
Ha! The financiers told IFC they will provide financing IF (and that's a big IF) Ilyushin can find NEW non-Russian ("European") operators willing to buy the CSeries.

Which means they're NOT willing to finance IFC's current order. And why should they? IFC's current order is for airlines like UTAir-Ukraine and Moscow's VIM which are struggling right now with the ruble and various sanctions.

But, the price of oil will go back up. Right? Greed will see to that.
Eventually. But unless we have another 9/11 type event, cheap oil will persist for years.

That's because oil for delivery as far as 2023 is already price-locked in the futures market (http://www.wsj.com/articles/oil-futures-signal-weak-prices-could-last-years-1439159387) at under $64/barrel.

Bombardier as we know it might be long gone by then.

Can they still survive? Of course. But Bombardier management has to make tough choices and time is ticking.

[Willie Everlearn]

peekay4

Thanks for the rebuttal. I appreciate your taking the time to engage as you do provide some interesting commentary. BTW, we hear in Montreal this morning courtesy of the CBC that BBD are now in discussions with Embraer regarding CSeries, so it sounds like confirmation the company is making the rounds seeking a financial partner.

I have to say, I think that's a better response to a crisis than cancelling the program this close to certification before trying at least to find additional investors.

I believe the aeroplane will fly and it will find a home with legacy carriers who still need to develop markets with 110-130 pax aircraft. This fact alone will impact regional airlines in that I think they will shrink further and/or disappear.

Let's see how this all plays out.

I, for one, sure as hell don't know but it's going to be fun to watch.

Willie
P.S. BBD killed the 415 at the same time they delayed the LR85 due to very weak sales, and that was a good thing. Now, if they could only dump Lear.

[Torquelink]

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.

Willie: you are quite right: on paper the CS300 doesn't have direct competitors. Except the airlines don't see it that way. They can get A319neos / 737-MAX7s for less money: they burn a tad more fuel on an aircraft basis but have more seats so burns less per seat, have longer legs and are part of a family.

I think the sales performance of the 737-600 and A318 shows the size of the market for the CS100/CS300. Granted its much more economical but there has never been a large 100+ seater market and it seems there never will.

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?

Lessors will only take delivery if the manufacturer has sold the aircraft into the market - they are not sales organisations themselves. Launch customer LCI can already walk away from their "orders" as the programme has not met the specified sales waypoints.

I have no doubt that that the CS is a fine aircraft and I am sorry to see the state the project is in now. I wish I could see a rosier future for it but it's looking pretty bleak at present.

[peekay4]

@Willie

I did mention the Embraer talks in my prior post (2nd para). Frankly, I can't wrap my head around it.

@Torquelink has a good point

Anyway I'm trying to work out some simple numbers. Bombardier made a $3.4 billion investment into the CSeries and for that they need about 300 firm orders at the beginning of commercial service to get through ramp up, etc.

But then they sunk another $2 billion into the program. That's almost a 60% overrun, which simplistically suggests that they also proportionally need 60% additional firm orders (to around 475 total) just for parity.

They're now at 243 which means they actually need more than 230 new firm orders just to get back in healthy state. And that's on top of any possible cancellation from Republic, IFC, etc.

Another way to look at it is from a margin perspective. CS300 lists for $71 million. Again for simplicity lets say they generously make 5% margin off the list price ($3.5 million) and all of the planes they sell are CS300s.

That means the need to sell more than 570 CS300s just to get that additional $2 billion back. That's a staggering amount. To put that in perspective, that's about the size of the entire CRJ 700/900 fleet worldwide, down the drain.

Even if United, JetBlue, Air Canada, etc., all put in large 100 aircraft firm orders each, that still doesn't come close to recouping just this additional $2 billion investment, never mind the original investment, and any new investment they're seeking from partnerships.

So really Bombardier needs to deliver > 2,000 aircraft to make this endeavor worthwhile. Can they? Yes, it's possible.

But I can't see them getting to these numbers by partnering with Embraer, for example. With Airbus at least they can take advantage of that company's massive scale and network.

I know some analysts have called on Bombardier to cancel the CSeries but I don't see how they could at this point. With cancellation costs they'd be left with $10 billion in debt and an aging product line. They're in way too deep.

[striker26]

And once again the point is, not enough sales. Again everyone defending the C-Series is missing the facts. Since inception this airplane has not sold, every airplane they do sell will be like a Christmas gift. I agree that they shouldn't cancel now, and they have looked into partnerships and now to save face, im sure they will push the federal government to allow the sell of majority of their stake to a foreigner who can increase cash flow for the next airplane development (very unlikely as after this election the sale to foreigners is going to be very tough). Its a sad reality but i wish they introduced this airplane 10 years ago.......:

https://en.wikipedia.org/wiki/Bombardier_Aerospace_and_Embraer_S.A._government_subsidy_con troversy

While Bombardier was crying about domestic subsidies, Embraer created one of the best 75-90 seat airplanes and a suitable replacement to operators who didnt want the 737/a320. Not to mention the RJ's which took many CRJ sales as well. Facts and history speak for themselves, maybe a new vision is in order.

[ExDubai]

I don't get it. Why should Airbus, Boeing or Embraer step in as the wight knight?

[Willie Everlearn]

peekay4

A lot of sensible comments in your post caused me to reflect and research a few of my own thoughts and ideas about all of this. Thanks. Being close to an abyss doesn't necessarily mean you'll fall in or be pushed in. There is however, that possibility if BBD refrain from trying to do something about avoiding it and from what I read, hear, and see, they don't appear to be rushing head-on toward that abyss willingly.
Which might be a good thing. Time will tell. I only would wish them best of luck.

Torque link

I appreciate your comments as well.
While I am not a numbers person when it comes to large number$ or aircraft order$, I take market projections from Airbus and Boeing with a pinch of salt. I do with BBD as well, with a minor exception. I don't think A&B pay too much attention to markets they don't have a major interest in. They've already lost in that 110-130 seat segment. This may be why they blow the CSeries off and I'd even speculate the E2 as well. The reality is the 110-130 seat market segment is there AND the CSeries (perhaps only for a few more months) is the only aircraft at present purposely designed for that market and they've achieved many impressive targets along the way. Overlaps with A&B are there but they are overlaps. Once some carriers get their heads around that and understand how the CSeries won't have to deal with any scope clauses (because it isn't a regional, seating restricted, weight restricted jet) and realize how they take back flying turned over to regional carriers, will they likely start buying CSeries. That's simply the way I see it and I'm not looking for any agreement or disagreement.
-------------

Embraer (apparently) are denying they're in any talks with BBD. So, between the two stories I've heard this week, I have no idea what's really going on
When a company has a successful aircraft like the CRJ series, it's difficult not to recognize a successful competitor like Embraer who also have a successful stable of their own. As for which is the better aircraft that's simply a subjective opinion. As for the CSeries, my subjective opinion is that it's superior to any E jet which, by the way, may be targeted for the same seating capacity, but has no way near the cockpit or cabin compared to the CSeries and that will likely be a big deal to the people who buy aeroplanes. We'll see.

Willie :ok:

[peekay4]

I don't get it. Why should Airbus, Boeing or Embraer step in as the wight knight?

To make money, obviously, while at the same time neutralizing a competitor.

Thinking out loud:

If Airbus can take a majority stake in a CSeries joint-venture for say $2 billion, that could be a steal, for a program that's close to certification and has most of the risks already solved. They get the potential upside without any the downside.

With time Airbus can also negotiate more forcefully with the CSeries supply chain, and leverage their vast sales and service networks to ensure the program's success. They could also demand more efficiency from internal Bombardier manufacturing.

And with Airbus backing, airlines which today may lack confidence in Bombardier can be secure in placing orders.

Airbus can also offer the CSeries as a sweetener to their customers, to package alongside the regular lineup, complementing or outright replacing the tepid A319neo.

Strategically, they can also ensure that there's no CS500 to compete with the A320 in the future.

Lots of questions though:

- How big is the actual market for 110-160 seat jet aircraft? Hundreds? Thousands?
- How will the deal be financed?
- What would be Airbus's ROI on the money they put into the joint venture?
- Will the Quebec government agree to consolidation of plants, etc., for efficiency?
- What's the best strategy vs. the A319neo?
- Will having the CSeries really help sell more A320s and above?
- How problematic is the lack of common cockpit, spares, etc., on the service network?

[ExDubai]

Peekay

Airbus developed around the A320 a family of aircrafts with a common design and most important with a lot of common parts. This designfeature is helps a) keep production cost under control and b) is a hell of an sales argument when it comes to maintenence cost, etc. The other usp is the flight deck/type rating. So why should Airbus try and sell an Aircraft which doesn't fit into their productline?

The point is, if Airbus needs an Aircraft in the range of the CS 100, it will be a derivate of the A320 family because Airbus and their customers are able to take the full advantage of the common development/design. Bombardier is not really a competition for neither Airbus or Boeing. They are to small and they play in a total different league. Don't know if the figure is right but I heard that BMD is bleeding 400 Mio. Dollar/quarter. Plus the upcoming cost to ramp up the CSeries production, no clou where BDD will find the necessary cash for a CS 500 development.

Embraer has already a product which is a competition for Bombardier. So why should EMB be the "white knight". Embraer wouldn't start breaking out in tears if one of their main competitors is struggeling over the next years. BDD is loosing ground on the commercial and on the business/private jet market.

At the end of the day there are only 2 options for the financial problems of Bombardier. A) Foreign/Chinese money or B) the canadian tax payer.

Bombardier needs a large order from somebody like United. Currently I don't know if BDD is willing to pay the prize for such a kind of order (meaning selling them on a hugh discount).

Also interesting the current leasing rates/month
http://www.myairlease.com/resources/fleetstatus

[peekay4]

@ExDubai

Did you see my last bullet point above? The lack of commonality is an obvious question in any analysis of a possible partnership.

BUT, the fact is, within the Airbus Group they obviously already have numerous heterogeneous aircraft with no commonality between them.

And more to the point, Airbus already have several joint ventures. Like the 50%-50% JV with Alenia to make the ATR 42/72 mentioned earlier in the thread, and also their 30% stake in DAHER-SOCATA for the TBM 700.

So similarly they can enter say a 51%-49% JV with Bombardier for the CSeries.

Bombardier probably need $2 to $3 billion plus 300-400 firm orders to get the CSeries in sound footing. So it's not a matter of just getting money from the Canadian/Quebec government or from China. As @striker26 points out, they need sales, and for that they need a strategic partner.

IF (and it's a big if) Bombardier can survive independently and take the CSeries to a break-even-point, then there is no doubt that a CS500 will be on their sights. Expanding the product line beyond the CS100 & CS300 is almost the only way they could rationalize the current investment in the program.

If so, Airbus might regret not spending that $2 billion.

[Grizzz]

Canadian election coming on the 19th. As I see it, 2 of the main contending parties will offer some kind of help to Bombardier, as both are currently promising the sky to any Quebec based business enterprise. Bombardier may get a hand up from all us poor Canucks.

[ExDubai]

....Bombardier may get a hand up from all us poor Canucks.
That's the reason why you pay taxes, it's called solidarity with the weak and poor ones ;)

[twochai]

Embraer (apparently) are denying they're in any talks with BBD. So, between the two stories I've heard this week, I have no idea what's really going on

A tie-up with Embraer makes no sense at all:

(a) because of product line overlap,
(b) because EMB has plenty of problems of their own right now, like:

(a) Brazil and its serious financial and business issues
(b) The KC390 military transport - serious technical problems resulting in an announced two year delay on a fixed price development contract, with minimal ultimate market potential in a saturated and declining segment:

https://www.flightglobal.com/news/articles/embraer-announces-two-year-delay-for-kc-390-415195

[Willie Everlearn]

From Leeham news...

"Earlier this year, Airbus officials said they will concentrate on improving existing airplanes once the A350 enters service.

Boeing followed by saying it would not take any “moonshots” and develop new airplanes, at least for some indeterminate time.

The sentiment on the part of both companies is understandable if not disappointing for aviation purists who want to see new and innovative airplane models rather than made-over sub-types.

This is one of those cases where both schools of thought are right.

New airplanes are, to state the obvious, very expensive to develop and in this increasingly technological age and demand for “smarter” airplanes that are more fuel efficient and which try to improve passenger experience while cramming as many revenue-paying passengers into the airplane as possible, becoming more and more challenging. Where it once was possible to bring an airplane to market within four years of launch, today airframers routinely look at seven years and even eight. Even derivative airplanes are now taking six or seven years to enter service from launch.

The most recent all-new new airplane programs that suffered delays are the Boeing 787, the Airbus A350, A380, the Bombardier CSeries, the Mitsubishi MRJ, the AVIC (now COMAC) ARJ-21, the COMAC C919, Sukhoi SSJ and the Irkut MC-21.

In other words, every single one. Some are running 18 months late (the A350), two years (the CSeries and MRJ and some are much longer (787, SSJ, ARJ21 and C919). Reasons vary, from inexperience (AVIC, COMAC and Mitsubishi) to industrial issues (787), design issues (ARJ-21, 787) and technical issues (pretty much all in one way or another).

Programs have price tags in the billions before anything goes wrong. Boeing’s 787 probably has set a record for program cost overruns in the civilian sector, with estimates hitting $22bn all-in–Boeing won’t put a price tag on it publicly. So it’s only natural that with these numbers and technical challenges at stake that the OEMs want to “harvest” the technology, as Boeing puts it, not only in derivatives but across family siblings.

Boeing’s 787 was a program debacle but this didn’t stop the company from applying design features and technologies rather quickly across the siblings. The 787’s 21st Century look interior inspire the interiors for the 747-8 and 737. Elements will clearly be included in the forthcoming 777X. The 787’s GEnx engines were applied to the 747-8 and so were elements of the 787 wing design, which were also applied to the 777X. The 787-8/9 begot the 787-10.

At Airbus, the company was sorely hurt by the development costs and delays of the A380 and military A400M. The cash squeeze, in our view, forced Airbus into at first a band-aid response to the 787 and expensive redesigns of the A350 until it settled on the three-member family of the XWB, the -800/900/1000. The -800 was the response to the 787-9; the -900 and -1000 took on the 777-200 and 300ER. The 787-8 went unchallenged, technologically speaking, leaving this battle to the A330, which for clarity we will call the A330 Classic.

Any fair assessment concludes that Airbus fumbled the ball, though it was a fumble induced by the A380 and A400M issues. Trying to cover two competitors, the 787 and the 777, with one family simply wasn’t a strategy that many thought would work. While Airbus was making the argument that the 787 carried too few passengers in an aviation world that was increasing in size, thus justifying the larger A350-800, its A350-1000 was smaller that the 777-300ER it was designed to compete with. This would come back to haunt Airbus in the coming years.

As time passed, it became clear the -800 wasn’t the right solution. Aircraft economics just weren’t good enough. The airplane cost about as much to operate as the larger -900 but it carried fewer passengers. Airlines were beginning to upgauge to the -900 and, in a few cases, the -1000, in part because Airbus had limited resources and were concentrating them on the -900 and -1000. It was clear the -800 had limited appeal and would be better off dropped. But what to do to cover the 787-8 and 787-9 markets?

The -1000 had its own issues. the original intent was to have full commonality between the family members, including the all-important (and very expensive) engines. But the performance was proving to fall short as analysis progressed. Airbus and engine maker Rolls-Royce soon tweaked the airplane, but in doing so angered customers because some of the critical engine commonality was lost. Emirates Airlines years later canceled its order for the A350 because it wasn’t the airplane it contracted for, said president Tim Clark.

After Boeing launched the 777-9, which carries an advertised 407 passengers to the -1000’s advertised 369, Airbus is faced with having too-small an airplane against the 777. The company is working to close the gap.

Airbus and Boeing weren’t the only OEMs to encounter problems with new airplane programs. Mitsubishi is two years late with the MRJ regional jet. Bombardier is 18-24 months late with the CSeries. China’s AVIC and COMAC, building their first jet transports that aren’t mere “Chinese copies” of other Western jetliners, are finding great difficulty and endless challenges. Russia’s Sukhoi and Irkut, integrating Western technology into local designs, are running into challenges as well.

Embraer, on the other hand, elected to take a bye on going with a new airplane design to succeed its popular E-Jet, electing instead to proceed with derivatives. It’s too early to know whether EMB is going to have challenges, but other OEMS found that derivatives can be anything but easy.

With multiples and multiples of billions of dollars at stake to develop new airplanes, and the billions of dollars of cost overruns at risk, it’s understandable the Airbus and Boeing are shifting to looking at derivatives and incremental improvements now for the lower-risk and ability to “harvest” technology across family lines.

This is hardly new. Airframers have been doing this since the Douglas DC-1 prototype begot the DC-2, which led to the DC-3. The Douglas DC-4 was the basis for the DC-6 and DC-7, for which there were A, B and C versions. Lockheed revamped the L-049 Constellation through several major upgrades (the -649, 749, 1049 and 1649, with several sub-sub-types in between). Convair created the CV-240 and revised it twice with the CV-340 and 440. The Martin 202 became the 303 (dumped after design issues with the 202) and the 404.

The trend continued into the jet age. Douglas created the DC-8-10/20/30/40/50 on the same basic airframe and really went to town with the DC-8 Super 60 Series. The DC-9-10 became the -20/30/40/50, the Super 80 (in four variants) and the basis for the MD-90 and MD-95. Boeing’s ground-breaking 707-120 became the 138/227/320B/C, the 707-020 (more commonly known as the 720), the C-135/KC-135 and a number of other military variants. The fuselage was the basis of the 727, 737 and 757. And so on.

European manufacturers of the early jet age followed the same pattern. There were four commercial versions intended for the deHavilland Comet. The Hawker Siddeley came in multiple versions, as did the British Aircraft Corp. BAC-111.

Bombardier created several versions of the Dash 8 turbo prop and the CRJ regional jet. Embraer has four versions of its E-Jet, reduced to three in the forthcoming E2 re-engined derivative.

Derivatives usually are successful, but not always. Often there becomes a “derivative too far.”
The small Boeing 737-500 sold reasonably well, 389, but its upgraded counter part, the 737-600 proved a dud with just 69 sales. The 737-7 MAX has done even worse: 55 sales to just two customers. We doubt this model will ever be built.
The Airbus A319 sold more than 1,500 in its original version, a solid number by any standard, but the upgraded A319neo has just 49 sales. The smaller A318 topped out at 79 sales.
Specialty airplanes haven’t done well, either. The Douglas DC-8 Super 62, designed to be a an extended long range airplane of the era, garnered just 51 orders. The more recent super-long range airplane, the 777LR, has sold 59; the last commercial airline order was three years ago. The -200LR replacement, the 777-8, is unlikely to do much better. The 747SP did worse, selling just 45.

Boeing’s decision to proceed with derivatives for the 737 and 777 rather than new designs stemmed from the debacles of the 787 program, which in turn adversely affected the 747-8, inducing two years of delays and adding billions to the cost.

Boeing ridiculed Airbus for proceeding with the A380 but went ahead with the 747-8, which has done far worse. The A380, no barn-burner by any means, has 314 net sales but the 747-8I has 51 sales (19 t Lufthansa and several head-of-state orders). There have been 67 747-8F orders. Boeing has already taken a write-off of more than $1bn on the program and is likely facing another big charge and a production rate cut. Outside of the public face of Boeing, there are few who believe the program has much life left and when talking to Boeing personnel privately, they almost to a person agree. This is clearly an example of a derivative too far.

So were the Airbus A340-500 and to a lesser degree the -600. One can argue whether the A340 was a mistake, but at the time of its launch, ETOPS was in its infancy and two-engine safety over water for extended flights was still a matter of some disagreement. The A340 simply came along at an inopportune time. Developing the super-long range -500 fell into the specialty airplane tap and the -600 was hampered by thirsty engines at a time when twin-engines had made four-engine aircraft obsolete. Bad timing all around.

Boeing’s 787 family now consists of the -8/9-10. The 10 has 139 orders, but sales have largely stalled since its launch. There are 459 orders of the 8 and 456 for the 9. Why isn’t the 10 selling better? It’s the largest family member, at a nominal seating of 323, with decent range of 7,000nm. Economics on the airplane should be at the top of the industry.

When we talk to people in the industry, comments range from the 10 will be a “niche” airplane to the line is sold out to 2020. The consensus opinion, however, is that Boeing is simply demanding too much money for the value received. The 10’s list price is $297.5m, $40m more than the 9 and $32.5m less than the larger, more capable 777-300ER.

Boeing’s 737 MAX family is a story of Good News-Bad News. The program has nearly 2,300 firm orders, clearly a success. But the MAX 7 has only 55 and the MAX 9 perhaps 350-400 when making some allocations of the Series TBD category–not bad, but trailing the competing A321neo by a factor of more than 2-3:1. The MAX 9 is widely recognized to have field performance issues. It can’t get off a 10,000 ft runway with maximum payload and fuel, according to our sources and our own calculations. The poor-selling MAX 9 is a get reason why Airbus retains about a 60% market share in the single aisle category and why a survey of an audience of 1,200 at the recent ISTAT conference in Istanbul showed 50% believe Airbus now has the better competitive single-aisle airplane vs 23% for Boeing–a market perception that must strike a dagger in Boeing’s ego.

Airbus announced it will re-engine the A330 and incorporate some other improvements. Boeing quickly began to talk down the airplane, to be point of being insulting-which tells us it’s worried about the A330neo. (Airbus resorted to the same tactic against the Bombardier CSeries.) Boeing routinely compared the 787-10 with the A330neo and boasted the 10 has 30% better economics. When you consider that 10 carriers 35 more passengers, you can see why Boeing would make this claim–but Boeing’s silence on comparing the 787-8/9 with the economics of the A330-800/900 is deafening.

Our own sources inside Boeing tell us Boeing is, in fact, quite worried about the challenge the neo presents to the 8/9, particularly with Airbus’ ability to price the neo much lower than the 8/9.
Embraer comes in almost as an afterthought in such discussions because with jets seating 75-122 passengers, the E-Jet is essentially overshadowed by the sex, sales and bickering at the Airbus and Boeing levels.

Some make an argument that Embraer was wiser to choose the derivative route in proceeding with a re-engined E-Jet, the E2, than was Bombardier in designing a new, clean-sheet jet. BBD had no choice: its CRJs are out-classed by the E-Jet and the CRJ-1000 is another example of a stretch-too-far.

Furthermore, the E-Jet aircraft isn’t that old–although design does, indeed, date to the late 1990s (the E-Jet entered service in 2004), wings and engines make the airplane and the E2 will have new designs of each. With a large, installed customer base for what is now known as the E1, EMB faced a much easier sales task than BBD did and does for the CSeries, for which a customer base must be created. In many respects, on a number of levels, EMB’s decision to go with a derivative was the classic no-brainer.

Despite the Airbus/Boeing strategies today of pursuing derivatives and harvesting technology, we are firmly convinced Boeing has no choice but to launch a 757/737-9 replacement in 2018, followed in two years by a replacement for the 737-8. The 737 has been taken as far as it can go. The MAX 7 is dead and the MAX 9 is struggling. The recently launched MAX 200 will be a highly niche airplane that will limit its appeal. This makes the MAX family basically a plane-and-a-half family.

The A319neo, if it is built (we think this more likely given special hot-and-high condition of Avianca Columbia) has already been reduced to today’s A318. The A320neo and A321neo are selling very well. Both are subject to incremental improvements and we expect to see more that will further enhance their competitiveness and capabilities. But when (not if) Boeing launches a replacement program for the 757/737, Airbus will have to follow.

It’s almost 2015 and 2018 isn’t that far away. For the purists who want to see new airplanes, we don’t think you will have long to wait."

Food for thought.
Gino

[evansb]

Mitsubishi's MRJ maiden flight is scheduled within the next two months...

[peekay4]

Canadian election coming on the 19th. As I see it, 2 of the main contending parties will offer some kind of help to Bombardier, as both are currently promising the sky to any Quebec based business enterprise. Bombardier may get a hand up from all us poor Canucks.

Well if the Liberals win tomorrow (and they're up in the polls) then Bombardier can pretty much kiss the 12 orders from Porter Airlines goodbye. Those orders are conditional on an expansion of the Toronto City Airport, which the Liberals are on the record of opposing.

Bombardier is still pretty much a family-owned company, and no one will invest a huge amount of new cash into the company unless the family is willing to make some deep concessions (which so far they're not willing to do). Hence a joint-venture might be a better option.

And for Canadians, do we really want to bail out a super-rich family which has insisted on some questionable strategy? In Quebec (and Canada) there is a lot of patriotic feelings when it comes to Bombardier, but the reality is we may be bailing out a bunch of billionaires.

The most recent all-new new airplane programs that suffered delays are the Boeing 787, the Airbus A350, A380, the Bombardier CSeries, the Mitsubishi MRJ, the AVIC (now COMAC) ARJ-21, the COMAC C919, Sukhoi SSJ and the Irkut MC-21.

Mitsubishi's MRJ maiden flight is scheduled within the next two months...
Yeah. And even if the MRJ turns out to be a complete disaster and they cancel the entire thing, what's the impact to parent companies Mitsubishi and Toyota? Nothing. They have trillions of dollars in assets. The MRJ is a minor "side investment" to them.

And that's one of the ways the CSeries differs from the other programs mentioned.

The CSeries isn't just a "moonshot", but is a "bet the farm" proposition. When you "bet the farm", mistakes aren't just costly: they threaten your very existence.

During the 787 program, even after numerous delays, Boeing's overall financial health was barely affected. Their credit rating went from A+ to A. Airbus Group's credit rating actually went up during the A350 program.

Bombardier's credit rating is now junk, with negative outlook for even further reductions.

The 787 and A350 also had a proven market, with over 800 firm orders each at the time of their respective first flights, all but guaranteeing their financial positions.

Bombardier is struggling right now just to keep their 243 orders.

[ICT_SLB]

G7000/8000 are "delayed" - with the demonstrated efficiency of the CSeries, would there be significant sales of a BBJ-like Executive variant in their place? The airframe cost would not appear to be significant in that market.

[ExDubai]

G7000/8000 are "delayed" - with the demonstrated efficiency of the CSeries, would there be significant sales of a BBJ-like Executive variant in their place? The airframe cost would not appear to be significant in that market.

A C-Series business jet would make sense, but not as replacement for the G7000/8000. It could be a interesting competition for Embraer Lineage 1000 and the small Airbus ACJ or Boeing BBJ. Esp. if Aux fuel tanks available. The Global 7000/8000 are ULR Jets with a range of 7.300 NM and above to compete with the latest Gulfstream Jets. And when you see the Gulfstream sales numbers the Global 7000/8000 should have been in the market since 2013.

[peekay4]

In an AFP article this morning an industry analyst puts the CSeries break-even point at 800 firm orders, up from the original 300 target.

Back-of-napkin calculations suggests that even in a good case scenario the program will be losing money for around 7 years.

It also implies they'll need much more than $2 billion extra to invest in the program, on top of the $5.4+ billion spent to date.

They're really cutting it to the edge with this one.

http://news.yahoo.com/bombardier-win-medium-range-jet-bet-despite-airbus-063654327.html

[ExDubai]

City Jet announced that they will purchase/lease 15 Superjets +10 options.
One of their Investors explained that the prize tag on the C-Series is a real challenge for a regional airline. The weak Rubel and Real is another challenge

[ExDubai]

Interesting article about profit and new developments....
Will 787 program ever show an overall profit? Analysts grow more skeptical | The Seattle Times (http://www.seattletimes.com/business/boeing-aerospace/will-787-program-ever-show-an-overall-profit-analysts-grow-more-skeptical/)

[_Phoenix]

C Series aircraft is the greenest single-aisle aircraft in its class, it has radically reduced emissions and flies 4 times quieter than other in-production aircraft in its class. It has enhanced cabin interiors and lowest seat-mile cost in its class. I strongly believe that this plane is a brand new design of 21st century and it will become a real competitor, for decades to come.

[ExDubai]

I strongly believe that this plane is a brand new design of 21st century and it will become a real competitor, for decades to come...
How much do you want to bet The question is, under which Brand name....

[J.O.]

When oil was $100 a barrel, the C Series was a great idea. At $47, not as much.

[peekay4]

AirBaltic seeks CSeries reassurances

“We would like a clear statement from Bombardier on the status of the program,” Gauss told ATW on the sidelines of the European Regions Airline Association general assembly in Berlin. “I want certainty, not only on deliveries—which I think they will achieve—but that they will still be supplying and building these aircraft in five years’ time.”


AirBaltic seeks CSeries reassurances | Airframes content from ATWOnline (http://atwonline.com/airframes/airbaltic-seeks-cseries-reassurances)

Translation: let's talk discount or else...

N.B., AirBaltic is the CS300 launch customer and had expected delivery in Q4 2015.

[ExDubai]

“I want certainty, not only on deliveries—which I think they will achieve—but that they will still be supplying and building these aircraft in five years’ time.”

Frankly speaking, nobody with Bombardier is able to give such a commitment.

[Willie Everlearn]

"After a year suffering the economic consequences of the oil price slump, OPEC is finally on the cusp of choking off growth in U.S. crude output. As the U.S. wilts, demand for OPEC's crude will grow in 2015, ending two years of retreat, the IEA estimates.
While cratering prices and historic cutbacks in drilling have taken their toll on the U.S., OPEC members have also paid a heavy price."

How long are the 'greedier' OPEC states likely to continue to suffer lost oil revenues? How do you suggest they pay for those palatial extravagances, VVIP wide bodies, not to mention all those A380s, 777s, 787s? With oil at 45 bucks a barrel??? I suspect the price of their vanity will soon return to former levels.

Bombardier offer more in their C series than just a 20% fuel saving. Somebody needs to read their brochure. :ugh:

I don't see the C series listed for DXB next month but I wouldn't read much into it if it doesn't show. They have an aircraft to certify and it doesn't sound likely they'll announce any additional sales this close to the wire.

What launch customer of ANY new aircraft wouldn't want some assurance. Including Air Baltic. A Bombardier customer.

FWIW, Canada doesn't need F35s. We need a gazillion armed drones to create drone pilot jobs for us retirees.

Giddy up

Willie :ok:

[peekay4]

Willie I think you're underestimating the changes taking place in the oil & gas industry.

Saudi Arabia is dumping oil at cheap prices not because of choice, but because they are forced to. They are running budget deficits of over 20% annually. They'll turn into another Venezuela if this situation continues on for many years!

Oil will not return to $150/barrel any time soon, barring some massive unforeseen geo-political event. That's because oil is facing pressures from both the supply and demand sides:

While the Saudis will succeed in killing a lot of shale production in US & Canada, the fact remains that most US shale producers can make profit at $60/barrel, and some shale fields (like the Bakken shale) can be profitable at under $30/barrel. This puts an effective cap on the price of oil.
Any loss from shale oil declines will be made up by Iranian oil coming online soon as sanctions are being lifted, so there will be plenty of supply both OPEC and non-OPEC countries for the foreseeable future
From the demand side, the economic weakness in China, etc., is forecast to persist for years (China's GDP growth is nearing a 25-year low)
Further reducing demand for oil, this year for the first time in history the majority of new energy capacity is coming from renewables. In many parts of the world, the price of solar & wind energy is already cheaper than energy from oil.


Airlines don't order planes by reading brochures. Those penny-pinching bean-counters who run airlines would buy the CSeries in a heartbeat if it means more profit to them. Yet no one has placed a new order in well over a year now, and Bombardier needs hundreds of new orders just for the program to survive.

[Willie Everlearn]

I read this this morning over a coffee.
"Low oil prices today may be setting the world up for an oil shortage as early as 2016. Today we have just 2% more crude oil supply than demand and the price of gasoline in Texas is under $2.00 a gallon. If oil supply falls too far, we could see gasoline prices doubling within 18 months. For a commodity as critical to our standard of living as oil is, it only takes a small shortage to drive the price up."

True. Airline fleet planners rarely read brochures, but my reference had more to do with comments by other posters who see the C series as a regional jet with only a geared turbo fan on offer. Really??? :confused:

F35? How about a sufficient number of drones and a few Eurofighters? :D

Gino :ok:

[peekay4]

Low oil prices today may be setting the world up for an oil shortage as early as 2016. Today we have just 2% more crude oil supply than demand and the price of gasoline in Texas is under $2.00 a gallon.
Hey Willie that "article" was written last year (Dec 2014) as a prediction of what will happen this year, but pretty much all of his predictions have turned out to be wrong.

At the time that article was written, Brent crude was at $60/bbl and he predicted the price would shoot up to $90/bbl by the end of this year, with break-even near $100/bbl. He also predicted that $60/bbl oil for six months would be "catastrophic" to shale (non-OPEC) producers. This will cause supply shortages and will drive up gasoline prices, he says.

But what actually happened this year... we have more supply as compared to last year and demand is down; Brent crude has gone down to $48 and many shale producers are still making money at this level.

And you can find $1.64/gallon gasoline in Lubbock, TX.

The U.S. Government (EIA) is now predicting (http://www.eia.gov/forecasts/steo/report/prices.cfm) Brent crude to recover slightly to $55-$59/bbl in 2016 while gasoline prices will remain flat. They also predict that average oil prices won't go above $70/bbl through at least 2020.

[Willie Everlearn]

Looks like we're reading the same material. (Yes, that article was from last year. Took me awhile to find it.) The point being, what you read today, may not be the result you see tomorrow. Certainly last years prophecy of a price rebound was to be questioned. For me, that's hindsight.


The conventional 'wisdom' suggests things could bottom out around $20/barrel. Really? 50% of what I read conflicts with that prediction, so what's my take away? Continue reading, I guess. I looked at a chart yesterday that shows the average oil price won't get above $60/barrel till closer to 2030. It's all rubbish to me. What if they're wrong? They might be right. But, what if some event or events (Black Swan) play into things? Which is likely. Allow for that possibility and others and all those wonderful charts, facts, predictions, guesses are out the window. 10 to 15 years out is nothing more than an imaginary future at best. Like you said, a prediction.

As long as people continue to spend, it creates demand for oil. If a 2% supply over demand is accurate, that spells trouble no matter what we might think the price per barrel will do next month or next summer. That in itself will force the price up. If any low supply-high demand economic theories are to be believed. I'll take a look to see what the supply-demand ratio is today.

Willie

[peekay4]

Bombardier Inc will lose US$32M for each CSeries built in 2016-17: analysis

FP / Leeham have some numbers on CSeries financials:

Bombardier Inc. will lose US$32 million on each of the first 50 CSeries aircraft it builds, meaning the program will continue to bleed billions of dollars through at least 2018, according to a new analysis by U.S. aviation consultancy Leeham Co.

It’s normal for an aircraft manufacturer to lose money on the first several planes it builds, as production costs are highest at the beginning of a program and an all-new aircraft such as the CSeries is often priced aggressively to lure customers.

However, Bombardier lost control of the program’s timing, meaning it’s now stuck dealing with high costs at a time of weakening revenues.

More from:

Bombardier Inc will lose US$32M for each CSeries built in 2016-17: analysis | Financial Post (http://business.financialpost.com/news/transportation/bombardier-inc-will-lose-us32m-for-each-cseries-built-in-2016-17-analysis)

[ExDubai]

Interesting numbers. Together with the delayed Global 7000/8000 development BBD will burn more then 1 billion USD/Year 2016-2018.

[Willie Everlearn]

You might be disappointed to learn that Bombardier management seem to have a pretty damned good idea of how much they're spending, I suspect on a minute-by-minute basis so, admittedly, while the present situation is pretty gloomy, they're still in business and look to be for awhile yet.

From what I read, it also appears that they aren't just sitting around crying over it. They seem to be making some logical decisions that are likely reducing the blood flow and buying them some time.

I think they'll hang in there. I hope so, at least. Besides, despite all the so-called expert opinions, if this aeroplane can make money for any airline, it will sell. Of that I am certain. How much is Airbus losing on each A380. Post that one of you naysayers.

Willie :ok:

[ExDubai]

Willie, the difference between Airbus and BDD is, that Airbus has products which subsidize the loss on the A380. Similar like Boeing and the 787.

[Willie Everlearn]

Really :confused:
Are you suggesting BBD don't have other products and services that contribute to their cash flow as well?
On Oct. 2, BBD announced the sale and options for several RJs. Since all RJs they build are well beyond that programs break even, the sales are mostly profit for their Commercial aircraft division. That firm agreement signed by Bombardier and its customer is valued at approximately $369 million USD. The value could increase to $651 million USD if all options are exercised.
I don't think you've found the ultimate answer yet, but keep looking.

I would suggest the NG and Max more directly subsidizes the B747-8, but I agree with you. A&B are much larger than BBD and benefit from more successful and established programs across many more types than BBD to soften the financial pain of losers like the A380 and A340.
Not to mention the B787, which I believe will be an eventual winner, based on present day sales.

Willie :ugh:

[peekay4]

Willie, just because a program is beyond break-even, that does NOT mean sales are "mostly profit". It just means that they're no longer losing money on each sale.

And those numbers Bombardier provided are mostly a lie. Why? Because manufacturer announcements are based on "list price", but we know no one actually buys at list price!

Bombardier won't tell you: what was the discount from list? What is the actual margin on revenue?

Suppose we assume industry-standard 50% discount and a very generous 15% margin, that means even if all $651m in options are exercised, Bombardier's total profit from the entire deal is only $50 million, spread over several years.

That's nothing. Bombardier is burning more than $80 million per month on the CSeries. So even Bombardier closes similar-sized CRJ/BBJ deals each and every month for the next three years, that still won't come close to covering the CSeries program costs.

That's how big of a hole Bombardier have dug themselves in!

[ExDubai]

Are you suggesting BBD don't have other products and services that contribute to their cash flow as well?
I'm suggesting that BBD's other products do not contribute enough to the cash flow.

BBD lost the battle against Embraer during the last 3 years. The sales of the E-Series overtook the CRJ sales. Embraer also launched the next generation E2
Series with significant sales numbers. BBd'snew CEO recognized that BBD has to invest some R&D time and a certain amount of money into the CRJ Series. Most of the R&D work for the C-Series is done, so hopefully BDD will start soon on the CRJ series.

On the BizzJet side, they lost the market for the long range Jets to Gulfstream. I'm not that confidant, that BBD will be in track with the Global 7000/8000 development. Another delay on those Aircrafts might be possible.

[ExDubai]

Bombardier to book writedowns, get cash from Quebec: sources | Reuters (http://mobile.reuters.com/article/idUSKCN0SM1UP20151028?il=0)



WASHINGTON/MONTREAL (Reuters) - Canada's Bombardier (BBDb.TO) is set to book a writedown on its CSeries program and announce that the government of Quebec will be investing in the narrowbody jet program, according to several sources familiar with the matter.

The embattled Montreal-based company will also permanently mothball its Learjet 85 program, the sources said.

To form a joint-venture, Bombardier will write down billions of dollars it has already sunk into the CSeries, said the sources. If a deal is reached, the government would be on the hook to fund half the final development costs on the new jet, which is slated to enter service next year.

A Bombardier spokeswoman and Quebec's economy minister Jacques Daoust both declined to comment.

A similar deal with European aircraft giant Airbus Group SE (AIR.PA) fell apart earlier this month when news of the talks leaked.

Bombardier and its Brazilian rival Embraer S.A. (EMBR3.SA) vie for title of the world's third-largest civil aircraft maker behind Boeing Co (BA.N) and Airbus Group SE (AIR.PA). The Canadian company is the world's only manufacturer of both trains and planes.

In a note to clients on Tuesday, Sterne Agee analyst Peter Arment noted that CSeries program development costs have already topped $5 billion and he expects that another $2 billion in cash will be required to finish certification and absorb the ramp-up in production in the first three years.

That would mean Quebec would potentially front $1 billion or more in order to fulfill its side of the deal.

Quebec's government has repeatedly said it will support Bombardier and its 18,000-strong workforce in the province.

The stock was last up 12 percent at C$1.62.

[Willie Everlearn]

Ok.
You win. You've stumped the chump. I'm tapping out.
Bombardier are finished.
The experts are right.
The industry analysts are right.
The PPRuNe pundits are right.
Each has a very clear and informed ability to predict the future than the management at BBD, who apparently don't see this coming.
All the other OEMs are better, produce better products, have stronger financial records, better sales departments.
That's all she wrote for Bombardier.
It was fun while it lasted, but thanks for the economics lessons.
:{

I concede defeat and bow out gracefully.
Have a nice day
Willie :ok:

[peekay4]

Well, reportedly the total write-downs to be announced tomorrow may be in excess of $5 billion CAD, equivalent to the entire value of the CSeries investment to date, and almost 20% of Bombardier's total assets.

That practically guarantees the CSeries will be a multi-billion dollar loss to Bombardier, regardless of what happens going forward.

And they're not "out of the woods" yet, even with investments from Quebec.

It will be difficult for Bombardier's founding family to retain control, after all of this mess.

[ExDubai]

Bombardier are finished.

Not finished Willie, but IMHO in serious conditions.

[Grizzz]

Corporate welfare, when has that ever worked out for the lenders?

Those Provincial transfer payments will cover it but who will be paying? Alberta is now entering a deficit phase, maybe those Atlantic lobsters will pay the freight?

[striker26]

Bombardier loses $4.9B US in 3rd quarter; Quebec to invest $1B US in CSeries program - Business - CBC News (http://www.cbc.ca/news/business/bombardier-quebec-cseries-investment-1.3293716)

Wow what a waste of taxpayers money, they better overhaul that corporate office! i also hear the TTC is suing Bombardier for millions:

TTC to sue Bombardier over delayed streetcars - Toronto - CBC News (http://www.cbc.ca/news/canada/toronto/ttc-bombardier-lawsuit-1.3293180)

Its unbelievable.

[ExDubai]

1 Billion won't be enough. An estimated loss of 3 Billion $ over the next 3 years is the number they need to cover.

[peekay4]

Yeah, they must be lining up more financing. I believe they are still planning to sell parts of the rail division.

Also the first payment from Quebec won't be until April 2016. They will run out of cash by then if they don't get an additional investment. I hear they've approached the Federal government for bridge financing.

Any future earnings from the CSeries must now be split in half with Quebec. That already tight margin in Bombardier's business plan is now miniscule. They'll never come close to getting their money back... they've effectively doubled the number of planes they have to sell to regain their investment.

[_Phoenix]

Bombardier Announces Financial Results for the Third Quarter Ended September 30, 2015 (http://www.wallstreet-online.de/nachricht/8070336-bombardier-announces-financial-results-for-the-third-quarter-ended-september-30-2015)
-Revenues of $4.1 billion; backlog of $61.8 billion
-Solid liquidity at $3.7 billion
-C Series flight testing 97% complete and certification imminent
-Recorded $3.2 billion charge for C Series program
-Cancellation of Learjet 85 aircraft program announced
-Management team strengthened with appointment of Nico Buchholz as Senior Vice President and Chief Procurement Officer

"Today, we are proud to announce that the government of Québec will invest $1 billion in the C Series aircraft program. This partnership comes at a pivotal time, with the C Series on the verge of certification. The market is there, our leadership is in place, we have the best product and with the support of the government, we are ready to make this aircraft a commercial success," Mr. Bellemare.

[striker26]

"we are ready to make this aircraft a commercial success" ahahahaa....a decade too late :D

[peekay4]

Quebec to ask Ottawa to pitch in another $1 billion to Bombardier bailout

BLOOMBERG -- Quebec plans to ask Canada’s federal government to match the province’s $1 billion investment in Bombardier Inc.’s CSeries program to round out the funding for the troubled jet and assuage any lingering customer concerns.

“If the federal government comes in, the notion of risk completely changes,” Economy Minister Jacques Daoust said Friday in a telephone interview from Montreal. “If the federal government also put in $1 billion, that would mean the CSeries financing package would be complete.”


More from: Quebec to Seek Canada Match on $1 Billion CSeries Bailout - Bloomberg Business (http://www.bloomberg.com/news/articles/2015-10-30/quebec-to-seek-canada-match-on-1-billion-cseries-jet-bailout)

[ExDubai]

No Porter Jets @YTZ. So mostlikely Porter will cancel their C-Series order 12 fix, 18 options)

http://m.metronews.ca/#/article/news/toronto/2015/11/02/liberals-mum-on-jets-at-billy-bishop-airport.html

http://www.theglobeandmail.com/report-on-business/liberal-opposition-to-jets-at-billy-bishop-airport-kills-bombardier-order/article27074974/?service=mobile

[Sydy]

Sounds like a lot of incoming from World Trade Organization... Wait and see...

[er340790]

Slightly off-topic, but I'm curious as to how CL-215 and CL-415 used prices might react to the North Bay plant being shuttered...

No idea how many such aircraft remain in service - the very nature of their usage results in a pretty steady and high attrition rate - but something like 125 215s were built up to 1990 and 76 415s from 1993.

I believe Cascade Aerospace did some conversions to give us the CL-215T. Might be a niche market for some such outfit buy the production rights to the CL-415.

The CL-415 was perfected for its specialized role and, let's face it, those forest fires ain't gonna stop anytime soon.

Someone, somewhere... :ok:

[peekay4]

Actually fire fighting planes tend to be extremely durable and last for a very long time. There are water bombers from the 1940s which are still in service today, 70+ years later.

As far as I know Bombardier had zero CL-415 pending orders before closing the factory. Zero! That gives an idea about the size of the market.

Plus there are alternatives from China, Japan, Russia, even from the US, for both amphibious and non-amphibious fire fighting planes of various sizes.

[JasWil]

Probable the very next large order will have best concessions, but why to sell at a loss one of the finest aircraft in the air? Soon CSeries100 will be certified then production is ensured for 2-3 years, which is close to ideal ratio between enough backlog vs. delivery date.
free online store builder (http://www.sales.care) online shopping (http://www.sales.care) ecommerce software (http://www.sales.care) daily deals (http://www.sales.care)

[galaxy flyer]

JasWil Probable the very next large order will have best concessions, but why to sell at a loss one of the finest aircraft in the air? Soon CSeries100 will be certified then production is ensured for 2-3 years, which is close to ideal ratio between enough backlog vs. delivery date.


Because you can't selll them at a profit, that's why.

GF

[er340790]

Trudeau is quoted as saying that Bombardier will have to make a 'Strong Business Case' if the Feds are to match the QC-bailoutxxxx, buy-in sorry, with another C$1-Bn.

Is that just his hopey, changey doublespeak for something on paper to justify more corporate welfare??? Or will they actually do something concrete to tackle the unacceptable dual-class shareholding structure that leaves the same family powerbase intact with yet more handouts?

On va voir. :ugh:

[peekay4]

It's a BS statement for public consumption. There is no way Trudeau won't fund Bombardier after that kind of statement.

If the Ottawa doesn't fund Bombardier now, that would signal to the market that Bombardier does not have a "strong business case" for the CSeries, which would effectively kill the program.

There is about zero chance Trudeau wants to be seen as someone who killed the CSeries, given thousands of union jobs at stake.

So Ottawa will be funding Bombardier regardless of any business case. The questions now are how much and in what form? (e.g., direct investment, loan, loan guarantees, tax credits, etc.) The answers to those questions will also determine if any governance changes will happen.

To placate the critics, they may also wait for some "good news" (e.g., a sizable order or maybe the upcoming CS100 certification) to time any funding announcement.

[evansb]

Oh the perils of marketing, global economics, fuel prices and timing....

...Ditch the four turbo-jets for two high by-pass turbo-fans, add some leading edge slats, spoilers and a glass cockpit, and we have got a world-class RJ!
http://i1047.photobucket.com/albums/b477/gumpjr_bucket/Artist_Concept_AVRO_JetLiner.jpg

IT IS JUST THAT EASY. NOT.

[er340790]

The Canadian Press

MONTREAL - Bombardier Inc. (TSX:BBD.B) has signed a deal that will see the Caisse de depot et placement du Quebec invest US$1.5 billion in the company for a stake in its rail business.

Under the agreement, the Caisse will receive shares that will be convertible into a 30 per cent stake in a newly created holding company for Bombardier Transportation.

Bombardier says the deal concludes its review of options for Bombardier Transportation, which sells subway cars and other mass transit systems.

"This investment by CDPQ, which has a long history as one of our major investors, is a testimonial to the growth potential of the rail industry and to Bombardier's leadership in seizing the opportunities this market offers on a global scale," Bombardier chief executive Alain Bellemare said in a statement.

"Bombardier and CDPQ have one common objective: leveraging Bombardier Transportation's innovative portfolio of products and services, engineering talent and worldwide presence to drive margin expansion."

Bombardier has been struggling to complete development of its new CSeries passenger jet which is over budget and behind schedule.

Last month, the Quebec government agreed to give Bombardier US$1 billion to help complete development of the CSeries in exchange for a 49.5 per cent stake in that project.

The investment announced Thursday includes terms that give the Caisse a minimum return of 9.5 per cent as well as provisions tied to the performance of Bombardier Transportation.

"The strong performance incentives that are at the heart of this transaction and management's plan to improve execution have a single focus: creating more value at Bombardier Transportation," Caisse chief executive Michael Sabia said in a statement.

If the business does better than its plan, the Caisse's stake on conversion of its shares decreases by 2.5 per cent per year, down to a minimum of 25 per cent. The convertible shares' minimum return also falls from 9.5 per cent to a floor of 7.5 per cent.

However, if Bombardier Transportation underperforms the Caisse's stake on conversion of its shares will increase by 2.5 per cent per year, up to a maximum of 42.5 per cent. The convertible shares' minimum return would increase up to 12 per cent under those circumstances.

The deal values the rail business at $5 billion.

The new holding company will be governed independently by a new board to be composed of seven members, three of which will be named by the Caisse.

Bellemare will be chairman and Bombardier Transportation president Lutz Bertling will continue in his current role

[peekay4]

The deal values the rail business at $5 billion.
That gives some perspective to the $4.9 billion loss Bombardier posted this past quarter due to the Aerospace division writedowns.

The CSeries essentially wiped out an equivalent to the entire value of Bombardier's most valuable business.

BBD.B stock now in negative territory after a short-lived rally this morning.

[Rwy in Sight]

[QUOTE=peekay4;9178807
So Ottawa will be funding Bombardier regardless of any business case. The questions now are how much and in what form? (e.g., direct investment, loan, loan guarantees, tax credits, etc.) The answers to those questions will also determine if any governance changes will happen.

To placate the critics, they may also wait for some "good news" (e.g., a sizable order or maybe the upcoming CS100 certification) to time any funding announcement.[/QUOTE]

Any concerns for the issue of illegal subsidies to be raised by Embraer and/or Sukhoi or Mitsubishi?

[peekay4]

Yes, it is a concern, but governments are allowed to invest in companies, or to provide other forms of funding (such as some of those mentioned above).

The question is whether or not such funding is at "fair market value".

E.g., to keep things simple, let's assume Bombardier invested about $5 billion into the CSeries, then wrote down a $3 billion loss, implying the program's remaining value to be around $2 billion. Then Quebec's $1 billion investment into the program for 49.5% share does not seem out of line, and might not be considered an illegal subsidy.

Or, suppose the Canadian government agrees to provide $500 million in loan guarantees to Bombardier customers. That in itself is allowed, if the terms & conditions are reasonably in line with market benchmarks. However if the loan interest rate is far below market rate, for example, then there is a net benefit to Bombardier which may be considered an illegal subsidy.

[m39462]

And in today's news ...

The company expects to realize hundreds of millions in cost savings by taking advantage of its large size to centralize procurement, reduce the number of suppliers and transfer work on more complex aerospace projects to operations in Mexico and Morocco.Well, isn't that nice. They take a billion in government money, then without missing a step start offshoring jobs.

[peekay4]

Well, isn't that nice. They take a billion in government money, then without missing a step start offshoring jobs.
They have no choice really.

Changing economics mean the Q400 must compete head-on against the much cheaper ATR72, and the reality is in most markets the ATR will win the sale 9 times out of 10.

Similarly, the half-abandoned CRJ struggles against Embraer's offerings (especially with the E2s around the corner) plus they must also compete against newcomers such as the MRJ.

It's either cut cost and offshore some jobs, or completely shut down the programs.

[er340790]

I wonder if all people contributing to pensions in QC now realize that $1.5-BN of their future incomes now rides on the success of the program. If it were to fail, the knock-on effect of ongoing unfunded general pension liabilities across La Belle Province would be enormous.

With the Transportation Division being valued at $5-BN and the overall Market Cap at $3-BN, the stock market is indicating that the Aerospace Division is worth a (NEGATIVE) $2-BN. :eek:

Interesting times...

[clunckdriver]

er, you tooks the words right out of my mouth, I doubt the average PQ resident understands this in either official language, It will extend the problem if what was/is DH Canada gets dragged down by this, not to mention all the sub contractors and employees around the country, yesterday the air was full of C Series on flight tests, lets hope they wrap this up ASAP and start delivering a few!

[evansb]

Heard yesterday on CBC Radio, a conservative "think-tank" source says that in the last 50 years, (since 1965), Bombardier/Canadair received 80 government "handouts", i.e. funds other than corporate tax benefits that were not necessarily repayable. Yup, in 50 years, 80 handouts.

[clunckdriver]

Having spent a fair bit of time around the Bombardier plants it seems to me that there would be no need to go ofshore if the work ethic in the various plants could be ramped up a few notches, one hears this from a number of production employees, not just senior management {or mis- management if you prefer} but that there MUST be change there is no doubt!

[peekay4]

Bombardier presses Ottawa for $1-billion in aid for C Series

Bombardier Inc. is pressing the Canadian government for $1-billion (U.S.) in aid as the aircraft maker works to further bolster prospects for its new C Series plane after securing deals with Quebec and the province’s big pension fund manager, according to a well-placed source.
The Globe and Mail (http://www.theglobeandmail.com/report-on-business/bombardier-pressing-ottawa-for-1-billion-in-aid-for-c-series/article27536582/)

What's another US$1 Billion between, uh, 'friends'?

[peekay4]

CS100 certified, time to clean house? Long overdue...

Bombardier's Beaudoin seen stepping down as chairman
WASHINGTON/MONTREAL (Reuters) - Pierre Beaudoin is expected to step down as executive chairman of Canada's Bombardier Inc in early 2016, according to a source familiar with discussions about the issue, a move that could erode family control of the plane and train maker.
More from: Reuters (http://ca.reuters.com/article/businessNews/idCAKBN0U11Z320151218)

[peekay4]

The fallout with Airbus continues.

Airbus Executives call CSeries "an orphan" (http://www.theglobeandmail.com/report-on-business/international-business/european-business/airbus-executive-calls-bombardiers-c-series-jet-an-orphan/article28133795/):

Executives at Airbus Group SE, the world’s biggest plane maker, dismissed the Bombardier C Series jet as an “orphan” and said that talks between the two companies aimed at propping up the struggling Canadian aircraft are dead.

Speaking at Airbus’s annual press conference Tuesday in Paris, John Leahy, Airbus’s chief salesman and commercial officer, called the C Series “a nice little plane” that was probably forever doomed to be a poor seller. ...

Tom Williams, Airbus’s chief operating officer, said Bombardier will have to invest heavily in the C Series over the long haul if it hopes to make it a success. “If you take a 10- or 15-year view, if you’re willing to invest in customer financing, training, spares, residual-value guarantees et cetera, that needs a lot of deep pockets and a long-term commitment,” he said.

The question is... why are they making these public statements now? The Airbus-Bombardier talks collapsed months ago.

Either Airbus is very confident that the CSeries is going nowhere, or just the opposite -- an aggressive Bombardier sales campaign targeting Airbus customers might be behind these comments?

To be sure, approaching Airbus was a strategic blunder...

[twochai]

Good question.

My guess is that AB initiated the discussions of a few months ago as a 'fishing' expedition. John Leahy is famous for being bombastic and disruptive and the latest effort is just that - get Bombardier at a low point and kick more sand in their face.

[Willie Everlearn]

Ideally, Airbus would love it if they had NO competition. The reality is, they have competition as does every other company building aircraft.
No doubt Boeing, Bombardier, and others would love to have a monopoly, but alas, no such reality. Not even for a dominant player like Airbus.

Yes. Bombardier are building the C series in the face of extremely difficult markets, oil prices, competition, financial markets, you name it. But, they're likely to continue to remain in business, continue to press on until such time as they're bought out, find another investor, or simply close the doors. The slightest negative word about this company whether true or simply utter nonsense hammers their stock price. Idiotic "orphan" remarks by any Airbus executive, or anyone for that matter, is not only uncalled for but simply unprofessional. These comments are made simply in recognition of the threat Bombardier poses to a very small but significant sector of the passenger aircraft market. That in itself must be a compliment.

The safe bet is to predict this company will fail. A good bet is that they will be taken over. But the bet rarely offered is on their survival. I'm not so sure they're as doomed as some think. They might be, we'll see. For the C series isn't the only product this company sells and every time an aircraft sale is reported, it isn't the blow to Bombardier many seem to think it is. If it is, then it's a blow to whomever else doesn't get the sale, including Airbus, Boeing, Embraer, ATR, Mitsubishi, and Sukhoi. However, this point is rarely mentioned by the know-it-all smart alecs.

The fact they haven't sold a single C series in 18 months doesn't mean it's a bad aircraft or an unwanted aircraft. Nor does it mean there is no interest or market for it. This aircraft is going to sell. Of that I have no doubt.

Willie :ok:

[peekay4]

Idiotic "orphan" remarks by any Airbus executive, or anyone for that matter, is not only uncalled for but simply unprofessional. These comments are made simply in recognition of the threat Bombardier poses to a very small but significant sector of the passenger aircraft market. That in itself must be a compliment.

I believe the "orphan" comments were made in part to reduce Bombardier's ability to cut prices.

An "orphan" product will immediately lose resale value. If potential clients are concerned of this risk, then Bombardier must offer them residual value guarantees.

These guarantees represent liabilities to Bombardier and cost them money whether they are eventually exercised or not. It's very likely that Bombardier are being asked to provide significant monetary guarantees to potential CSeries customers.

[galaxy flyer]

Willie,

It's not a bad airplane, in fact, it is an amazingly good one, but it is an unwanted one. Proof: nobody bought has one one in 18 months and a business case for buying one in vanishingly small.

GF

[striker26]

The new engine technology on the C-Series is a huge advancement, it is a very nice plane, that if brought to the market earlier, could've gained traction over the MRJ and the new EMB. Now the MRJ has similar orders and will definitely have an advantage in the Asian market and EMB is still the front runner globally.

Past few years airlines have invested heavily in the 737 and a320, the market for regional jets will still be there to cater to routes that dont require 737/a320 capacities, but unfortunately everyone will get a piece of a small pie. My friend who works at Bombardier said they are basically selling the aircraft at or below cost. Now, before i jump ahead, i am aware that every manufacturer does this because the money is not the in the retail price, but the supply chain profits earned over the life of each aircraft.

When you have Airbus and Boeing selling hundreds to just one airline, they will break even due to volume - you can't say the same for Bombardier. This is their first non-rear mounted airplane fitted with brand new engine technology. It has had a ton of R&D pumped into it, without orders it will take years at this order rate for them to realize profits.

In my opinion, while Bombardier was pushing the market for CRJ's and EMB their EJets, they should've began the C-Series project then, instead they waited too long (filed lawsuits against EMB over unfair competition lol). I am glad not to be a Quebec resident :ugh:

[er340790]

The fact they haven't sold a single C series in 18 months doesn't mean it's..... an unwanted aircraft.



Really??? That sounds like a pretty good definition of 'unwanted' to most of us! :E

[Willie Everlearn]

Some interesting points posted above.

Boeing stock down 17% over the year despite impressive sales figures.
Airbus stock down 13% over the year despite impressive sales figures.
Regional Airlines (in the U.S.) are being reduced by their mainline partners.
Legacy carriers are starting to adjust regional flying and some have included the CS100/300 in mainline pilot union contracts. (Which has to mean something.)
MRJ is out of scope, three years late and are likely to run into a similar sales drought as Bombardier.
Bombardier has been quietly exiting the RJ market leaving much of it to Embraer and others.
Neo is having engine problems.
Oil prices are not likely to rise for some time to come.
Pilot shortages are becoming the reality many continue to disbelieve.
The airline industry and the way they conduct business is changing dramatically. Which is why that future industry will include C series.
To declare Bombardier's C series a loser based on the status quo is simply idiotic because sales will come as the industry deals with and readjusts to the many and varied realities of today.

Willie :ok:

[peekay4]

Funny Willie.

I recognize that same sentiment when some years ago a colleague of mine -- noting the rapid growth of the Internet -- proclaimed that "the telecom industry is changing dramatically. Which is why that future industry will include Nortel". After all, Nortel had "game changing" optical gear.

Nortel of course went bust within a year.

Yes, the aviation business is changing, as it always has. No, that does NOT mean the CSeries must be part of it!

In fact, unless there is a drastic change in business model, the mid-market for the next 15 years may be well served by E2, Neo, and MAX variants. If so, the CSeries will be a niche player at best.

Bombardier is still hoping to sell 3,500 CS100 and CS300s over the next 25 years. Possible? Sure, anything is possible. Really, I am not discounting this possibility.

But what's certain is that today, every aspect of Bombardier's aerospace business is under severe pressure. Other than the CSeries, the CRJ, Learjet, and Q400 programs are not exactly in great shape either. The upcoming reverse-split will keep them from getting delisted (in the short term) but their fundamentals are looking quite bleak at the moment. They are fighting for survival and may not emerge intact.

[tdracer]

Willie, most of Boeing's stock drop has been in the last month - after Boeing announced a big write-down on the 747-8 program, along with a general stock market slump. It spent most of 2015 near it's record high. There could be some unpleasant surprises in flight test, but so far the Max program is ahead of schedule. Contrast that with Bombardier which recently became a "penny stock".

This doesn't exactly paint a rosy picture for the future either:

Why Bombardier Is Struggling to Build Bigger Planes - Bloomberg Business (http://www.bloomberg.com/news/articles/2016-02-04/why-bombardier-is-struggling-to-build-bigger-planes)

Nearly a decade in, the C Series program has yet to gain traction and the company is in tatters. Bombardier is a penny stock, it’s burning cash and has gone cap in hand to the Canadian government for as much as $1 billion in aid to stay afloat. At stake is the survival of a 73-year-old plane and train maker that employs 24,000 people in Canada and contributes C$6.5 billion ($4.7 billion) to the Quebec economy alone.

[evansb]

Alas, reading the Bloomberg article reminds me of Studebaker vs. GM, Ford and Chrysler in the early 1960's..

[Willie Everlearn]

peekay4

A negative stock split is a very bad sign.
As a holder of too much of this stock, I'm fuct.
I have to concede, this Titanic Canadian Aerospace company has just hit an iceberg.
In fact, Nortel was brought up in a conversation over dinner.
Dark days ahead for sure.

Willie :ok:

[peekay4]

It's looking unavoidable now. BBD.B dropped another 8% today to 80 cents, down 20% just from last week.

At 80 cents, each penny of movement is 1.25% of the share price. It's potentially oversold but there's only 16 business days left for them to recover above $1 (thanks to the leap year).

I'm thinking a 20:1 reverse-split would be the minimum, to bring back the share price well above $10. Plus the controlling family needs to go.

Of course in theory reverse-splits don't change valuation but I think many mutual funds, etc., still holding BBD.B may finally exit the share, putting further downward pressure in the short term.

Little consolation but Nortel managed to survive for many years after hitting penny stock status, through several reverse-splits and accounting scandals. A lot can still happen either way.

A complete turnaround to former glories from this point would be historic.

[galaxy flyer]

The next problem is in the business aircraft side--the market is slowing and lack of investment is hurting its competitive position. The 650 is well past replacement, the 350 does well, but the Global series is starting to get long in the tooth. The Vision upgrade was needed but didn't add performance, improvements await investment money. Investment that the Lear 85 sucked up, eliminating a performance upgrade for the Global and a new technology 605 replacement. And don't get started on the Lear program.

GF