Liberal Party wins, Bombardier wins
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My guess is, the suggested 125 aircraft order will be shared between both BBD and Embraer.
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I haven't heard that one yet, but I recently read this...
Big Delta order for Bombardier jets, likely next week, will be thorn in Boeing's side
Steve Wilhelm
Staff Writer
Puget Sound Business Journal
Delta Air Lines may be trying to build its relationships with customers in the Puget Sound area, but late next week the Atlanta company could drop a bomb that will be hardly friendly to hometown jet builder Boeing.
Delta is expected to announce on April 28 or 29 that it will order 75 Bombardier C Series jets, with options for 50 more, which would in effect breach the duopoly Airbus and Boeing have maintained in the all-important narrow-body sector.
“A mere 125 aircraft order shouldn’t mean much,” wrote Ernest Arvai, in an AirInsight report. “But the C Series, entering service in 2016, has much more updated technology than the 737, first introduced in 1967, and the A320, first introduced in 1988.”
While such an order would be tiny compared to Boeing’s order book for 4,380 model 737s, it's still something Boeing is likely watching.
As the second-largest U.S. air carrier, Delta’s voice is powerful, and a purchase would give Canada’s Bombardier its first significant inroad among major carriers.
“It’s really bad news for Boeing, especially for the 737-700 and Max 7,” said Michel Merluzeau, managing partner for Frost and Sullivan. "When an airline like Delta takes on a new system like this, it brings the program to an entirely different level.”
Boeing and Airbus have been driving down their own narrow body jet pricing, partly to fend off orders for the Bombardier jet.
The Bombardier jet features wings and fuselage made largely of carbon composites, reducing weight compared to the 737's aluminum. The Bombardier jet also features advanced Pratt and Whitney geared turbofan engines similar to those Airbus offers on its A320neo. Boeing offers a comparable LEAP 1-B engine on the 737 Max series.
Analysts estimate the Bombardier jets may burn slightly less fuel than the Boeing jet, although that would be offset by the other expenses of incorporating a new model.
“It’s slightly more efficient than the Max,” said Scott Hamilton, president of Leeham LLC., about the Bombardier jet.
The even bigger threat would be a possible stretch of the current Bombardier CS 300 model to a proposed CS 500 model, which at 150 seats would compete almost directly against the Boeing 737 Max 8.
But that would be quite a few years out, because Bombardier has been hard-pressed to cover its cash flow requirements as it struggles with low orders and problems with the C-Series.
If Delta does order the jet, others could follow, Hamilton suggests.
“Delta is the potential rainmaker in that case,” he said.
Willie
Big Delta order for Bombardier jets, likely next week, will be thorn in Boeing's side
Steve Wilhelm
Staff Writer
Puget Sound Business Journal
Delta Air Lines may be trying to build its relationships with customers in the Puget Sound area, but late next week the Atlanta company could drop a bomb that will be hardly friendly to hometown jet builder Boeing.
Delta is expected to announce on April 28 or 29 that it will order 75 Bombardier C Series jets, with options for 50 more, which would in effect breach the duopoly Airbus and Boeing have maintained in the all-important narrow-body sector.
“A mere 125 aircraft order shouldn’t mean much,” wrote Ernest Arvai, in an AirInsight report. “But the C Series, entering service in 2016, has much more updated technology than the 737, first introduced in 1967, and the A320, first introduced in 1988.”
While such an order would be tiny compared to Boeing’s order book for 4,380 model 737s, it's still something Boeing is likely watching.
As the second-largest U.S. air carrier, Delta’s voice is powerful, and a purchase would give Canada’s Bombardier its first significant inroad among major carriers.
“It’s really bad news for Boeing, especially for the 737-700 and Max 7,” said Michel Merluzeau, managing partner for Frost and Sullivan. "When an airline like Delta takes on a new system like this, it brings the program to an entirely different level.”
Boeing and Airbus have been driving down their own narrow body jet pricing, partly to fend off orders for the Bombardier jet.
The Bombardier jet features wings and fuselage made largely of carbon composites, reducing weight compared to the 737's aluminum. The Bombardier jet also features advanced Pratt and Whitney geared turbofan engines similar to those Airbus offers on its A320neo. Boeing offers a comparable LEAP 1-B engine on the 737 Max series.
Analysts estimate the Bombardier jets may burn slightly less fuel than the Boeing jet, although that would be offset by the other expenses of incorporating a new model.
“It’s slightly more efficient than the Max,” said Scott Hamilton, president of Leeham LLC., about the Bombardier jet.
The even bigger threat would be a possible stretch of the current Bombardier CS 300 model to a proposed CS 500 model, which at 150 seats would compete almost directly against the Boeing 737 Max 8.
But that would be quite a few years out, because Bombardier has been hard-pressed to cover its cash flow requirements as it struggles with low orders and problems with the C-Series.
If Delta does order the jet, others could follow, Hamilton suggests.
“Delta is the potential rainmaker in that case,” he said.
Willie
Funny thing, that!
It was Delta's partner Comair who started the North American stampede on the CRJ by ordering 10 + 10 options 24 years ago. Which eventually led to DL and its Connector partners operating 440 of the type!
Delta has always been counted upon for outside-the-box thinking!
It was Delta's partner Comair who started the North American stampede on the CRJ by ordering 10 + 10 options 24 years ago. Which eventually led to DL and its Connector partners operating 440 of the type!
Delta has always been counted upon for outside-the-box thinking!
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Well, kind of.
Bombardier isn't really a threat to Boeing (or Airbus) unless it starts making CS500s. Bombardier can duke it out with Embraer all day long and Boeing won't care.
Strategically, countering a possible CS500 is where the game is. So we now see Boeing's response with the MAX 7X idea being floated. This move if it happens could really disrupt future CS300 sales in order to prevent a CS500.
Or put it another way, a potential MAX 7X could be more troublesome to Bombardier vs. a potential CS500 is to Boeing.
It basically comes down to financial resources. Even assuming Bombardier wins Delta, but losing Republic and a good portion of the Russian orders, the CSeries order book is still pretty short, around ~ 250. They need to sell > 3000 just to recoup their investment back.
This model assumes zero competition from Boeing. If Boeing enters with MAX 7X then it's just that much harder for the CSeries to ever be profitable, and raising more debt money for a CS500 might be close to impossible.
Unless of course Ottawa and Quebec would agree to even more $$$ Billions.
Another wildcard is of course Embraer also crowding the market with a larger E2, but so far they're on the record that they don't want to compete in the 150-seat market.
Bombardier isn't really a threat to Boeing (or Airbus) unless it starts making CS500s. Bombardier can duke it out with Embraer all day long and Boeing won't care.
Strategically, countering a possible CS500 is where the game is. So we now see Boeing's response with the MAX 7X idea being floated. This move if it happens could really disrupt future CS300 sales in order to prevent a CS500.
Or put it another way, a potential MAX 7X could be more troublesome to Bombardier vs. a potential CS500 is to Boeing.
It basically comes down to financial resources. Even assuming Bombardier wins Delta, but losing Republic and a good portion of the Russian orders, the CSeries order book is still pretty short, around ~ 250. They need to sell > 3000 just to recoup their investment back.
This model assumes zero competition from Boeing. If Boeing enters with MAX 7X then it's just that much harder for the CSeries to ever be profitable, and raising more debt money for a CS500 might be close to impossible.
Unless of course Ottawa and Quebec would agree to even more $$$ Billions.
Another wildcard is of course Embraer also crowding the market with a larger E2, but so far they're on the record that they don't want to compete in the 150-seat market.
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peekay4
This is why I rarely listen to investment advisors. They know as much as me.
wink, wink.
This is why I rarely listen to investment advisors. They know as much as me.
wink, wink.
I hope you don't have a lot of BBD.B in your retirement funds...
ICT_SLB:
Delta is considered the US launch customer for the CS100. Republic's orders were for the CS300. So Delta didn't take over Republic's orders (at least not yet).
I'm actually quite puzzled that Delta is going with the smaller / cheaper CS100 here, although they may convert some to CS300s. It does give credence to the earlier reports that they were competing primarily vs. Embraer for the deal.
Tomorrow's AGM will be very interesting...
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Peekay4
Where were you when I needed you?
Fortunately, I dollar cost averaged till it hit 77 cents. Then I stopped buying.
I don't think, even if BBD reaches $5.00 in the next 5 years it will help in my retirement. That ship has sailed. Please don't take any of my barbs seriously as I find your comments and advice well informed.
Delta understands how it can recover flying and services from the Regional airlines by introducing the CS100 and eventually the CS300. The threat the Cseries poses here isn't just to the B737 Max, but also the longevity of regionals.
Willie
Where were you when I needed you?
Fortunately, I dollar cost averaged till it hit 77 cents. Then I stopped buying.
I don't think, even if BBD reaches $5.00 in the next 5 years it will help in my retirement. That ship has sailed. Please don't take any of my barbs seriously as I find your comments and advice well informed.
Delta understands how it can recover flying and services from the Regional airlines by introducing the CS100 and eventually the CS300. The threat the Cseries poses here isn't just to the B737 Max, but also the longevity of regionals.
Willie
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We've speculated for months now that Bombardier will have to sell the CSeries below cost (at a loss), and now we have some idea of the magnitude of that loss.
Bombardier will take a one-time charge of $500 million to cover "onerous contract" provisions relating to the Delta and Air Canada orders, and to a lesser extent the recent Air Baltic top up.
So back-of-the-envelope calculation means they are losing roughly $4 million per aircraft. And since most of this loss likely relate to Delta's CS100 orders (cheaper / less margin), that loss might equate to roughly 75% discount or higher.
Some observations:
Make no mistake, as been said many times here, at this juncture Bombardier needs to do "whatever it takes" to win key contracts. The alternative is to fold the program.
$500 million accounting loss isn't massive in the big scheme of things. But it also represents fully half of Quebec's incoming $1 billion investment, spent on essentially just two deals.
To put it another way, Quebec taxpayers have effectively given Delta a $300 million subsidy -- undoubtedly a great arrangement for Delta -- and partly explains why Embraer could not compete in the deal even with used aircraft.
Clearly neither Bombardier, Quebec (nor the Federal Government) can afford to keep losing hundreds of millions per deal. Hence aggressive cost cutting must be part of the equation -- which is why Bombardier needs to continue its outsourcing strategy regardless of any future investments.
We're still seeing the CSeries competing on the low-end market against regional jets. They need to find a strategy to pick up CS300 orders instead of CS100s. They are not yet finding that "mid-size" gap between regionals & single-aisles the CSeries is supposed to address, which essential to their long term business case.
Bombardier will take a one-time charge of $500 million to cover "onerous contract" provisions relating to the Delta and Air Canada orders, and to a lesser extent the recent Air Baltic top up.
So back-of-the-envelope calculation means they are losing roughly $4 million per aircraft. And since most of this loss likely relate to Delta's CS100 orders (cheaper / less margin), that loss might equate to roughly 75% discount or higher.
Some observations:
Make no mistake, as been said many times here, at this juncture Bombardier needs to do "whatever it takes" to win key contracts. The alternative is to fold the program.
$500 million accounting loss isn't massive in the big scheme of things. But it also represents fully half of Quebec's incoming $1 billion investment, spent on essentially just two deals.
To put it another way, Quebec taxpayers have effectively given Delta a $300 million subsidy -- undoubtedly a great arrangement for Delta -- and partly explains why Embraer could not compete in the deal even with used aircraft.
Clearly neither Bombardier, Quebec (nor the Federal Government) can afford to keep losing hundreds of millions per deal. Hence aggressive cost cutting must be part of the equation -- which is why Bombardier needs to continue its outsourcing strategy regardless of any future investments.
We're still seeing the CSeries competing on the low-end market against regional jets. They need to find a strategy to pick up CS300 orders instead of CS100s. They are not yet finding that "mid-size" gap between regionals & single-aisles the CSeries is supposed to address, which essential to their long term business case.
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Peekay4
It's early days of a program that just gained huge credibility. Yes, they took a bath to get this deal done. Something new management clearly understood. Future deals will likely involve a bath too, but that's the price of admission to a former duopoly. A & B have now put themselves in a bad position. They've cut prices on their product that are below the 10 year average rate of inflation and sold so many single aisle aircraft that delivery dates become a problem for new buyers who will have to wait a ridiculous amount of time to get an aircraft. This will likely prove to be a boo boo on the part of A And B because they are now well behind in technology on top of that.
We'll see how deeply BBD penetrates the new triad.
British Airways and Iberia are believed to be interested.
I agree with your comment regarding the 300.
Willie
It's early days of a program that just gained huge credibility. Yes, they took a bath to get this deal done. Something new management clearly understood. Future deals will likely involve a bath too, but that's the price of admission to a former duopoly. A & B have now put themselves in a bad position. They've cut prices on their product that are below the 10 year average rate of inflation and sold so many single aisle aircraft that delivery dates become a problem for new buyers who will have to wait a ridiculous amount of time to get an aircraft. This will likely prove to be a boo boo on the part of A And B because they are now well behind in technology on top of that.
We'll see how deeply BBD penetrates the new triad.
British Airways and Iberia are believed to be interested.
I agree with your comment regarding the 300.
Willie
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(Boeing and Airbus) sold so many single aisle aircraft that delivery dates become a problem for new buyers who will have to wait a ridiculous amount of time to get an aircraft.
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A and B have achieved amazing success. No question. Miles ahead of Bombardier. But, in a race that isn't over yet, we're still waiting for a winner. (There's no finish line BTW)
A&B's success however could be their undoing. Airlines want newer technology (which is why Lufthansa was the lead on the C series) which neither A or B presently offers. As airline buyers re-jig business plans, fuel prices drop, emission standards rise, A and B single aisle sales will likely slow, due in part to distant delivery delays, meaning longer wait times. Not to mention their heavier aircraft weights (landing fees).
If this idea is even remotely close to what is likely to happen, Bombardier's C series probably has a huge advantage over A&B. Whether or not things play out that's way is anyone's guess. I'm guessing.
One things for certain, the C series is head and shoulders above both A or B from a pilot's perspective. (Yes, I've flown all 3)
The guys and girls at AC and DL are going to be quite impressed with this aeroplane and its Vision flight deck capability as will BA and IB, if they decide to buy it.
We'll see. Delta's decision to buy C series is likely to now influence others in making similar decisions.
Willie
A&B's success however could be their undoing. Airlines want newer technology (which is why Lufthansa was the lead on the C series) which neither A or B presently offers. As airline buyers re-jig business plans, fuel prices drop, emission standards rise, A and B single aisle sales will likely slow, due in part to distant delivery delays, meaning longer wait times. Not to mention their heavier aircraft weights (landing fees).
If this idea is even remotely close to what is likely to happen, Bombardier's C series probably has a huge advantage over A&B. Whether or not things play out that's way is anyone's guess. I'm guessing.
One things for certain, the C series is head and shoulders above both A or B from a pilot's perspective. (Yes, I've flown all 3)
The guys and girls at AC and DL are going to be quite impressed with this aeroplane and its Vision flight deck capability as will BA and IB, if they decide to buy it.
We'll see. Delta's decision to buy C series is likely to now influence others in making similar decisions.
Willie
Last edited by Willie Everlearn; 1st May 2016 at 23:43.
Willie
While I work for Boeing - aka "the Lazy B", I'm far from a position to make such decisions.
That being said, Boeing really didn't want to do the MAX. They fully understand the 737 is based on 50 year old tech, and wanted to do an new airplane. But Airbus forced their hand with the NEO. Not only would an all new airplane have taken additional years to get to market relative to the NEO, both AB and Boeing are pumping out 40 plus narrow bodies per month. Getting an all new airplane up to speed for 40 or 50 per month deliveries would have meant literally gifting thousands of orders to AB.
Now, my far from perfect crystal ball says Boeing is working on a totally new airplane for the 150 - 250 market - something far better than the 737 MAX and A320 NEO - and a step ahead of the C series. It wouldn't surprise me if it's not single aisle (if you've ever sat near the back of a 757-300 you know just how long it takes to turn a 200+ passenger single aisle aircraft
). Such an airplane would force AB's hand, and could bring Bombardier to their knees....
OTOH, I picked up several hundred shares of Bombardier a few weeks ago - already nearly doubled my money. I just wish I had the guts to follow my gut feelings. I bough a similar amount of Sirius a few years back - 5x return to date - if only I'd bought 10x (or even 100x) shares....
While I work for Boeing - aka "the Lazy B", I'm far from a position to make such decisions.
That being said, Boeing really didn't want to do the MAX. They fully understand the 737 is based on 50 year old tech, and wanted to do an new airplane. But Airbus forced their hand with the NEO. Not only would an all new airplane have taken additional years to get to market relative to the NEO, both AB and Boeing are pumping out 40 plus narrow bodies per month. Getting an all new airplane up to speed for 40 or 50 per month deliveries would have meant literally gifting thousands of orders to AB.
Now, my far from perfect crystal ball says Boeing is working on a totally new airplane for the 150 - 250 market - something far better than the 737 MAX and A320 NEO - and a step ahead of the C series. It wouldn't surprise me if it's not single aisle (if you've ever sat near the back of a 757-300 you know just how long it takes to turn a 200+ passenger single aisle aircraft
). Such an airplane would force AB's hand, and could bring Bombardier to their knees....OTOH, I picked up several hundred shares of Bombardier a few weeks ago - already nearly doubled my money. I just wish I had the guts to follow my gut feelings. I bough a similar amount of Sirius a few years back - 5x return to date - if only I'd bought 10x (or even 100x) shares....
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If this idea is even remotely close to what is likely to happen, Bombardier's C series probably has a huge advantage over A&B.
As you've pointed out, the 737 MAX and A320neo are extremely successful, even on the basis of older technology.
With already more than 7,500 firm orders between them (and counting), Airbus & Boeing are quickly locking up the 150+ market for the next decade.
Even if Bombardier were to announce a CS500 today, by the time it can enter into service the single-aisle market would probably be 75-85% sold. Bombardier would have to compete in a three-way contest for scraps.
And in 10 years, when the next big purchasing cycle will start again, Airbus & Boeing may well have all-new aircraft to offer, perhaps with even newer technology than what the CSeries has today.
The C-series will live (or die) as an up-gauged "regional" jet that has some new advantages the old RJ didn't have--transcontinental range, lower emissions and noise, solid pax comfort and acceptability. And, ALPA and other union contracts will have to concede some wages. Unfortunately, that market will reach saturation before 2,000 deliveries, IMO.
Agreed a new MOM plane will change some of the business, but the C-Series won't get bigger than 150 seats, so Boeing's new offering might not be a direct competitor.
GF
Agreed a new MOM plane will change some of the business, but the C-Series won't get bigger than 150 seats, so Boeing's new offering might not be a direct competitor.
GF
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galaxy
Up-gauged Regional jet??? Some new advantages??? I don't agree with that analysis at all.
You obviously haven't been anywhere near a C series. Maybe you should hold off on your assessment before blowing this aircraft off as nothing more than a wannabe.
Airbus and Boeing may soon regret having decided to do nothing more than re-engine their airframes and add fancy new winglets. Whoop-de-do.
Their decisions were nothing more than an attempt to cut Bombardier out of the action. So far, it's been working. What many are missing here is what the CS100 and CS300 are capable of and what the future expanded capabilities are in this aircraft.
I'm sure A&B are hoping Bombardier doesn't start cutting their grass, in fact they're doing everything they can to prevent BBD from doing so, and for good reason. Otherwise their duopoly starts to suffer more lost sales.
Someone previously stated a huge sale of B737s to United was a blow to Bombardier. Well, every C series airframe sold is a blow to both Airbus and Boeing. Not to mention Embraer and Mitsubishi. What applies to one also applies to the others.
I'm not so sure a CS500 isn't in Bombardier's future plans. They've copyrighted it and the C Series type rating is the BD500 (for all variants). Of course, they need a better financial footing first. Another sale like the Delta sale and this company's future takes on a whole new reality and elevates it to a whole new threat level.
That's not news, that's just the competitive reality.
ALPA will do what it needs to do to protect its members. The airline will do what it needs to do to be profitable for its shareholders. Whatever aircraft fits the bill will be the aircraft of choice. ALPA's say will be limited one way or another.
Willie
Up-gauged Regional jet??? Some new advantages??? I don't agree with that analysis at all.
You obviously haven't been anywhere near a C series. Maybe you should hold off on your assessment before blowing this aircraft off as nothing more than a wannabe.
Airbus and Boeing may soon regret having decided to do nothing more than re-engine their airframes and add fancy new winglets. Whoop-de-do.
Their decisions were nothing more than an attempt to cut Bombardier out of the action. So far, it's been working. What many are missing here is what the CS100 and CS300 are capable of and what the future expanded capabilities are in this aircraft.
I'm sure A&B are hoping Bombardier doesn't start cutting their grass, in fact they're doing everything they can to prevent BBD from doing so, and for good reason. Otherwise their duopoly starts to suffer more lost sales.
Someone previously stated a huge sale of B737s to United was a blow to Bombardier. Well, every C series airframe sold is a blow to both Airbus and Boeing. Not to mention Embraer and Mitsubishi. What applies to one also applies to the others.
I'm not so sure a CS500 isn't in Bombardier's future plans. They've copyrighted it and the C Series type rating is the BD500 (for all variants). Of course, they need a better financial footing first. Another sale like the Delta sale and this company's future takes on a whole new reality and elevates it to a whole new threat level.
That's not news, that's just the competitive reality.
ALPA will do what it needs to do to protect its members. The airline will do what it needs to do to be profitable for its shareholders. Whatever aircraft fits the bill will be the aircraft of choice. ALPA's say will be limited one way or another.
Willie
Last edited by Willie Everlearn; 3rd May 2016 at 00:22.
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Well, every C series airframe sold is a blow to both Airbus and Boeing. Not to mention Embraer and Mitsubishi. What applies to one also applies to the others.
First of all, obviously sales of CS100 don't directly affect either Airbus or Boeing. Even when we look at the CS300, it only competes with the smallest offering from the B737 / A320 family, not the "bread and butter" 150+ passenger single aisle lines.
So what we have is an asymmetric situation.
Imagine a hypothetical deal that's coming down to a head-to-head between Boeing MAX 7 and Bombardier CS300:
If Bombardier wins CS300 orders, that might mean some lost MAX 7 sales to Boeing. But Boeing never expected a ton of MAX 7 sales anyway. The vast majority of profits will come from MAX 8s and MAX 9s.
MAX 7 is where Boeing makes the least amount of money. The overall impact to Boeing of this loss would be marginal.
The flip side is very different. If Boeing wins new MAX 7 orders (or even -700 orders), that hits Bombardier where it hurts most: lost CS300 sales.
CS300 is where Bombardier makes the most money. The overall impact to Bombardier of this loss is huge; every order makes a big difference to them.
There's also the relative financial strengths between the two companies, differences in their product portfolios, and where they are in their product cycles.
Boeing has thousands of 737 MAX orders in their backlog. Boeing is in a prime position financially, and can afford to lose a deal or two. And they have older models (like 737-700s) which can be offered for cheap, with near zero impact to Boeing's bottom line.
Bombardier's situation is very different. They are in a mountain of debt. Without a CS500, they don't have a deep product portfolio to offer. They currently need hundreds of millions in subsidy money just to win each sale.
So again, the loss of any sales to Bombardier is a huge blow to them, as compared to loss of sales to Boeing or Airbus.
That's why if Boeing introduces a MAX 7X, they can make life very difficult to Bombardier. Boeing doesn't need to sell many 7Xs. It would be a marginal product to Boeing. But every 7X sale vs. the CS300 will heavily impact Bombardier, and will reduce Bombardier's capacity to launch a CS500.