Bombardier’s New Plane Gets a Lift From Delta Order
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Version 0 of 1. OTTAWA — The Canadian plane maker Bombardier said on Thursday that Delta Air Lines had agreed to buy 75 of its new CSeries airliners, a deal that could bring stability to Bombardier’s attempts to challenge Boeing and Airbus directly. Based on list price, Bombardier said the Delta order, for the CS100 aircraft, was worth about $5.6 billion. Like automobile buyers, however, airlines generally do not pay the posted price, and Delta is known as a canny negotiator. Delta has taken options for an additional 50 aircraft beyond the 75. Stumbles within Bombardier, combined with particularly aggressive competition from its larger rivals, had led many analysts to question Bombardier’s decision to try leveraging its success in the market for small regional jets by building an airplane that could compete directly with the Boeing 737 and the Airbus A320. The support from a major airline, after a recent letter of intent from Air Canada to buy 45 of the CSeries planes, may begin to dispel speculation that Bombardier may have to abandon the project. The development of the CSeries has created a financial drain for the company, which struggled to find buyers. “This is a real big deal for us,” Alain Bellemare, the president and chief executive of Bombardier, said at a news conference at the factory northwest of Montreal were the planes are assembled. “It’s a turning moment.” Bombardier also said on Thursday that it had lost $138 million on sales of $3.9 billion during its first quarter. For the comparable period a year ago, the company posted a $100 million profit. With the Delta deal, Bombardier will hold 325 firm orders when the CSeries will enter service this year, 25 more than the company’s target. The CSeries, which can carry 100 to 150 passengers, was intended to be the first airliner using a new engine technology from Pratt & Whitney, a unit of United Technologies. The engine is said to be unusually quiet and, according to the companies, it requires up to 20 percent less fuel. But the CSeries project is more than two years behind schedule and vastly over budget. Delta will receive its first deliveries of CS100 planes in early 2018. Although analysts have praised the CSeries as technically innovative, the delays have allowed Boeing and Airbus to introduce versions of their existing planes with engines said to offer similar innovations. Although those slightly larger airplanes are not as modern or fuel-efficient as Bombardier’s offering, the two industry giants are able to offer them at attractive prices. Ed Bastian, who will take over as Delta chief executive on Monday, said at the news conference that his company’s purchase “brings Bombardier in as the third competitor into the mainline aircraft marketplace with Boeing and Airbus.” He added: “And we are thrilled to be able to have that choice in the marketplace.” While the announcement is expected to help create momentum for further sales of the CSeries, it will not immediately resolve Bombardier’s financial problems. Evan Mann, an analyst with Gimme Credit, an independent debt research firm, called the Delta order “a step in the right direction” but maintained Bombardier’s underperform rating. “The company is still burning through cash, and the timing as to when the CSeries program turns profitable and becomes free cash flow positive is still sometime away,” Mr. Mann wrote. As the project drained Bombardier of cash, the company was forced to seek $1 billion in aid from the province of Quebec, which is now a shareholder in the CSeries. The company is seeking a similar bailout from the government of Canada, led by Prime Minister Justin Trudeau. Negotiations for that investment, however, appear to have bogged down on a number of questions, including the special voting shares that give members of the founding families of Bombardier, a one-time snowmobile maker, control of the company. During a conference call with analysts on Thursday, Mr. Bellemare said that talks with the government remained underway but suggested that federal money was no longer necessary to keep the company operating. Later, he told reporters that any federal money would “further strengthen our ability to continue investing in aerospace right here in Canada.” |