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American Airlines, US Airways merger good news for Bombardier

Nov. 13, 2013, Montreal - Bombardier officials were encouraged by the re-launch Tuesday of a merger between American Airlines and US Airways.


November 13, 2013
By The Montreal Gazette

“It’s good news,” said Bombardier Aerospace spokesperson Marc Duchesne.

 

The
Montreal aircraft maker has been negotiating for years to sell American
Airlines a large batch of regional jets, estimated at about 40. That
would provide some stability and certainty for Bombardier’s hard-hit
regional-jet division.

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Orders had basically dried up and layoffs
loomed large before a major order last December by Delta Air Lines for
40 CRJ900 90-seat jets rescued the division temporarily.

 

In
February, the boards of American Airlines and US Airways approved a
merger, the last in a series of consolidations of the biggest U.S.
airlines.

 

But in August, the U.S. Department of Justice and six
states surprised the aviation industry by blocking the merger. Their
anti-trust suit charged that it would result in higher airfares.

 

On
Tuesday, they allowed the merger to proceed on various conditions,
including paring down some operations. The Federal District Court, which
must approve the compromise, is expected to do so.

 

“We’re still interested in getting this order, obviously,” said Duchesne.

 

“It’s
up to this new airline to decide which aircraft they want. We have
clearly made representations to them, they know our airplanes very well
and we’re enthusiastic at the idea of snagging this deal. So it’s good
news, but it’s up to them now.”

 

He couldn’t say when American/US Airways would make their decision, but it is generally expected to be announced by year’s end.

 

American
Eagle, the regional division of the mainline carrier, operates 47 older
and smaller Bombardier jets, as well as about 177 Embraer aircraft.

 

Concessions
by pilots’ unions at most U.S. airlines have resulted in the loosening
of the so-called scope clauses which restrict the size and number of
regional aircraft a carrier is allowed to fly.

 

Cameron Doerksen,
an analyst with Montreal brokerage National Bank Financial, said that
the decision by the U.S. Department of Justice “creates a little more
certainty that there is effectively going to be an order from American.”

 

“So it’s positive from that perspective, but it doesn’t change much other than the timeline.”

The
work would be welcome for Bombardier’s RJ group, “but they’re actually
okay for 2014 because of that Delta order, which is ramping up,”
Doerksen added.

 

“So Bombardier has some time to get an order in
and do a quick turnaround on this. If American needs aircraft by the end
of 2014, they can probably deliver that.”

 

“But it’s not crucial that they get it in the next couple of months.”

 

Bombardier’s Brazilian rival, Embraer SA, is believed to be the only other bidder for the contract.

 

The
similar contract for Delta was worth about $1.85 billion U.S. at list
price, significantly above the actual price airlines pay.

 

Another potential order for Bombardier has surfaced.

 

Michael
Arumemi-Ikhide, chief executive officer of Nigerian carrier Arik Air,
told media outlets in Nigeria that he considering ordering between 13
and 15 CS300 CSeries aircraft.

 

“We are looking at it seriously,”
Arumemi-Ikhide said. “So seriously, in fact, that we will be having
further conversations with them (Bombardier) on potentially taking 13 to
15 units.”

 

“One option is potentially to take the CS300 product
and use that to phase out our CRJ products, as well as (for) potential
replacement for the Boeing 737-700, but all that is in play.”

 

Arik Air also operates Bombardier Q400 turboprops and regional jets.