Bombardier denies reports of CSeries delay
Nov. 16, 2011, Montreal - Bombardier Aerospace says it remains on track to deliver its first CSeries plane in about two years despite mounting industry suggestions that a delay announcement could be weeks away.
November 16, 2011 By The Canadian Press
"We're charging towards an entry-in-service in late 2013, but acknowledge there are challenges in achieving that," spokesman John Arnone said from Dubai where it announced the 10th customer for the plane.
Walter Spracklin of RBC Capital Markets said a formal delay announcement could come around its Dec. 6 investor day.
He said Bombardier signalled a possible delay at the Dubai Air Show this week by saying that meeting the deadline won't be easy and that it will have to revisit its plans.
Delays of this type of are typically announced two years before the first scheduled delivery.
"We believe the risk window for a delay announcement is now," he wrote in a report.
A delay of less than 12 months would have a modest impact on earnings estimates. But anything longer would likely affect cash flow and earning estimates.
Spracklin said a delay of six to nine months would indicate a cost overrun of $150 million to $350 million, which could be absorbed without additional financing. Anything over $500 million would pose bigger challenges.
Bombardier announced Tuesday that it has signed up the first low-cost carrier and first customer in Turkey.
Atlasjet Havacilik A.S. signalled an interest in purchasing up to 15 larger planes in a deal that could top US$1.18 billion. The carrier signed a letter of intent to buy 10 CS300 planes and holds an option for five more.
The initial contract is valued at US$776 million based on list prices and would increase to $1.18 billion if the option for the five planes is exercised. Deliveries are scheduled for the first quarter of 2016 to mid-2017.
Founded in 2001, Atlasjet operates 17 aircraft on domestic and international routes with scheduled and charter services.
Bombardier has booked orders and customer commitments for 262 aircraft. This includes firm orders for 133 CSeries airliners (61 CS100 and 72 CS300), 119 options and 10 purchase rights.
It also has up 45 additional letters of intent, 15 from Atlas and 30 from Ilyushin Finance Co.
"We consider airlines operating in Turkey and the Middle East to be prime candidates for CSeries aircraft," said Bombardier Airspace president and CEO Guy Hachey in a release.
"Airlines in the region face revenue and performance challenges as their current fleets are composed mainly of jet aircraft larger than the CSeries aircraft. The CSeries aircraft gives airlines a right-sized solution optimized for their environment and operation."
The CSeries launched in 2008 and is due for its first delivery in 2013, with the larger model expected to follow a year later.
Bombardier eventually hopes to capture half the global market for 100-149 seat planes.
Arnone said the manufacturer's business case was built around having a diversified customer base with orders for 10 to 30 planes.
"As the first low-fare airline to intend to order the CSeries, we continue to diversify our customer base to include now mainline carriers, low-fare carriers, leasing companies and that was our hope all along," he added.
Cameron Doerksen of National Bank Financial said Atlas has previously indicated an interest in the CSeries even though its fleet consists mostly of Airbus A320s.
While investors would like to see more orders, he said Bombardier has effectively sold out its delivery slows through 2015.
"Thus, Bombardier is in good shape to support its initial delivery plans and we expect the order book to grow as first delivery approaches," he wrote in a report.
Qatar Airlines said it was still "interested" in the CSeries even though it ordered 50 Airbus planes at the show, including six rival A319neos.
The airline also said it is in talks with Bombardier for more business jets.
Bombardier added it is in talks with Indonesia's Garuda Airlines, which had been expected to award a contract at the show for 18 regional jets. The airline is deciding between the CRJ1000 and Embraer's E-190.