Bombardier’s CSeries hits another snag as Jones leaves
Jan. 12, 2015, Montreal - Bombardier’s struggling CSeries program has hit yet another bump, with the departure of its sales chief, who had only been in the job for a year.
January 12, 2015 By The Toronto Star
Ray Jones was appointed senior vice-president of sales, marketing and asset management at Bombardier Commercial Aircraft last December, after previous executive Chet Fuller left the company a year ago.
Bombardier spokesman Marianella de la Barrera said in an interview Thursday that Jones was leaving for personal reasons, adding “we have elected to part ways,” refusing to offer any more details.
Jones, a commercial pilot and flying instructor, had previously worked for a decade for Bombardier’s business aircraft division.
No replacement has been named, and de la Barrera said sales leaders will report to Bombardier Commercial Aircraft president Mike Arcamone in the meantime.
Bombardier is at a critical juncture in the development of its new CSeries jet program, which has faced repeated delays and ballooning costs. Orders have not been pouring in, though the company insists it is on target.
Braathens Aviation of Sweden withdrew as launch customer, citing concerns around uncertainty over the program, but Bombardier said it has since secured a new launch customer, though it is not disclosing the name.
The company is betting its future on the larger narrow-body plane, which can seat 110 to 160 passengers, moving from its traditional regional jets.
An engine fire last May on a CSeries jet grounded all test planes from flying for months, but company executives have insisted the CS100 jets will enter service in the second half of this year.
“We’re in a critical phase for this airplane. The job right now is to get it sold,” said George Ferguson, a senior aviation analyst for Bloomberg Intelligence. “Switching chief sales people is not going to help sales. It is disruptive to the sales organization. It does hurt a program you are trying to get off the ground.”
Ferguson noted that Bombardier Aerospace’s chief executive officer Guy Hachey also suddenly retired last summer.
Four CSeries test planes are now flying, with a fifth one—outfitted with full interior seating—undergoing evacuation tests. Three of the planes are at Bombardier’s Wichita, Kansas, facility where the winter weather is more favourable than Montreal’s Mirabel plant.
The larger version of the plane, known as CS300, is expected to have first flight early this year.
The planes have logged about 750 flight test hours. After first flight in 2013, the company said it would need 2,400 hours of flight testing before certification, though executives now say fewer hours may be needed.
The company, which had set a target of 300 firm orders at entry into service, has orders and commitments for 563 CSeries aircraft, of which 243 are firm orders.
Ferguson argued that a goal of 300 is too low, especially if Bombardier wants to recoup its investment, estimated now at $4.4 billion (U.S.)
The weak sales figures are magnified due to falling oil prices, which will make airlines rethink whether to invest in new fuel efficient aircraft.
“When you are selling the latest, greatest and fuel efficient narrow body, it hurts,” Ferguson said, adding lower oil prices will also have an impact on Boeing and Airbus, but the difference is they have large backlogs of orders.
Bombardier took a strategy of not discounting the price of the plane, Ferguson said, which means airlines think twice of the additional costs of switching fleets such as parts, equipment and training.
“To get into people’s fleets, you have to be ready to discount,” he said. “They have been reticent to discount and that has hurt adoption.”
He argues Bombardier should have been gathering orders at a time when fuel prices were high and airlines faced long waits for deliveries from rivals like Boeing and Airbus.
Ferguson believes Bombardier has two options: ride out the low fuel prices and wait for sales to come in when oil prices rise or begin to discount the price of the CSeries plane to spur sales.
“The timing of everything looks unfortunately stacked pretty hard against Bombardier,” he said. “They need to get the CSeries in customers’ hands. They need to discount.”
Ferguson believes it’s not too late. “Inventory problems can be solved by price,” he said, adding that can apply to everything from house to car sales. “Price cures a lot of problems.”
Porter Airlines has placed a conditional offer for 12 CS100 jets, but it must first win approval to lift the jet ban at Toronto’s island airport and extend the runway.
City council deferred making any decision until this year after studies on environmental impact and runway design are completed.
Air Canada announced this week that it assessing the viability of its operations at the airport where it operates 15 round-trip flights to Montreal.
It cited high fees at the passenger terminal, which is owned by Porter’s parent company Porter Aviation Holdings. The terminal is up for sale, and Bloomberg reported this week that InstarAGF Asset Management is leading a group interested in purchasing the building.