CSeries delays give rivals a much bigger edge
By The New York Times
Jan. 12, 2015, Montreal - If all had gone according to plan, Bombardier’s direct challenge to the Boeing 737, the world’s best-selling commercial plane, would be approaching its second year in service. Instead, Bombardier’s grand plan for a new plane, the CSeries airliner, has faced myriad delays.
By The New York Times
There have been unspecified supplier problems, design changes and last winter’s horrible weather. Then in May at an airport outside Montreal, one of the plane’s innovative new engines exploded during a ground test, damaging a prototype.
Now, many analysts expect that the first passengers won’t step aboard a CSeries jet until 2016, although the company is standing by its forecast of late 2015.
While delays are common in the aviation business, the time lost has made it all the more difficult for Bombardier to take on its notoriously aggressive and vastly larger rivals, Boeing and Airbus. Those industry giants have rushed to create versions of their existing single-aisle planes that steal CSeries’ thunder by incorporating many of its innovations, particularly better fuel economy.
“They’re in a street fight,” Addison Schonland, a partner at AirInsight, a commercial aviation consulting firm.
Bombardier’s project has long passed the point of no return. Hundreds of planes have been ordered. Production is slowly rumbling up to speed. The company is on track to spend US$4.4 billion to develop the plane.
The bet on the CSeries won’t break Bombardier, which has yearly revenues of about US$18 billion. But it does make the company vulnerable. The delays have depressed Bombardier’s share price. And because airlines pay for planes on delivery, any further delays could squeeze the company’s credit.
The payoff for Bombardier could be significant if the plane proves a serious competitor to the 737 and the Airbus A320, the European company’s highest volume airliner. Already the world’s largest rail producer and a leader in commuter and business jets, Bombardier could become a major player in civil aviation if the CSeries succeeds.
“It would be hard to predict where Bombardier is today if I went back to when I started,” Pierre Beaudoin, Bombardier’s president and chief executive, who in 1985 joined the company founded by his grandfather. “Investments like the CSeries give us that opportunity again to double the size of the company.”
Bombardier has a history of transformation.
Back home in Quebec, Bombardier is still celebrated as the company that ended rural isolation early in the 20th century when winter cut off many towns outside the reach of trains. The solutions from Joseph-Armand Bombardier, Beaudoin’s grandfather, was a tracked, scarab-shape snowmobile. After World War II, as Quebec introduced widespread road clearing, Bombardier survived and prospered by selling the Ski-Doo snowmobile as a winter toy for adults.
That coincided with Montreal’s glory years when it embarked on a variety of megaprojects. Laurent Beaudoin, the founder’s son-in-law, father of Pierre and the company’s chairman, reopened a shuttered Ski-Doo factory to build the cars for one of those plans: the city’s new subway. He then aggressively landed a contract to supply New York with subway cars. The US$1 billion deal was more than double the company’s total revenue at the time.
Laurent Beaudoin’s biggest gamble came in 1986. Bombardier was the only bidder for Canadair, an ailing aircraft manufacturer that the Canadian government put up for sale. Pierre Beaudoin recalled that Bombardier was widely criticized as overreaching.
“I remember the cartoon in the paper: It was a flying Ski-Doo,” Beaudoin said. “What do these people know about aerospace?”
Before its sale to Bombardier, Canadair was exploring how to turn its executive jets into regional jets, which could replace propeller planes on routes feeding passengers from small centers into airline hubs. During the 1990s, Bombardier and Embraer of Brazil blindsided the aviation industry by successfully creating that market.
Beaudoin sees the CSeries as a repeat of its regional jet story. That is, a plane for a market segment that, in conventional aviation wisdom, does not exist.
Bombardier committed to the CSeries program in 2007 after an air travel study that it commissioned. The study showed, according to Beaudoin, a growing impatience among travelers to route through major hubs on the way to their final destination.
Those hubs give airlines greater economies of scale. But Bombardier calculated that a new efficient airliner slightly smaller than a 737 or an A320 – one with 100 to 150 seats – could carry passengers directly between smaller airports at the same cost per seat as the larger planes.
“Airlines are forcing you through hubs because they’re being forced to have big airplanes,” Beaudoin said. “The only person that’s not happy there is actually the traveling public.”
The linchpin for the CSeries was a new concept for engines developed by Pratt & Whitney, known as a high bypass geared turbofan. The new engine design promised fuel savings of up to 20 per cent and unusually low noise levels.
A trip out to the 1.1 million-square-foot factory in Mirabel, Quebec, where the CSeries is being built, reveals that the plane is as much a technology gamble as a financial one. Inside the assembly hall, two towering robots join wings, nose and tail pieces made from lightweight carbon-fiber composites to traditional aluminum fuselage sections. Tucked in another part of the plant, a complete cockpit is connected to a room filled with computers. The CSeries is Bombardier’s first “fly by wire” plane; the only connections between the cockpit’s controls and the parts they command are electronic.
As he walks briskly through the plant, Robert Dewar, a Bombardier vice president who is general manager for the CSeries project, acknowledged that the new technologies, particularly fly-by-wire, contributed to the delays. The engine’s failure in May, he added, eventually proved to be caused by a relatively minor fault in an oiling system rather than a fundamental design flaw.
Most analysts agree the plane, which will come in two models of different lengths ranging from 108 to 160 seats, represents an advance in airliner design. But that achievement, they add, is far from the end of the struggle.
“It’s a small company in Canada that has pulled off something that’s very impressive,” Schonland said. “Now, tell me how you are going to sell it.”
Neither Boeing nor Airbus has ignored Bombardier’s challenge. Tom Williams, the chief operating officer of Airbus, has been particularly open about its plan to keep Bombardier out of the full-size airliner market.
As Bombardier sorted through its problems, its two rivals introduced versions of their smallest planes equipped with similar engine technology. Embraer has also joined the field with a stretched-out regional jet.
Bombardier may find it difficult to carve out space, given the preference among many air carriers to stick with a single aircraft-maker, according to Richard Aboulafia, vice president for analysis at the Teal Group, an aerospace and defense industry analysis firm. More important, he said, Boeing and Airbus have a significant cost advantage.
But Beaudoin remains confident that Bombardier will reach its target of 300 orders before deliveries begin. The company has about 200 firm orders.
Many of those buyers, he expects, will be new carriers drawn by the plane’s ability to avoid hubs. The program’s credibility has mainly come from an order for 30 planes from German airline Lufthansa and one for 40 from Macquarie AirFinance.
“The two big manufacturers have spent their time saying that we won’t have an airplane, that the airplane won’t fly,” Beaudoin said, referring to Boeing and Airbus. “You can imagine now that the spotlight will be on the reliability of the airplane.”
“But, you know,” Beaudoin added with a small laugh, “I would be doing the same thing as they’re doing.”