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CSeries will add value to Bombardier

Oct. 16, 2009, Montreal – An aerospace analyst has raised his target price for Bombardier (TSX:BBD.B), saying he’s confident the company’s new CSeries regional jet will add lots of value for the company.
Benoit Poirier of Desjardins Securities estimates the new 110- to 149-seat plane is set to enter service in 2013 will be worth $1.20 per share for the company, raising its market capitalization by more than $2 billion a year.

Poirier was among the first analysts to reflect the CSeries contribution by raising his target price for Bombardier shares to $7.

After visiting the aircraft’s facility in Montreal with institutional clients, Poirier said they were impressed with the program’s development.

“We continue to believe that the timing of the CSeries is advantageous to Bombardier and that the program will create value for the company,” he wrote in a report.

Bombardier said it is confident that active negotiations with a dozen carriers will translate into one to two new orders by the end of January.for a total of 50 aircraft.

Poirier said market conditions are promising for the airplane and “it should be relatively easy to line up potential customers.”

Among those rumoured to be interested in the fuel-efficient plane are AirTran, Avianca Airlines, Air Canada (TSX:AC.B), Qatar Airways, International Lease Finance Corp., Delta/Northwest, American Airlines, China Southern Airlines, Shanghai Airlines, Eznis Airways and Lessor Hong Kong Aviation Co., he said.

Poirier estimates that 1,200 aircraft in service around the world are prime candidates to be replaced by the CSeries in the next few years.

One major reason is the fuel inefficiency of the aircraft, which have an average life expectancy of 15 to 20 years.

Although the aviation market remains challenged, a gradual improvement in financing availability has given Poirier enough confidence to include the CSeries contribution in his price target, he added.
The analyst’s assessment comes amid some skepticism about Bombardier’s foray into a market segment dominated by Boeing and Airbus.

Boeing has said it will defend its share of the lucrative single-aisle passenger airlines, but neither it nor Airbus is is expected to introduce a newly designed plane before 2020.

Qatar Airways CEO Akbar al-Baker recently said a reworked Airbus A320 would be negative for the CSeries.

Bombardier Aerospace is the world’s third-largest airplane manufacturer but has concentrated on regional jets and turboprop planes designed to carry fewer than 100 passengers as well as corporate and executive jets used by companies and wealthy individuals.

The company is also one of the world’s leading suppliers of commuter trains, subway equipment and other rail mass transit vehicles through its Transportation division.