The dearth of new orders for the C Series is a source of concern for anyone following the program. Why, one might ask, is such a technically good aircraft not winning orders?
Bombardier’s competitors have been very successful at undermining their C Series not because of anything wrong with the aircraft. It has been far easier to undermine sales by pointing to the overall company as it has struggled financially to get the program done along with developing the Global. The debacle on the Lear 85 was symptomatic of this: it was a program that appeared poorly executed. One did not have to say anything about the C Series. It has been far easier to cast doubt on the Bombardier management overall.
By comparison Airbus was moving its neo project rapidly and closing what should have been a two year advantage for Bombardier. Boeing has moved its MAX project forward no big issues. And Embraer is also moving its E2 program forward. In other words the rest of the industry can get the job done.
So it is with interest that we read this Bloomberg story. The reason why this is especially interesting is because it signals strength and confidence. This has been missing from Bombardier for too long. The company wasn’t able to send confident signals because it was burning cash at an alarming rate on top of the C Series, Lear and Global fumbles.
However, Quebec sees the company as “too big to fail”. The recent investments take a lot of financial pressure off the C Series sales and marketing team. This means they can now exert themselves in campaigns. We saw the C Series displayed to United recently complete with soft branding. Last week Bombardier had a visit with Delta about the C Series.
If the C Series is to succeed, it needs an order from one of the big three US carriers. Bombardier does a lot business with these firms now. Its brand needs no introduction. But it C Series will still have to “buy its way in”.
This is a key issue because, to date, the company could not do this. With Pierre Beaudoin stepping down, a major hurdle is taken out of the way for more aggressive sales campaigns. Mr. Beaudoin is credited with the creation of the C Series concept. He was adamant on not discounting the aircraft because airlines and lessors would pay for its better performance. Fat chance. Airbus ate away 80% of that improved performance for the same price with its neo. For risk averse airlines and lessors, the choice was simple – buy the neo. Airbus has sold nearly 4,500 neos and Bombardier, which had a head start, has 243 firm orders. Throw in the even later Boeing MAX and the Embraer E2, and one can see the market’s reaction to Mr. Beaudoin’s position.
Now look forward. At the April ISTAT conference we overheard appraisers talk about the market value of the C Series and they were coalescing on $36m. With stiff competition, especially from Airbus, that roof has moved lower. Airbus and Boeing have all but won every campaign. The floor under Bombardier is Embraer with its E2, promising similar economics and a well respected, well known, aircraft. Bombardier is being squeezed.
But with fresh capital bolstering the sales team, and the removal of a major hurdle to winning orders at real world, market driven, prices we might see some deals. United and Delta are tough to win. Which is why a win is so critical. And the way to win these deals is to price accordingly. Bombardier sales lead Fred Cromer says he knows what it takes to win deals. We believe him and he has a track record to prove it. With the financial backing behind his team and internal hurdles out of the way he will likely succeed. Shareholders have already taken a big haircut. The new investors (Quebec) are looking way beyond the pain Mr. Cromer will put the company through to win these two big target deals. But win he must. Delta and United are in for a marvelous time as Bombardier goes aggressive to fight Airbus and Boeing. American is no doubt watching with equal interest. Its a buyer’s market.
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