Bombardier today announced two news items relative to the CSeries; one positive and one negative, though much anticipated.
On a positive note, an new order was announced from Al Qahtani Aviation Company for 16 CS300 aircraft plus ten options. These aircraft will be operated by SaudiGulf Airlines, a newly launched Saudi Arabian airline. This order underscores continuing interest in the aircraft, and the firm order backlog is now close to 200.
Meanwhile we understand that Malmö Aviation AB of Sweden has agreed to be the first operator of the CSeries. We heard from Geir Stormorken, Chairman, Braathens Leasing. Malmö Aviation is preparing – in cooperation with Bombardier – to become the launch operator. The delays announced this morning push deliveries out approximately 12 months. While unwelcome, Malmö will cope by retaining its Avro RJs for another year – they remain fully confident in the CSeries program. Malmö Aviation operates out of Bromma, the environmentally sensitive City Airport in Stockholm. As such, reduced noise, lowered emissions and short airfield capability are crucial to future operations. Lowered fuel burn and longer range are the other chief CSeries features appealing to the airline. Mr Stormorken says they are pleased to note that the test flying so far confirms that the program will deliver on its promises in these respects.
On a negative note, Bombardier officially confirmed a CSeries program delay, which had been widely anticipated given the pace in flight testing. The CS100’s EIS is now scheduled for the second half of 2015, rather than late 2014, and will be followed by the CS300 aircraft’s EIS approximately six months afterwards.
While this delay should not dampen enthusiasm for the aircraft, it will result in a delay of positive cash flows from deliveries for a few more months, which could negatively impact short-term earnings expectations. It also narrows the initial entry into service lead for the CSeries over the A319neo, 737-7MAX, and Embraer E2jets, negating the advantage of potential earlier delivery positions. With the initial three years of production for the CSeries nearly committed, it would be difficult for Bombardier to now deliver a large order faster than Boeing or Airbus.
These days, delays in aircraft programs have become as frustrating as delays by airlines at a terminal gate — perhaps karmic retribution for airlines that seem to always tell passengers that “we’ll have more information every 15 minutes”, and do it repeatedly, during delays. The A380, 787, and now CSeries have emulated that process, and even the A350, which appears to be running smoothly, had a false start and an early delay. Yes, everybody appears to be late. But it doesn’t solve carrier’s need for lift, or the OEMs needs for cash flow generation.
While delayed entry into service for new airliners seems to have become the rule, rather than the exception, it is as frustrating to airlines and shareholders as maintenance delays are to passengers, particularly when several delays are stacked up each other.
The Bottom Line:
What will be the impact of this additional delay on Bombardier? If we look at the A380 and 787 as examples, the net effect should be minimal, except in the timing of cash flows. Apart from pushing positive cash flow further to the right, it should not impact the program, as their customers are standing behind the aircraft and their orders. Bombardier has a $4B line of credit available, and can certainly withstand any delay. But this needs to be the last delay in the program to avoid potential further risks of losing customers to Airbus or Boeing.
Whats wrong with the aviation industry lately? There are more people with PHD’s, Master degrees and higher education standards than ever before in the aviation industry, we have designed and built countless number of aircraft so you think we have learned a thing or two, we have the latest supercomputers, imaging, manufacturing software at our disposal but the product that is being produced today is way behind the standards of decades before when engineers used nothing more than a slide ruler for calculations and a pencil to put thoughts to paper. Back then engineers strived to get projects completed ahead of schedule and under budget like the legendary Clarence Leonard “Kelly” Johnson from Lockheed Martin
The A380 had an embarrassing wiring issue during production and wing cracks after, the A350 is going to be late into service as well, the 787 is a nightmare from every aspect, Boeing considers it a good day when a fire aboard a 787 is contained in a metal box!, Lockheed’s F-35 is underperforming and way over budget and now the CSeries is following in that footpath as well, behind schedule and problems galore.
It scares me what happening these days, I not sure if the problem is a result of the latest and greatest techno porn blinding us, lack of proper leadership and management or what, either way we better get our act together or this once proud and reputable industry will end being nothing more than the butt of all jokes by late night comedians…
All of the above!
That said, the weird thing is why would anyone who needs a short to mid range 130 pzx (more or less) buy a 737 or A320 series that weighs so much you can fly to Hawaii from US coast cities (Seattle and Anchorage as well as LA so far) ?
They serve totally different markets unless you simply kill the C series leaving no option.
Why would you care? For what Boeing and Airbus serve, its a chicken feed market though a nice niche for Bombardier.
The shame is that Bombardier is exporting the technology and shooting themselves in the long term foot. Otherwise it is an amazing effort in a segment that is not economically served currently