An article in the Montreal Gazette over the weekend entitled “CSeries story will have happy ending” quotes several noted aviation analysts, including Michael Boyd of Boyd International and Marco Pencak of GMP Securities, as well as our own Scott Hamilton and Addison Schonland.
Boyd focused on the superior economics of the CSeries over both current offerings and re-engining programs and that even with new aircraft, Bombardier will have a significant lead in the market. He also indicates that while the aircraft is aimed at a specific market niche, that niche is substantial enough for a significant production run, as a 160 seat Boeing 737 could be replaced by a 145 seat CS300.
Pencak indicated that he believed order momentum would begin to build for the aircraft in 2011, with several orders expected. He indicated that expectations for Farnborough orders that did not materialize has been perceived negatively, but should not impact the overall success of the program.
Addison Schonland indicated that uncertainties caused by delays at Airbus with the A380 and Boeing with the 787 and 747-8 have potential customers concerned, and holding back on orders until they have more clarity on the status of the program. As a result of failures by Boeing and Airbus, Bombardier may have a spike in orders once it appears its program will be on-time. So far, they are on schedule.
Scott Hamilton is taking a more cautious approach than Michael Boyd, but is impressed with the economics of the aircraft, which Boeing and Airbus will need to match. Hamilton’s caution centers around the uncertainty of what Embraer will do with the E190-195 at the lower end of the 100-149 seat spectrum in competition with the CS100; and the ability of Airbus and Boeing to exercise a pricing power across a family of airplanes that is beyond the ability of Bombardier to match deep price discounts.
The consensus view at AirInsight is positive with respect to the CSeries. Bombardier will be the first to market with a new technology aircraft that will offer significant savings, far more than re-engined aircraft.
While the PW1524G engines on the CSeries provide double digit fuel burn savings over existing models, that represents only half of the gain in operating economics, which also result from improved systems, innovative materials, and advanced technologies. An existing model, even if re-engined with the PW GTF, would fall substantially short of the economics of the CSeries.
With pending announcements on the horizon from Airbus within a couple of weeks, and Boeing by year end, many customers are waiting to compare the CSeries with forthcoming alternatives by the bid two. As a result, the CSeries appears to be in a temporary holding pattern until market uncertainties are removed.
Historically, economics have always driven demand, and this aircraft, with industry leading economics, has taxied out, and seems to be in “position and hold” mode prior to take off. We expect 2-3 additional customers prior to year end, and momentum to begin to build in 2011.