After announcing the sale of the Q Series, following Airbus assuming control of the C Series, the general consensus is that Bombardier is exiting the commercial aerospace OEM business. Maybe. What is clear is that Bombardier has thrown down the gauntlet on the CRJ. It wants its business partners to come to the table.

During last week’s investor call, Bombardier CEO Alain Bellemare explained that Bombardier will continue to “actively participate in the regional aircraft market, with our established and scope compliant CRJ platform, while exploring strategic options for the program.”  In his direct style, Bellemare also explained that Bombardier is losing money on CRJ sales and that Bombardier must be able to “extract the right value” for the program to continue.

In other words, Bombardier no longer has an appetite for operating a program it can’t make a decent return on.

Clearly, this is a message to both suppliers and airlines; and maybe others. That message is, if you want the CRJ to continue, it can’t be business as usual. This raises the questions of what value airlines are willing to pay to keep the CRJ as a viable alternative to Embraer, and whether suppliers are willing to sharpen their pencils sufficiently for Bombardier to keep the CRJ production lines flowing.  The airline industry does not want to see a market without competition.  There have to be at least two vendors.  Mitsubishi is still too far off to be a credible source.  If the industry wants competition to Embraer, Bombardier is is the only game in town.

Some have argued that exiting the CRJ program would be politically challenging for Bombardier.  But, Bellemare has shown he has the fortitude to make the hard decisions necessary to support his vision of returning Bombardier to financial strength. He has also shown the ability to surprise us all with partnerships.

In the case of the CRJ, Bombardier’s recent announcement to explore strategic options will likely draw attention from aircraft manufacturers with aspirations to advance their own commercial aerospace capabilities (think Japan and China). While rumors (like the visit to the CRJ line by the Japanese) have been circulating since before the Airbus deal, Bombardier remains tight-lipped, declining to say anything with respect to the range of options being explored.  With Boeing’s plans to acquire Embraer, Mitsubishi’s development partnership with Boeing could run into future competitive issues, and Bombardier’s expertise could be of value in multiple areas.

It is clear that a partnership with the pioneer of the regional jet market could bring value. Bombardier has demonstrated capabilities in navigating through the complex certification processes in the U.S., Canada, and Europe. Add to that an aftermarket business with an in-service fleet of 1,500 aircraft and established relationships with all regional airlines, it’s easy to see why the rumors persist. Consider how quickly Bombardier’s team learned from the C Series and developed their latest Global quietly and, by all appearances, very successfully.

It’s unclear how long Bombardier’s review of strategic options will take, but what is clear is that the days of the CRJ are numbered if the current situation doesn’t change.

 

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