The Globe and Mail of Toronto has this recap of one element of our new Bombardier CSeries Study, and this is the greatest threat we see to BBD is the prospect of a price was initiated by Airbus and Boeing that it cannot hope to win.
As discussed in our new Study, Airbus and Boeing have the ability to make the A319/319neo and 737-700 loss-leaders, should they choose, to out-price the CSeries. With a full family of airplanes, up to and including Very Large Aircraft, Airbus and Boeing can subsidize the A319/319neo and 737-700 either within the A320 and 737 families or as part of deals with the larger brothers.
If one assumes a 25% discount off list prices for CSeries sales (and certainly this could be deeper for all we know), Airbus will have to discount the A319neo a whopping 41% off its list price (including the $6m premium over the legacy A319) just to match the CSeries discount. This discount would not be unprecedented for Airbus, but it’s not something the company wishes to do on a regular basis.
As for Boeing, which so far is resisting the idea of re-engining the 737, it, too, has pricing power afforded it through a family of airplanes. Boeing, and Airbus, also plan to boost production to as much as 40-42 737s and A320s per month. The additional production efficiencies also lend weight to pricing power, as well as being able to flood the market with airplanes at production rates Bombardier can’t match.
Other press coverage:
Flight Global: Larger CSeries would be ideal for Southwest.
GLG: CSeries economics significantly better than NEO.
National Post: Build larger CSeries.
In these times of economic uncertainty it behooves nations to endorse and support indigenous aircraft industries. Canada, Brazil and others need to form a CSeries Cartel to ensure that profitability is reached. It may be that Bombardier is the 3rd largest builder of Aircraft and parts but the need is also for employment and future industry growth. Many governments, unfortunately are dealing with Banking Disasters and are not looking at future growth. However, Canada, Brazil, China and Russia are not hampered by Bail-outs. Protectionism may be the wave of the future by countries that need to break into the Civilian Aircraft market—but that has its downside too; that needs to be worked out. What is true is that both Bombardier and Embraer have great planes for a specific market. I hope they grow to produce the next generation “flying wing/blended fuselage” aircraft with 1,000 seat capacity—I’m sure the drawing boards are full of ideas and wind-tunnel tests of models are “flying”.
sincerely
My starting point would be that it isn’t any more expensive for Airbus and Boeing to build a plane than for Bombardier. The CSeries uses slightly less material (but more of the expensive kinds like CRFP and AL-Li). Otherwise all planes have the same basic components that have to assembled and paid for. If Boeing have larger planes such as the A321 and 737-900 that cost the same to make but sell for higher prices, they can sell their smaller planes at a lower price than Bombardier that can’t offset in the same way. Finally, Bombardier will have to amortize their new development costs into their plane prices
In summary I would expect the CSeries to cost more than their Airbus and Boeing equivalents, without them having to sell their planes at a loss. Bombardier will need to offer better operating economics to make up the difference in selling price.
BTW, your link to the Globe and Mail article is broken. I assume it’s this .
Trying the again.