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 $36m. With stiff competition, especially from Airbus, that roof has moved lower. Airbus and Boeing have all but won every campaign. The floor under Bombardier is Embraer with its E2, promising similar economics and a well respected, well known, aircraft. Bombardier is being squeezed.
But with fresh capital bolstering the sales team, and the removal of a major hurdle to winning orders at real world, market driven, prices we might see some deals. United and Delta are tough to win. Which is why a win is so critical. And the way to win these deals is to price accordingly. Bombardier sales lead Fred Cromer says he knows what it takes to win deals. We believe him and he has a track record to prove it. With the financial backing behind his team and internal hurdles out of the way he will likely succeed. Shareholders have already taken a big haircut. The new investors (Quebec) are looking way beyond the pain Mr. Cromer will put the company through to win these two big target deals. But win he must. Delta and United are in for a marvelous time as Bombardier goes aggressive to fight Airbus and Boeing. American is no doubt watching with equal interest. Its a buyer’s market.
Bombardier is getting the same market reception to its CSeries today as Airbus Industrie did with the A300 in the late 1970s. Credibility? Support? Residuals?
I have an issue with saying “winning orders at real world, market driven, prices” because the prices of planes are anything but driven by “real market prices”. A real market doesn’t have the government in the equation. The prices that airlines pay are extremely reduced because of all the tax breaks every aerospace company gets. Airbus is 60% subsidized, Boeing 30% and Bombardier 16%. If it weren’t for all the tax breaks, the prices of planes would be waayy higher. I’m not saying that this is the only problem that Bombardier has but in Canada, even a 1B$ tax break makes people jump out of their minds. For Boeing, getting an 8.7B$us tax break from Washington state (just the latest example) doesn’t turn into a hate fest on Boeing. It’s just “the way it works”. I take exception to that. If anything, the SpaceX landing of yesterday shows us what happens when REAL private companies take charge. REAL change happens. People jump up and down and high-five in excitement. When was the last time this happened at Boeing/Airbus? In the 1980s? There is no excitement. It’s bloated, it’s government at its worse. And, the real issue for Bombardier, is that it lives in a too highly subsidized industry. Give Bombardier the same level of subsidies that Airbus gets (FOUR times the amount of subsidies it currently gets) and I’m sure everyone will agree that the game would be TOTALLY different. But I’m not suggesting that we do that AT ALL. What I am suggesting is quite the opposite: we should re-open the WTO discussions and put an end to all these subsidies. This is NOT a real market. This is a totally distorted market. And it’s easy for Airbus to gloat while bathing in taxpayer money that should be better spent on the people whose hard-earned money is wasted on subsidizing aircraft sales. That makes me sick. I’m outraged that Quebec has to fork out 1 billion dollars on Bombardier because “that’s just the way it is”, you can either stay in this industry and dump taxpayer money into your aerospace industry or you get out completely.
BTW, both Boeing and Bombardier would be true winners if those WTO discussions restarted. And taxpayers everywhere would be winners too. Including taxpayers in Europe. Even if we don’t un-distort the market BUT we push Airbus to go from 60% to 30% subsidized, that’s a boatload of money right there given back to taxpayers. Then Boeing can go from 30% subsidized to 0% subsidized (US taxpayers rejoice, plenty of billions there, I’m sure we can save some for the Veterans) and Canadian taxpayers would go from 16% to minus14% 🙂 Heck, just drop it to 0% for Bombardier and that’d give them 14% more money than they have now. How distorted is that?
Thank god for SpaceX and other “rich billionaire” companies that have enough money to bankroll the “keeling over of the dinosaurs”, they just might be able to save our free market economy. Maybe.
Certainly, C Series sales / commitments already on the books have been made well below list prices. What we are talking about now are gigantic discounts, selling the plane below even recurring manufacturing cost, after the initial ramp-up. If BBD does that, it risks setting a new baseline low price from which it will not be able to recover.
It would also be questionable to sell now to United for less than the price Swiss got as the launch customer.
Yes, they have to be aggressive on pricing, but there has to be a limit.
There are more than 600 firm orders and commitments on the C Series books. Allowing that only about 150 firm orders are credible, those options and Letters Of Intent are not all worthless. There is no need to panic.
Finally, with abysmal sales, the A319neo and B737-700MAX are possibly more in trouble than the C Series. If Bombardier plays its cards astutely, these A & B products might not even see the light of day, thus clearing the 100-150 seat market for the C Series and E2.
Bombardier ventured into an already crowded segment of commercial airliners. The CRJ has gone as far as it can and perhaps with some major upgrades it might still be a player in the 70-90 seat arena.
Embraer is way ahead with its product line and the orders show its acceptance by many carriers. While the C Series may prove to be a good plane like the 717 did,the market did not support the 717,only 156 frames made.
The delay in the EIS has also hurt the program but maybe with some early delivery slots,it might appeal to some carriers. Now we wait.
I agree with the above comment. Discounting is easy as a general principle. But when United comes and says: “All right, we’ll give you $2 billion for a hundred planes including all spares we’ll ever need”, then how does one reply? When it comes to the specifics, the balancing act of discounting can be excruciatingly difficult. I wish Fred Cromer all the best, and I believe that he’s the right person for the C Series right now.
SpaceX recieves governent funds, it’s kinda laughable the way you bring them up as an example of a “REAL” private company. While they don’t dislose just how much they recieve from the state, Musk’s various ventures have been granted almost five billion in subsidies
http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html?track=rss#page=2
Quite simply the Aerospace industry does not exist without state support – no-one in their right mind would even try to enter the market without it. The return of investment associated with Civil Aircraft (to recover ALL costs incurred including Development costs) would will take far too long; this is of course assuming you are able to develop a successful product that one can certify, that the market wants and is also competitive.
I found this article particular insightful:
http://leehamnews.com/2015/10/30/bjorns-corner-aircraft-programs/
One does not enter the (or stay in) Aerospace industry on the basis to generate a profit, instead it is for prestige and if you can make a return on your investment it is a bonus.