99Embraer and Bombardier announced their 3Q13 results this week.  The numbers suggest the battle against the duopoly is not going easily.  Both Bombardier and Embraer build smaller commercial jets and business jets.

Bombardier’s deliveries were 9 commercial and 36 business jets.  Bombardier describes its manufacturing revenue decline as “…an unfavourable mix of medium versus large business aircraft due to timing of deliveries to customers, as well as lower deliveries of light business aircraft…and lower deliveries of turboprops…”. Highlights for the quarter were CDB Leasing Co., Ltd. of China with its conditional order for five CS100 and 10 CS300 aircraft, which also includes options for an additional five CS100 and 10 CS300. This announcement brings the number of firm orders and other agreements (LOI, etc.) for the CSeries program to 403 aircraft with 15 customers and operators. In terms of Q400s, an agreement with Rosteckhnologii  validate the opportunity to set up a Q400 NextGen turboprop aircraft final assembly line in Russia plus an order for 50 Q400s, plus another 50 for Ilyushin Finance.  The big news for Bombardier was business jets – selling its FlexJet operation and the buyer agreeing to also order 85 Learjets and 30 Challengers plus 150 options.Embraer’s deliveries were 19 commercial and 25 business jets. While Embraer also saw softening in its commercial aircraft segment, it has seen better numbers from its defense side.  Orders at the Paris show were excellent: 50 from ILFC for E-Jets, with options comes to 100 aircraft.  The announcement of its revised E-Jets has impacted orders; of the 396 aircraft in backlog, 38% are of the E2 variety.  Since January Embraer has accumulated 330 firm E-Jet orders.

This points to an important aspect of these competitors.  Bombardier is seeing growing customer interest in Russia and China.  The quarterly report made no mention of the CRJ, and this program needs to win its next competition.  Embraer is seeing market interest in its light business jets plus its E2 version of the E-Jets.  For both OEMs though the big money comes at the top end of the commercial aircraft models.

In both cases, the aircraft are being eyed carefully by customers. The CSeries is now in test, with four flights to date. Observers think this slow and may point to EIS moving out of 2014 into 2015.  Which gives Embraer time to move forward its E2 program and less pressure as the gap between the CSeries EIS and its own E2 EIS shrinks a bit.  While airlines have placed orders, program delays on the A380 and 787 have taught harsh lessons.  It does not pay to order early and place a deposit.  For example, “We should never have been the worldwide launch customer of a new airplane,” David Barger (JetBlue CEO) said in an April 21 address to the Harvard Business School’s Aerospace & Aviation Club in Boston, adding, “We weren’t big enough.”

Each of these companies have excellent products, with new technology engines and compelling economics, in their pipeline.  However, between now and entry into service, when revenues are realized, the need to sell existing products is under increasing pressure.  Bombardier should turn around with the first CSeries deliveries in 2014-2015, but Embraer will need to bridge the gap from the E-Jets to the E2 series in 2018, which could lead to several additional tough quarters.

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