C series shelved...

Yoyoma · Post by **Yoyoma** » Wed Feb 01, 2006 4:27 pm

Bombardier grounds jet plan
CSeries on hold: $2.1-billion program screeches to a halt after two years of research and planning

Bombardier is blaming the cancellation of CSeries jet production on poor market conditions.

NICOLAS VAN PRAET, The Gazette
Published: Wednesday, February 01, 2006

Bombardier Inc. has put on ice a $2.1-billion program to develop a new line of jets, raising questions about its future in the commercial aviation business.

For months, federal and provincial politicians hyped the creation of thousands of spinoff jobs from the planemaker's plans to develop a new series of transcontinental airliners, called the CSeries.

Commentators said all Canadians should feel proud that the Montreal region would be home to the next big thing in commercial aviation.

All that came to a screeching halt yesterday.

After two years of research and planning - and months of marketing - Bombardier announced it will not launch the family of 110-to-135-seat jets at this time after it failed to win over customers.

Without a significant launch order, president Pierre Beaudoin said, Bombardier could not make the investment needed to ramp up the program and deliver planes by the projected date of 2010.

"This is the correct business decision given today's market dynamics," Beaudoin said.

Many investors had expected this outcome after Bombardier repeatedly delayed a final decision on whether to build the much-hyped aircraft, while others had hoped to see the planes flying by the end of the decade.

The CSeries, to be built in Mirabel, would have been the biggest Bombardier plane, an

attempt by the Montreal company to crack the market in the 100- to 135-seat range.

With the CSeries, Bombardier would have thrust itself into big-league competition against Airbus SAS of France, Boeing Co. of the U.S. and Embraer of Brazil.

Without it, Bombardier is left in the near term with its existing stable of CRJ regional jets and turbo-propeller planes that leave some analysts unimpressed.

Robert Fay of Canaccord Capital questioned yesterday how long Bombardier's line of commercial passenger jets will remain viable in the current market.

Last month, the company suspended production of its flagship 50-seat jet - the CRJ200 - amid declining sales. It was counting on the CSeries to give it a competitive leg up on rival Embraer and drive future revenue.

"It's going to be very tough for them," said Michael Boyd, president of Colorado-based aviation consultancy Boyd Group.

"(The argument is) if you don't build the CSeries, the current product lines are going to peter out and you'll be out of the airliner business, which is what happened to Sweden and Saab."

Beaudoin insisted yesterday that won't happen. He said he believes Bombardier can sell a lot of 70- and 90-seat regional jets and that the company is taking steps to renew its stable.

Besides, Bombardier said it is scaling back the CSeries development program, not killing it outright. A smaller team led by Gary Scott, president of Bombardier's new commercial aircraft program, will continue to work on the CSeries business plan.

Bombardier has spent $100 million to develop the CSeries so far, Beaudoin said. He said the company expects to spend about

$20 million on it during the next fiscal year.

With four of its North American customers in bankruptcy protection - notably Northwest Airlines - Bombardier said it will seek out partners and opportunities for the CSeries in China, India and Russia.

Beaudoin said those countries are high-growth markets for aerospace and that Bombardier already has held talks with Russian and Chinese potential partners, including fighter-jet maker Sukhoi.

Bombardier said it now will shift its attention to developing a new product for the 80- to 100-seat market, where demand is immediate.

Beaudoin said that could include stretching the existing Bombardier CRJ900 86-seater, or building a new jet, which would take longer.

"They can (still) do things that are dramatic enough that would put them back in the game big time," said Eric McConachie, an aviation consultant and former Bombardier executive credited with spearheading the company's regional-jet business.

Investor reaction to yesterday's development was muted. After initially dropping three per cent in morning trading, Bombardier shares closed the day unchanged at $2.98 on the Toronto Stock Exchange.

Steve Laciak, an analyst with National Bank Financial, said Bombardier is better off without the CSeries.

"They need to concentrate on getting their costs in line at their existing operation," Laciak said.

The governments of Canada, Quebec and Britain - where Bombardier has an assembly plant in Belfast, Northern Ireland - together pledged more than $700 million U.S. to the CSeries program.

None of the money has so far been paid out, Bombardier said.

nvanpraet@thegazette.canwest.com
© The Gazette (Montreal) 2006

WJflyer · Post by **WJflyer** » Wed Feb 01, 2006 8:55 pm

Why am I not surprised?

shack · Post by **shack** » Wed Feb 01, 2006 10:43 pm

I was on a jetBlue E190 the other day. Bombardier ought to just close its doors.

WJflyer · Post by **WJflyer** » Wed Feb 01, 2006 10:49 pm

shack wrote:I was on a jetBlue E190 the other day. Bombardier ought to just close its doors.

Or at least their aerospace division... they make good trains.

The Hammer · Post by **The Hammer** » Wed Feb 01, 2006 10:53 pm

Amtrak would probably disagree with you on that!!!

shack · Post by **shack** » Wed Feb 01, 2006 10:57 pm

Do they still make water-mobiles that put men in effeminate straddling positions? My old woman grasps me like that, feels pretty ok, but I get a little uncomfortable when I see a man in his speedo in that position.

Maybe Egypt will come along with a better Sea-doo product so we can lose to them, because that's the same as losing aerospace to those piss drinker Brazilians.

WJflyer · Post by **WJflyer** » Wed Feb 01, 2006 11:07 pm

The Hammer wrote:Amtrak would probably disagree with you on that!!!

Translink will have to agree with me... they love their new Bombardier MK II SkyTrain sets, and the Bombardier BiLevel Coach on the West Coast Express...

neophyte · Post by **neophyte** » Thu Feb 02, 2006 11:54 am

I read an article that stated the "C-series" was going to save Bombardier's Aerospace division. I fear the long term outlook doesn't look good.

Do they have enough Dash 8 orders to keep the line running in the coming years?

x-wind · Post by **x-wind** » Thu Feb 02, 2006 12:16 pm

I find it weird that they claim the market is the problem. The industry is booming around the world. I hope they can get Russia and China on board.

duplicate2 · Post by **duplicate2** » Thu Feb 02, 2006 2:59 pm

There's talk of Bombardier getting in on the Russian RRJ.

By market conditions, they mean the legacy carriers that need to replace their DC-9s and 737-200s etc aren't in a position to buy. They are mostly referring to Northwest.

x-wind · Post by **x-wind** » Thu Feb 02, 2006 5:08 pm

I see. Got a link for the RRJ?

duplicate2 · Post by **duplicate2** » Fri Feb 03, 2006 12:02 pm

Bombardier to ditch CSeries in favour of RRJ participation

Inverted2 · Post by **Inverted2** » Fri Feb 03, 2006 12:21 pm

Doesn't Bombardier own whats left of Fokker? They could just re engine and update the F100 and I believe its about the same seating capacity as the EMB 190. I don't think they can strech the CRJ any further!

Yoyoma · Post by **Yoyoma** » Fri Feb 03, 2006 12:29 pm

shack wrote:I was on a jetBlue E190 the other day. Bombardier ought to just close its doors.

I've always thought of BBD as a company that manufactured high quality machines. My beef with them is timing. 3 of their last 4 programs were lauched too late.

EI-EIO · Post by **EI-EIO** » Fri Feb 03, 2006 3:46 pm

AFAIK the right to the F100 is owned by a crowd called Rekkof

duplicate2 · Post by **duplicate2** » Sun Feb 05, 2006 3:43 am

Inverted2 wrote:Doesn't Bombardier own whats left of Fokker?

No.

duplicate2 · Post by **duplicate2** » Sun Feb 05, 2006 3:46 am

Yoyoma wrote:I've always thought of BBD as a company that manufactured high quality machines. My beef with them is timing. 3 of their last 4 programs were lauched too late.

Which ones are those? On the non-business a/c side, the last 4 would be CSeries (although not launched), 900, 700 and Q400.

If you're including biz jets, then you are referring to Challenger 300, Global and L45?

wallypilot · Post by **wallypilot** » Sun Feb 05, 2006 5:28 am

i agree on the high quailty machines remark. market timing does seem to be terrible lately, although in the previous decades, i can't comment. BUt now is probably the time when you want be first in...with so much competition, getting those first few hundred orders ahead of the other guy is everything. Imagine if the CSeries would have been ready for delivery in 2005. would probably be a totally different story.

Yoyoma · Post by **Yoyoma** » Sun Feb 05, 2006 9:58 am

duplicate2 wrote: Which ones are those? On the non-business a/c side, the last 4 would be CSeries (although not launched), 900, 700 and Q400.

If you're including biz jets, then you are referring to Challenger 300, Global and L45?

by launched I even consider "studied", "developed"...They're experts at catching up and running behing the crowd. At least, that's my personal impression in their aerospace division.

- C series -> They talk on their website (news conference) of cancellation due to market conditions. While Boeing, Airbus and Emb have no problem selling. A few years earlier and we could have been in the race. There is also a clear lack of committment from BBD which customers can sense, they're not that easy to fool.

- Q400 -> launched too late leaving $1 or $1.5 Billion in sales for the ATRs and Casa upgrades. Although catching up, 1 billion is no pocket change.

- Response to the 7X and to Gulfstream's new line, a challlenger 605, a revamped Global express! All weak and late launches, not really considered a response.

I like BBD but I don't like their corporate culture. I just feel bad for all my Airbus buddies who had to leave their sweet @ss jobs to come to work on the program, not realising that it was headed for the ground!

Yoyo

duplicate2 · Post by **duplicate2** » Mon Feb 06, 2006 11:55 pm

Yoyoma wrote:- C series -> They talk on their website (news conference) of cancellation due to market conditions. While Boeing, Airbus and Emb have no problem selling. A few years earlier and we could have been in the race. There is also a clear lack of committment from BBD which customers can sense, they're not that easy to fool.

- Q400 -> launched too late leaving $1 or $1.5 Billion in sales for the ATRs and Casa upgrades. Although catching up, 1 billion is no pocket change.

- Response to the 7X and to Gulfstream's new line, a challlenger 605, a revamped Global express! All weak and late launches, not really considered a response.

I generally agree with you about these programs. Bombardier has definitely been playing it safe for the last 5+years, basically offering incremental upgrades to existing designs instead of all-out new programs. My guess as to the reasoning would be the beating the stock price took when, after 2001, everyone (including the company) realized how far costs had gone out of control with the crazy number of new aircraft they had invested in over the previous decade. Their credit ratings are now shot, and shareholders are very wary of risky programs.

My take is that their current product line-up does not lack in quality but in innovation. They are not pushing the boundaries in any direction and the products will not be able to compete in a few years time.

You should remember that "Gulfstream's new line" is of course nothing of the sort. All Gulfstreams are dervied directly from the GI turboprop, a 1950's design. They have not had a "clean-sheet" design in 60 years. Their current line-up is just the GIV/GV derivatives with Primus Epic avionics and various fuel capacity/options combinations. I'm not saying this isn't a good idea, but it's the same approach as improving the payload/range/avionics in the Challenger 604.

Finally, who made your friends go to Bombardier? That sucks that the program is slowed/on-hold, did any of them lose their jobs?

Yoyoma · Post by **Yoyoma** » Tue Feb 07, 2006 3:38 pm

duplicate2 wrote: Finally, who made your friends go to Bombardier? That sucks that the program is slowed/on-hold, did any of them lose their jobs?

Oh, good ol' money did!!

A good pay at Airbus is €40/50,000 but some of the jobs over here were offering $70/95,000 + $15,000 sign in bonus + 20% yearly bonus and benifits...

Greed, I say....