Bombardier to Offer CSeries

Bombardier is now offering its CSeries for sale to operators worldwide and, because of the value of the Canadian versus the U.S. dollar as well as the British pound versus the dollar, is considering moving some production, possibly final assembly, to a new, yet-to-be built plant in the United States. List...

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Bombardier is now offering its CSeries for sale to operators worldwide and, because of the value of the Canadian versus the U.S. dollar as well as the British pound versus the dollar, is considering moving some production, possibly final assembly, to a new, yet-to-be built plant in the United States.
List price of the aircraft, scheduled for service entry in 2013, will be in the low $40 millions for the 110-seat aircraft and in the high $40s for the larger version, according to Bombardier Aerospace President, Aircraft Services and New Commercial Aircraft Program Gary R. Scott, who said the company is aiming at an eight-to-10-percent margin. Bombardier has already invested $140 million in the aircraft project and expects another $2.5 billion investment in research and development and $700 million in capital costs for buildings and factory tooling.
The company sees a 5,900 aircraft market – valued at $250 billion over the next 20 years – and expects to take half the market share. “We expect to get more than half on the lower end of the 110- to 140-seat market and less than half on the upper end,” said Bombardier Aerospace President and Chief Operating Officer Pierre Beaudoin. (Continued Below)

A third will be coming from the Canadian government while another third is coming from suppliers, including Pratt & Whitney, AVIC 1 and others while Bombardier will be putting up the final third. But the Canadian government portion could be in jeopardy if production were moved to the U.S. Bombardier and AVIC I announced long-term strategic cooperation on commercial aircraft starting last year on the CSeries, which gives it access to the exploding Chinese market. AVIC I will produce the center fuselage and doors. In turn, Bombardier intends to participate in the development AVIC I’s five-abreast ARJ21-900, following on from the ARJ21-700 aircraft. Related Story
The aircraft will we powered exclusively by the Pratt & Whitney next-generation, high-bypass Geared Turbofan, according to the announcement made Friday that Bombardier’s board has granted it permission to offer the aircraft for sale. Launch is expected this year after the company books orders and it is significant that Lufthansa, Qatar Airways and International Lease Finance Corporation all lent their names to the press release. "ILFC is not only considering buying the aircraft, we could become a co-launch customer,” said ILFC’s CEO Steven Udvar-Hazy. “However, other major airlines need to sign up to the program as well. We would like to see a North American, European and possibly Asian customer.”
Scott said the company is looking for one to two quality customers with 50 to 100 aircraft. “We are now in a position to offer firm proposals,” said Beaudoin. “Now we’ll be able to advance those discussions. Their needs are significant but we are not quoting numbers. We’ve also been talking to many others for some time. What really counts is the pipeline and what could follow on from these three and we feel very good about that.”
In response to concerns expressed by investors that the company was poaching on Boeing and Airbus territory with its 110- to 130-seat aircraft, Beaudoin said that the last time either offered a single-aisle aircraft was the MD 80, B-717 and A319. Furthermore, he said, the two were concentrating on developing and producing aircraft that were optimized for 150 seats and above. He also pointed to their three- to five-year backlogs and previous announcements they would not be offering any new aircraft before 2015 or later. “Our strategy is to provide an optimized family just below the space Boeing and Airbus occupy today,” he concluded.
Beaudoin also noted that Embraer and Sukhoi are both developing regional aircraft at the high end of the regional market, although Sukkhoi's larger aircraft is over 100-seats, and will continue to do so to recoup investments. “We think the timing is great for us because we are the only ones who have come up with an optimized solution for this segment of the market. One of our advantages is we have lower costs than Boeing and Airbus and have leveraged the technology developed by the two larger manufacturers into our aircraft.”
Scott reiterated the operating advantages of the proposed aircraft at 20 percent lower fuel burn and said that assumption was based of $65-a-barrel fuel costs. “The thing about the CSeries is the higher the fuel goes, the 20 percent fuel burn (benchmarked on the ERJ 195) advantage looks better and better,” he said. “It just gets more attractive all the time. Fuel is now 50 percent of operating costs and we should also have a 25- to 30-percent advantage on the maintenance side. All this varies by airline and continent. This is a very global mainline product for both network and low-fare carriers. We made sure the aircraft is a good performer in all conditions and operates as well in India as it does in North America. This, of course, provides flexibility for leasing companies.” In addition, the aircraft offers operating costs 15 percent lower than current generation aircraft and double that for the narrow-body aircraft it is intended to replace. He noted that Northwest still had DC-9s needing replacement and Delta, which is negotiating a merger with Northwest, had MD-80s.
“This aircraft is a true game changer and we intend to offer an airplane that is best in its class,” he said, adding that in addition to the operating benefits, the CSeries will be the greenest aircraft on the market, bettering Stage 4 by up to 20 db and may even match Stage 5. “It is very passenger friendly, offering a wide-body feel to a single-aisle aircraft. The 2,700-nm range will mirror larger Boeing and Airbus aircraft but it has been designed with the field length performance of smaller aircraft which means it is able to land at short, difficult airports, while performing true transcontinental operations with full load in all weather. It will have good hot-and-high performance for the more difficult areas in North America, Western China and the Middle East.” Windows will be the same size as that offered on the 787 at 11x16 with larger aisles, seats and with the same drop-down, rotating bins as offered on the 777 able to fit larger roll-on bags.
He pointed to the benefits of having waited to offer the aircraft since first announcing the program in 2005. Scott said the market was clearly not ready and customers told the manufacturer to wait. He noted that two of its main targets – Northwest and Delta – were just entering bankruptcy at that time and the rest had yet to climb out of serious financial losses. The company pulled back in 2006 and said last year it expected a launch decision this year.
“Stars have aligned much better today than they were in 2005,” said Scott. “You have to remember we will be making this aircraft for about 20 years, so taking a couple of years to refine the aircraft and wait for the market was a very good decision. The wait allowed us to take advantage of the new technology. The CSeries will be 46 percent composite but 24 percent third generation, aluminum lithium which makes over 70 percent of the aircraft made up of new technology materials. The wings are also composite as are the empennage and aft fuselage along with 34 percent of the main fuselage. It will have the latest in systems with full fly by wire. The service entry date of 2013 driven a lot by available of engines and the new geared turbofan is a game changer in itself. This will benefit airlines that have not had anything to replace such aircraft as the 727, DC 9 and Fokker 100. We have a family that has 90 percent parts commonality and a lot of interest from airlines.”
The possibility of losing Canadian production riled the Canadian press which insisted on asking the same employment and production questions for over 30 minutes in an effort to get Beaudoin to say more than he already had several times. He would only say that it is part of the company’s fiduciary responsibility to investigate all options and that it could change the investment of the Canadian government in the project which is now one third of the $3.2 billion expected over the next five years. However, he reiterated that government investment in Bombardier has always provided healthy returns with Canadian government investments in previous programs realizing returns of 131 percent. “The best way to protect our business plan is to make sure we are competitive in context of a weak dollar,” he said. “Four years ago, the Canadian dollar was at 60 cents and last year it was 90. Now it is at parity.”
Currently the wing will be built in Belfast while the final assembly is scheduled for Bombardier’s Mirabel location. The cockpit is schedule to be built at its St. Laurent facility but the decision to move will be made when and if it finds sites that are more competitive in the long term. Employment would rise between 2,000 and 2,500 at Mirabel, 2,000 at St. Laurent and 1200-2500 at Belfast should production remain there. “Knowing the significant pent-up demand, we may produce up to an aircraft a day or between 220 and 230 a year,” said Scott.
"Our decision to continue refining our business plan over the last two years has proven to be the right one,” said Beaudoin. “It has allowed us to take advantage of new technologies and to meet the airlines' evolving requirements for future efficient five-abreast aircraft. Airlines worldwide have expressed their keen interest to receive formal sales proposals from us," he added.
"We are delighted that Bombardier's Board of Directors has given authorization to offer the CSeries aircraft, and we are excited to partner with Bombardier in discussions with airlines and operators around the world," said Todd Kallman, president, Pratt & Whitney Commercial Engines. "The game-changing performance of the Pratt & Whitney Geared TurbofanTM engine, combined with the new generation design of the CSeries aircraft, will bring double-digit improvements in fuel efficiency, environmental emissions, noise and operating costs to CSeries customers."