At a time when Embraer (ERJ) is reporting high sales for both its commercial and business jets, Bombardier (BBD) reported a 33 percent drop in quarterly regional aircraft deliveries, forcing moves to cut costs and boost profit margins. It noted that higher shipments on business jets offset the drop in regional business.

"I think there is the potential to maintain the production rate we have in place today," Bombardier Aerospace President Pierre Beaudoin said. "But, at the same time, I am saying it is likely that we will have to reduce production rates."

The company earned US$58 million in the second quarter ending July 31, down from US$117 million in the year-ago period when the sale of the inventory finance business of Bombardier Capital unit boosted results. Income from continuing operations was US$57 million, compared with US$10 million last year.

One analyst called the company's aerospace margins disappointing, at a full percentage point below its predicted 3.9 percent for the quarter. Others noted that orders from Northwest (NWAQ), Delta (DALQ) and USAirways (LCC) are key to boosting the order flow for the CRJs. Of the 75 aircraft it delivered in the quarter, only 26 were regional aircraft, down from 39 in the year-ago period. It also received only nine net orders for regional aircraft, down from 11.

In a recent research report, Canaccord Adams Analyst Robert Fay noted that Northwest may have already decided whether to order up to 70 regional jets from either Bombardier or Embraer. Delta just issued its regional aircraft request for proposal and, in addition to 50 76-seat aircraft, bids also cover 43 70-seat aircraft and up to 50 50- seat jets, to replace those covered by existing contracts. Delta and its regional airline partners currently operate 450 RJs. (RAN, August 28, p.1) The only other outstanding RFPs include Midwest Air Group's requirement for 50-seat regional jets for market development. (RAN, August 7, p.7) In addition, Frontier Airlines (FRNT) is about to issue an RFP calling for the operation of 20 regional jets.