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Monday, March 28, 2005

Skeptics Voice Misgivings About Bombardier's New Jet

Bombardier is ready to move into the major league, but some skeptics are questioning whether its new airplane will succeed.

As the Canadian manufacturer of regional jets begins marketing its new CSeries jetliners, Bombardier [BBD] is pitching the narrow-body, mainline jets to the major airlines - the network and low-fare carriers, not the regional airlines. The proposed aircraft will have a 110-seat model and a 130-seat version. It will cost more than $2.1 billion to develop.

While Bombardier executives are enthusiastic, industry analysts question if the plane will rack up enough orders to ever break even.

"This will serve the mainline carriers, " said Pierre Beaudoin, president of Bombardier Aerospace division in an analysts conference call. "It is a global market. It includes everybody but the regionals. The plane is a unique combination that offers low-cost with range."

Beaudoin would not disclose the minimum number of firm contracts its needs to launch the plane. The company hopes to have enough firm orders in hand to announce a launch at the Paris Air Show in July.

Cracking the major league, will be a problem. "Bombardier will have tough time breaking in as the airlines will not want to get into a different fleet type. Bombardier also does not have an installed base of customers in that category," said aviation consultant Michael Boyd.

Perhaps Bombardier should not be so quick to shut the door on sales to regional carriers.

SkyWest [SKYW] has been looking at aircraft up to the 150-seat size, said CEO Jerry Atkin. Atkin told investors assembled for the 2005 Goldman Sachs Transportation Conference that SkyWest is prepared to take a look at the CSeries when it comes to market. "It sounds like a very economical airliner," he said.

As more regional carriers abandon the small RJs for larger jets, the CSeries could be an option. "You will have to have something off-the-wall like this to happen for this CSeries to sell big," Boyd said.

"It has been a long-time since I have seen a proposal that is this poorly thought out," said Richard Aboulafia, an analyst with the Teal Group. "Bombardier is not in a position to be launching aircraft like this. They are basically depending upon other people to give them money.

"It is easy to kid yourself that if you build the exactly right aircraft it can outweigh the advantages of a broader family. But you are kidding yourself. It is not like there is any kind of new technology in the CSeries that will allow this proposal to succeed," he said.

>>Contacts: Michael Boyd, Boyd Group, (303) 674-2000; Jerry Atklin, SkyWest, (435) 634-3000; Robert Aboulafia, Teal Group, (703) 385-1993.<<

Bombardier's CSeries
C110 110 passengers; 1,800 nautical miles
C110 ER 110 passengers; 3,000 nautical miles
C130 130 passengers; 1,800 nautical miles
C130 ER 130 passengers; 3,000 nautical miles
2005 Launch
2008 First flight
2010 Enters service
CSeries Competition
Embraer 195 108-118 passengers; 1,800 nautical miles
Boeing 717 106 passengers; 1,430 nautical miles
Boeing 737-600 110-132 passengers; 3,510 statue miles
Boeing 737-700 126-149 passengers; 3,752 statue miles
Airbus 318 110-129 passengers; 2,850 nautical miles
Airbus 318 110-129 passengers; 2,850 nautical miles
Airbus 319 110-145 passengers; 3,000 nautical miles
Targeted For Replacement
DC-9/ DC-10 1965-1981
BAe 146/ Avro RJ 1982-2002
MD-80 1979-1997
Boeing 737-200 1967-1985
Boeing 737-300 1984-1999
Boeing 737-300 1984-1999
Fokker 70/100 1986-1997
Sources: Bombardier, Airbus, Boeing, Embraer
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