Commercial

To Fruition: How the C Series Turned Itself Around

By Juliet Van Wagenen | July 18, 2016
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[Avionics Today 07-18-2016] Swiss International Air Lines (Swiss) officially launched Bombardier’s C Series CS100 aircraft into revenue service on July 15, ending a rocky 12-year journey from concept to launch. The C Series faced several challenges as it moved toward certification and first delivery, both internally and from stiff competition as challengers in the 100- to 150-seat single aisle commercial airliner market segment, namely Airbus, sought to block sales of the new aircraft with the launch of their A320neo.
 
Bombardier and Star Alliance CEOs and executives
Bombardier and Star Alliance CEOs and executives. Photo: Bombardier
 
After a management shake-up and company restructure that cut production on other aircraft programs such as the Learjet 85, for which Bombardier CEO Allain Bellemare announced a “pause” to development and certification activities as well as a reduction in the Global 5000 and 6000 production, the Canadian manufacturer  was able to bring the aircraft to fruition and win several large contract orders. As part of its turnaround plan, it was also announced in February of this year that the company would reduce its global workforce by 7,000 employees, including 2,000 contractors, over the next two years.
 
“The CSeries always had the potential of being a success. It was a good jet in an underserved market,” Richard Aboulafia, senior analyst at the Teal Group, who had previously been skeptical of the program’s ability to come to term, told Avionics Magazine. “The question was: Could they find the resources to make that happen? Management being what it was, it was a challenge. But when management changed, it was just a question of doing the right thing.”
 
The adjustments impacted all units aside from the commercial aircraft segment and aimed to enable Bombardier to resize its organization in line with current business needs, according to the company, which released a statement alluding to the need to funnel resources to the CS100 program.
 
The turnaround for the program was successful and the CS100 received certification in June from the European Aviation Safety Agency (EASA) and the FAA, assisted by backing from the government of Quebec. The  agreement between the government and the company allowed it to speed the aircraft to certification through $1 billion in funding in return for a 49.5 percent stake in the C Series program. 
 
Aboulafia believes that what really tipped the scales for the CS100, however, was one large commercial airline fleet order from Delta. The U.S. carrier announced a $5.6 billion purchase of 75 C Series CS100 aircraft to be delivered in 2018. The contract also includes options for an additional 50 CS100 aircraft. 
 
“As a blue-chip carrier, the Delta CSeries order is a strong endorsement,” said Aboulafia. “The order also provides the kind of numbers that save a program. But most of all, it tells you an awful lot about what Bombardier is willing to do. They could have struck the Delta deal previously, but now they were willing to compromise and make the aircraft a worthwhile purchase for the airline.”
 
Other airlines have jumped on board as well, including Air Canada, which announced in June a firm purchase agreement worth $3.8 billion for 45 CS300 aircraft. The agreement includes options for an additional 30 CS300 aircraft and deliveries are scheduled to begin in late 2019 and extend to 2022. 
 
“The launch of revenue service with the CS100 aircraft ... follows Bombardier Commercial Aircraft’s strong sales performance in the first half of 2016 during which we obtained firm orders for 127 C Series, 19 CRJ and 15 Q400 aircraft — including orders from Porter Airlines and All Nippon Airways each of which ordered an additional three Q400 aircraft as disclosed during the airshow. The capture of these 161 firm orders in six months signals Bombardier’s intent to re-assert itself as a strong leader in commercial aviation,” said Fred Cromer, president of Bombardier Commercial Aircraft, in a statement regarding the CS100 launch.
 
Aboulafia says that as airlines jump on board, more are likely to take a look at what the CSeries could do for their fleets as well.
 
“It creates a prospect of a virtuous cycle, especially since the A320neo series introduction has been a lot more difficult than expected,” said Aboulafia, pointing to issues the A320neo is currently having with mounting the engine.
 
But with orders now pouring in, Aboulafia said there are still hurdles ahead for those steering the program.
 
“The challenges still are pretty huge, but they are doing exactly what they need to give them the best chance of success,” said Aboulafia, noting that he still believes the company will have a difficult time ramping up production while maintaining costs. 
 
The company is planning to deliver more than 300 aircraft in the next four years to airlines such as Delta, Air Canada, Swiss and airBaltic, according to recent orders. On top of that, Bombardier announced further orders at Farnborough as the CS100 entered into service. Already, the CSeries ramp up contributed to downed earnings noted in Bombardier’s fourth quarter 2015 earnings conference call, which saw full-year revenues at $18.2 billion for the company, a 3.7 percent dip compared to 2014.
 
Even with new government buy-in and strong order numbers behind the program, Aboulafia says the new management will have an uphill battle bringing the aircraft to all customers on time.
 
“There are three challenges [facing the program still]. One from impression; that’s problematic. Two, keep costs coming in from investors, bonds, the government, etc. And three, work wonders on the cost front. Those are the three variables,” said Aboulafia. “I think given the new management team’s ability to do all three, it might just be enough.”
 

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