Analysis: Delay on Bombardier's new jet heightens price pressure

Sat Nov 10, 2012 10:53am EST
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By Susan Taylor and Nicole Mordant

TORONTO/VANCOUVER (Reuters) - Bombardier Inc's (BBDb.TO: Quote) decision this week to delay the maiden flight of its new C-Series jetliner raised questions about the company's ability to deliver the jet on time - and the amount it may have to discount the price to boost sales.

Tripped up by supplier delays, Bombardier pushed back the inaugural flight by six months, a blow that adds to a host of challenges the world's No. 3 planemaker faces in cracking the narrow body jetliner market dominated by Boeing Co (BA.N: Quote) and Airbus EAD.PA.

The C-Series promised market-beating performance when it was launched a few years ago, due to new engine technology and a lighter airframe. But Boeing and Airbus have since launched similarly advanced planes based on their best-selling 737 and A320 models, eclipsing much of Bombardier's advantage.

The Montreal-based plane and train maker had hoped the C-Series would spark sales growth at its commercial plane unit, compensating for sputtering demand for its small regional jets and corporate Learjets.

Bombardier is very confident in its revised timetable, company spokeswoman Marianella de la Barrera said.

But with delay concerns hanging over its biggest jet yet, Bombardier faces an even tougher sales job, analysts say.

To overcome airlines' reluctance to place firm orders for an unproven aircraft that could be delivered late, Bombardier will have to offer bigger discounts, financing, residual value guarantees and walk-away rights, said aerospace analyst Richard Aboulafia, of Virginia-based Teal Group.

"The cost of developing a jet is just the start," Aboulafia said. "Now that they're in, they need to put an awful lot more on the table."   Continued...

A scale model of a CS100 Bombardier airplane is displayed beside a mock-up of the future CSeries Bombardier aircraft at the Bombardier Inc. REUTERS/Christinne Muschi