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MIRABEL, Quebec (Reuters) - Bombardier Inc's (BBDb.TO) CSeries jetliner successfully completed its first flight on Monday, a key step in a $3.4 billion program to develop the first all-new narrow-body plane of its size in decades that the company hopes will increase sales.
But the new jet still faces an ambitious, 12-month deadline to start carrying commercial passengers, and tough sales competition from bigger rivals Airbus EAD.PA and Boeing Co (BA.N).
Bombardier Commercial Aircraft President Michele Arcamone told a press conference on Monday the development cost had climbed to $3.9 billion, but he later sought to backtrack on that figure, telling reporters the company had always targeted costs at "less than $4 billion" and saying that $3.4 billion remained the official estimate.
He said the cost fluctuates due to suppliers, materials and other factors.
The white-and-blue CS100 test aircraft landed beside the Bombardier plant in Mirabel, Quebec, at 12:23 p.m. EDT (1623 GMT) before a crowd of employees, media and spectators.
"It flew very well," said Bombardier chief test pilot Chuck Ellis on stepping out of the cockpit after the flight. "It's a very, very nice airplane."
About 2-1/2 hours earlier, the plane rose from the tarmac amid cheers and surprisingly little noise from its new engines.
"You could hardly hear the take-off," said Martin Gauss, chief executive officer of Latvian carrier AirBaltic, which has ordered 10 of the larger CS300 planes, which seat 130 passengers.
"This was one of the reasons why we bought it, along with the cost savings from lower fuel burn," he said by telephone after watching the take-off from a spot near the runway.
Montreal-based Bombardier believes big profits await it at the lower end of the market served by Airbus and Boeing for aircraft seating between 100 and 149 passengers.
Critics say the Canadian design for the medium-haul jet made of light-weight composite materials ignores a trend toward larger aircraft seating 150 people or more as air traffic expands and carriers offer more seats.
Bombardier says its plane will have a 15 percent cash operating cost advantage, 20 percent fuel burn advantage and will be significantly quieter that competing single-aisle jets.
Those proposed improvements prompted Airbus and Boeing to launch in recent years new versions of their older single-aisle models, with similar new, fuel-efficient engines.
Airbus says that when comparing "apples with apples," its upgraded A319neo, part of the A320ne family, will have similar fuel burn and cash costs to the CS300, merely by adopting similar engines. Boeing's competing jet, the 737MAX, is an update of its best-selling 737 jet, first launched in 1967.
While most industry experts say Bombardier's "all new" aircraft built with composites has the edge on fuel performance, Airbus and Boeing sales pitches emphasize "commonality" with the airlines' existing fleet of A320s and 737s - similar design, controls and components that reduce the cost of training and spare parts. Airbus and Boeing planes also command cheaper financing since they are the industry's most popular models.
The two big plane makers have won more than 3,800 orders for their A320neo and 737MAX planes. Only a small portion of those orders are for the smaller models that compete directly with the CSeries, suggesting that airlines prefer larger planes.
In contrast, CSeries sales have stalled at 177 firm orders, far short of Bombardier's goal of 300 by the time the plane enters service next year.
But Bombardier, which also makes trains, is staking a claim in a niche: the single-aisle, 100- to 149-seat class that is midway between the size of so-called "regional" planes and the larger commercial jetliners of Boeing and Airbus. Bombardier says it can corner half that market over the next 20 years.
Brazil's Embraer SA (EMBR3.SA), the world's No. 3 planemaker, leads in sales of smaller, regional jets.
The CS100 seats 110 in a typical configuration, while the larger CS300 seats 135 and can be modified to seat up to 160.
Bombardier also says the CSeries will be the world's quietest commercial aircraft, to meet evolving regulation.
After witnessing the flight on Monday, Gauss of AirBaltic said he would talk with Bombardier about increasing the airline's order by dipping into its options for 10 additional planes. AirBaltic has not yet decided how many of these options it will exercise.
While the CSeries performance is strong on paper, now that it is flying, airlines and rival plane makers will see if it lives up to its claims of high fuel efficiency, low operating costs and low noise levels.
Competing plane makers also will look closely at the performance of the CSeries systems and components, most notably its PurePower PW1500G turbofan engine made by Pratt & Whitney, a unit of Connecticut-based United Technologies Corp (UTX.N).
"The CSeries has already caused an earthquake in the airliner industry," said Michael Boyd, chairman of aviation consulting group Boyd Group International. "That's what caused Boeing and Airbus to redesign their airplanes."
While the first flight was successful, the CSeries' still faces numerous obstacles before it can start carrying commercial passengers in 12 months.
Guy Hachey, president and chief operating officer of Bombardier, said on Monday that nothing from the flight indicated changing the schedule for entry into service.
But others were skeptical that the ambitious deadline would be met, especially after the first flight was delayed for nine months. The plane still faces considerable work in testing, certification and setting up production.
"There has not been a flight test program yet that's ever gone up there and they haven't found something that needed addressing," Chris Murray, an analyst with PI Financial, said recently. Like many others, Murray expects entry into service in 2015.
Reporting by Solarina Ho and Tim Hepher; Editing by Alwyn Scott, Gerald E. McCormick, John Wallace and Chris Reese