MONTREAL (Reuters) - Bombardier Inc (BBDb.TO)(BDRBF.PK) sliced in half the 2016 delivery forecast for its CSeries aircraft on Tuesday and said it expected full-year revenue to be at the lower end of its previously announced range.
The setback is the latest for the CSeries program, which took years to get off the ground and has been hit by production delays and cost overruns, causing the Montreal-based plane and train maker to agree to a C$1 billion ($774 million) investment from the Quebec government.
The company remained in talks with the Canadian federal government about possible funding, and some analysts said the delays could add to concerns about its financial strength.
“Bombardier has a lot of debt, limited financial flexibility and these kind of setbacks, even when they are modest and transient, can heighten concerns”, said one transport analyst who asked not to be named.
Desjardins analyst Benoit Peorier said the development was “slightly negative” and “unexpected.”
Shares in the company were down 4.7 percent to C$2.02.
Bombardier expects to deliver seven of the planes this year, compared with its earlier forecast of 15, blaming engine delivery delays by supplier Pratt & Whitney, a unit of United Technologies Corp (UTX.N).
The CSeries jets, which have between 100 and 160 seats and are designed for short- and medium-haul travel, entered service earlier in 2016. Bombardier hopes to compete with Boeing Co (BA.N) and Airbus (AIR.PA) in the single-aisle jet market.
Lufthansa AG (LHAG.DE) unit Swiss International Air Lines confirmed on Tuesday it expected to take delivery of fewer CSeries planes from Bombardier than initially planned this year, due to the engine delays. It had anticipated receiving nine, but declined to say how many it now expected.
Bombardier now expects to be close to the lower end of the $16.5 billion to $17.5 billion revenue range for the full year. However, it reaffirmed its outlook for 2016 revenue and earnings before interest and taxes.
Bombardier said it was working closely with Pratt & Whitney to quickly address the engine problem and remained confident it could meet its production goal of 90 to 120 aircraft per year by 2020.
A Bombardier spokeswoman said the delays would also affect deliveries to airBaltic, the launch customer for the company’s larger CS300 jet, but should not have an impact on orders further down the road from carriers Air Canada (AC.TO) and Delta Air Lines Inc (DAL.N).
Pratt & Whitney is facing heavy demand from aircraft makers and has 8,200 orders and options for the fuel-efficient GTF engine family, which is also being used in the Airbus (AIR.PA) A320neo.
“In terms of production, we’ve made significant headway in the supply chain, but there is some pressure on new engine deliveries for this year,” said Sara Banda, a spokeswoman for U.S.-based Pratt & Whitney.
Banda could not say how the pressure on new engine deliveries would affect other aircraft makers.
Airbus has said it is receiving newly revised engines from Pratt & Whitney after delays caused by software error messages and slow start-up times.
($1 = 1.2912 Canadian dollars)
Reporting by Subrat Patnaik and Narottam Medhora in Bengaluru, additional reporting by Matt Scuffham in Toronto, Tim Hepher in Paris and Vicki Bryan in Frankfurt; editing by Sayantani Ghosh and Jeffrey Benkoe