TORONTO/MONTREAL (Reuters) - Bombardier Inc’s CSeries passenger jet will finally debut at the Paris Airshow this month, but the event will also let the Canadian company show off what may be an even more important asset: its new management team.
With the CSeries nearing certification by regulators after years of delays and cost overruns, Paris offers an opportunity for Bombardier to improve a weak order book by clinching new sales, or at least laying the groundwork for future deals.
The event is also a debut of sorts for the company’s new Chief Executive Alain Bellemare and the team he has assembled to get the CSeries program back on track.
The Montreal-based planemaker has not announced a single firm CSeries order since September, and none of the tentative orders announced around last year’s Farnborough International Air Show in Britain have been converted to firm orders.
Analysts have long urged Bombardier to be more aggressive to win orders, offering risky walk-away rights and other allowances that could see the program losing money for years.
“This is a long game, and you had the old management just in
complete denial,” said Richard Aboulafia, an aerospace analyst with Virginia-based Teal Group. “What you’ve got is a management team that now recognizes market reality. You want a strategic win? It’s going to cost you.”
Bellemare, who touts the aircraft’s efficiency, is cautious about sales strategy, promising to do right by both buyers and shareholders.
“We understand the dynamic of the market and we will do what is right for the business,” he said in a recent Reuters interview.
Bellemare, a former United Technologies executive, in February took the reins from Pierre Beaudoin, whose family controls the company.
He has hired other industry veterans to fill key roles. In April, former International Lease Finance Corp president Fred Cromer became president of commercial aircraft, replacing Mike Arcamone, who had been with General Motors before joining Bombardier in 2012.
“Rivals used to dismiss the CSeries for its delays and its management for being automotive specialists,” said one source familiar with the company. “They can’t say that now.”
Bombardier, which estimates the capital cost of the CSeries at $5.4 billion, has booked 243 firm orders since 2009, and is targeting 300 before entry into service, expected in the first half of 2016. Rival Embraer SA has announced 242 firm orders for its similar E-Jet E2 since 2013.
Lufthansa’s Swiss International is a key customer but many other orders are small or conditional.
U.S. regional carrier Republic Airways has a firm order for 40 jets but plans to simplify its operations and many in the industry expect it will re-sell the planes.
Russian lessor Ilyushin Finance Corp has complained about CSeries delays and said it hopes to revise its deal, perhaps at the Paris show.
“We are all questioning the quality of the backlog and the quality of the airlines,” said a fund manager at a large
Canadian firm that is a major Bombardier investor. The company says it has a high-quality order book.
A large new order from a blue-chip airline would help
restore confidence in the CSeries, and reassure other potential
customers that the plane will have resale value.
But while its rivals have touted big anticipated orders, Bombardier has been tempering expectations ahead of Paris, saying it is still working on a new sales strategy.
“Anything would be good,” said the Canadian fund manager. “If they came out of Paris with 20 or 30 firm orders that would be excellent.”
Macquarie analyst Konark Gupta expects to see some non-binding letters of intent announced rather than a large number of firm orders.
Reporting by Allison Martell; Editing by James Dalgleish