Bombardier to close window on C Series jet discounts

Bloomberg

Bombardier Inc. gained sales momentum for its flagship C Series jetliner this year with major orders from Air Canada and Delta Air Lines. Now it’s looking to get away from the pricing discounts that fuelled the aircraft’s rebound.
The plane maker expects to book new sales in the coming months after racking up 360 firm orders and more than 400 commitments for the C Series, its biggest-ever plane, chief executive officer Alain Bellemare said. The jet’s better-than-expected performance at Deutsche Lufthansa’s Swiss International unit is fuelling interest, as is the entry into service of a larger variant at Air Baltic Corp. this week.
“I’ve got the right order book,” Bellemare said in an interview late Thursday at Bloomberg headquarters in New York. “What I need is a good solid order from another good customer, and with good commercial terms. That’s what we are doing.”
Bellemare is counting on the C Series to help Bombardier boost sales by about 50 per cent to $25 billion by 2020. That would cement a comeback for the Montreal-based company after it spent about $6 billion developing its biggest-ever jet, fuelling an increase in debt to $9 billion and knocking down the stock price to the lowest in more than two decades in early 2016.
“Aggressive” pricing was part of the strategy that allowed Bombardier to win the 75-aircraft deal with Delta, Fred Cromer, president of the Canadian company’s commercial aircraft unit, said in April. He wouldn’t give financial details of the accord, which also carries options for 50 more jets.
Carriers placing large jet orders typically negotiate discounts with aircraft manufacturers. The CS100, the smallest of two variants of the C Series, has a list price of $76.5 million, while the CS300 goes for $85.7
million.
New orders that avoid significant discounts are a must if Bombardier wants to make the C Series a financial success, said Benoit Poirier, an analyst at Desjardins Capital Markets in Montreal.
“Several orders in the backlog remain at risk and need to be monitored,” Poirier said in a note to clients published Friday. “Despite the encouraging order momentum in 2016, we believe the program requires more orders at decent prices to make the business case sustainable.”
Bombardier is targeting potential C Series buyers in every major region of the globe, Bellemare said. Air Tanzania became the latest carrier to endorse the plane when it agreed on Dec. 2 to buy two CS300 jets.
“We see many opportunities right now, and they vary from big orders to very small, tiny orders, depending on which region of the world you look at,” he said.
Swiss began operating the CS100, which can be configured to seat 108 to 133 passengers, in July.
The technical reliability of the C Series “has settled at very high levels, which are well above those seen for other recent new aircraft types,” Karin Mueller, a spokesperson for Swiss, said by email.
Bombardier has said the jet would cut fuel use, produce less noise and cost less to operate than competing models.
“The performance with Swiss has been so good, and that’s why we are confident,” Bellemare said in the interview. “Time is helping us here. The more customers appreciate the value of the aircraft, the better it is for us.”