Bombardier CSeries: a che punto siamo?


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Brutto colpo per Bombardier. Air Canada ha deciso alla fine di non rimpiazzare gli E190 - era stato a lungo rumoreggiato che gli avrebbero sostituiti con i CSeries.

Air Canada to Keep 25 Embraer Jets in Blow to CSeries

Air Canada (AC/A) said it will keep 25 Embraer SA jets instead of replacing them with new narrow-body aircraft, dealing a blow to Bombardier Inc. (BBD/B)’s CSeries which was in the running for an order.
Canada’s biggest airline said today it will continue to operate part of its current fleet of Embraer’s E190 jets, “given their young age, productivity and high customer acceptance on existing routes and to avoid additional capital expenditures and debt.” Air Canada currently has 45 of the Embraer aircraft, which can seat 97 passengers, in its fleet. The first of the jets entered service in late 2005.
Montreal-based Air Canada had been evaluating the CSeries as a replacement for its Embraer jets since announcing in December an order to buy Boeing Co. 737 Max planes valued at $6.5 billion. The agreement called for Boeing to buy as many as 20 of Air Canada’s E190s, with the airline leasing larger, narrow-body aircraft until taking delivery of the 737s.
At the time, Air Canada said it would review various options for the remaining 25 E190s, “including continuing to operate them or replacing them with a yet to be determined number of aircraft in the 100 to 150 seat range.”

Brand Name

Bombardier is counting on the CSeries, its newest and biggest jet, to boost revenue and profit. The plane so far has been beset by delays and cost overruns and has failed to attract many big-name airlines.
“I, and I suspect other analysts and investors, are still looking for more brand-name customers for the CSeries,” said David Tyerman, an analyst at Canaccord Genuity Inc., in an e-mailed response to questions. “Air Canada would have been one of those and I think a lot of analysts/investors felt this was a high probability sale.”
Tyerman has a buy rating on Air Canada and a hold rating on Bombardier.
Replacing the E190s with larger narrow-body aircraft will allow Air Canada to reduce costs per available seat mile, the company said. Expenses will decline even more when the 10 leased aircraft are replaced with 737 Max planes, the airline said.
“The up-gauging of aircraft should be highly accretive to Air Canada’s cost structure given the larger size and improved fuel efficiency,” Helane Becker, an analyst at Cowen & Co. in New York, said today in a note to clients. She has an outperform rating on Air Canada.

http://www.bloomberg.com/news/2014-05-15/air-canada-to-keep-25-embraer-jets-in-blow-to-cseries.html
 
Re: News Bombardier CSeries

Mi sa che qualcuno lo prenderanno se sarà certificato per l'aeroporto cittadino di Toronto.
Porter ha un ordine condizionato a questo ed AC non potrà farle concorrenza con i Q400
 
Nella lista degli apparecchi presenti al meeting per il 100° dell'aviazione militare svizzera organizzato durante due weekend di agosto e settembre a Payerne figura anche un esemplare di CS100. Data eventualmente prevista: 7 settembre prossimo.
 
Bombardier Plans More CSeries Test Flights after Fires

Bloomberg.com
Posted: 06.05.14


NEW YORK — Bombardier Inc. may resume flight tests in the next few weeks
for its troubled CSeries jet after a preliminary analysis of last month’s
engine failure found the fault to be minor.


Investigators believe the problem can be “rapidly fixed,” said Gregory
Hayes, chief financial officer of United Technologies Corp., whose Pratt &
Whitney subsidiary built the engine. Bombardier and Pratt said they expect
to issue a formal report on the cause of the May 29 blowout in the next few
days.


“It is not going to have a significant impact on the testing schedule,”
Hayes said today at an industry conference in Chicago. Pratt and Bombardier
are working on a plan to restart testing “in the next few weeks,” he said,
without giving a specific timetable.


Marc Duchesne, a Bombardier spokesman, didn’t immediately reply to a
voicemail seeking comment.


A swift return to flight trials would help bolster investor confidence in
Bombardier, which envisions as much as $8 billion in annual revenue from
the CSeries later this decade. The engine failure dealt the latest blow to
a model that has struggled with rising costs, delays and limited acceptance
by major airlines. …
 
Bombardier Workers Accused of Falsely Calling Themselves Engineers

The (Montreal) Gazette
Published/posted; 08.12.14


MONTREAL — Twenty-seven Bombardier workers in Toronto and Montreal are
accused of falsely using the title of engineer while working for the
company, according to a Radio-Canada report on Monday. The Quebec Order of
Engineers filed the accusations against them at the end of July.


The order is criticizing workers for having either undertaken tasks that
should have been reserved for engineers, usurping the title of engineer or
using it in online professional profiles. The acts allegedly occurred
between 2011 and 2013.


At least four of the employees worked on the company’s CSeries aircraft.
They’re being accused of having prepared a report titled CSeries FTV
Configuration Requirements for aeronautics work without actually being
members of the Quebec Order of Engineers.


The majority of the employees are accused of working on corporate jet
projects such as Global 7000 and Global 8000 without being members.


The order is also accusing three workers of falsely calling themselves
engineers on social networks like LinkedIn.


The order has agreed with Bombardier to set the maximum fine for each case
at $12,000, meaning the company could face more than $300,000 in fines.
 
Bombardier CSeries Suffers Blow as First Client Backs Off

Bloomberg.com
Posted: 08.29.14


Bombardier Inc. will have to find another CSeries jet buyer to become the
troubled plane’s first operator after Sweden’s Braathens Aviation AB said
it’s seeking changes to its delivery schedule.


“We have informed Bombardier that we will not assume the role of formal
launch operator,” Braathens, a buyer of 10 of the jets, said today in a
quarterly filing. “Due to increased uncertainty we are discussing other
possible changes to the aircraft delivery schedule with Bombardier.” …
 
Bombardier CSeries Aircraft Back in the Air

Bombardier Commercial Aircraft confirmed that the CSeries aircraft resumed flight testing with flight test vehicle two (FTV2) taking flight today at Bombardier's facility in Mirabel, Quebec.

The flight today follows an in-depth review and analysis of the engine-related incident that occurred during stationary ground maintenance testing involving CSeries aircraft FTV1 on May 29 at the Mirabel facility. Pratt and Whitney alongside Bombardier, has taken appropriate measures to address the issue, including the modification of the engine's oil lubrication system.

"We are pleased to see the CSeries aircraft back in the air. The geared turbofan (GTF) engine has over 10,000 hours of ground and flight testing and we're confident that it will enter into service meeting or exceeding the fuel burn, emissions, thrust and noise specifications, as promised by Pratt & Whitney," said Rob Dewar, Vice President, CSeries Aircraft Program, Bombardier Commercial Aircraft.

"Aircraft flight test programs are complex and involve extreme testing meant to draw out any potential issues and correct them prior to entry-into-service," added Mr. Dewar.

The CSeries aircraft's entry-into-service remains on track for the second half of 2015.

Video del decollo:
http://cseries.com/
 
Bombardier Seen Delaying CSeries Again as Tests Continue

By Frederic Tomesco Sep 16, 2014 6:23 PM GMT+0200

Bombardier Inc. (BBD/B)’s proposed CSeries jet, already two years late, is stirring concern among analysts that the company will miss its target to get the plane in service by the second half of 2015.

The initial delivery of the planemaker’s biggest-ever model will probably be postponed for a third time, pushing the commercial debut to 2016, according to nine analysts, investors and consultants tracking the program.

Another delay would heighten the threat of a liquidity crunch, according to bond researcher Gimme Credit, because Montreal-based Bombardier has $750 million in U.S. dollar-denominated debt due in January 2016. Shipping aircraft on schedule is crucial because buyers usually pay most of the purchase price upon delivery.

“There’s a risk that the ramp-up may be slower in coming than the company was anticipating, which would affect cash flow,” said Evan Mann, a Gimme Credit analyst who has an underperform rating on Bombardier’s bonds. “If that happens, it seems more likely to me they may need to raise more money.”

Bombardier reaffirmed its 2015 target earlier this month when flight trials resumed for the CSeries after an engine fire in May. The plane -- which first flew a year ago today -- is now about 15 percent of the way through a 2,400-hour test program and about $1 billion over budget.

Strategic Victory

“They’re being borderline delusional if they think they’re going to meet the 2015 target,” Richard Aboulafia, an aerospace consultant with Fairfax, Virginia-based Teal Group, said in a telephone interview. “That’s not going to happen. If it’s the first half of 2016, I will call that a strategic victory.”

Aboulafia has more than 20 years of experience in the aerospace industry and writes reports providing forecasts of aircraft markets.

Bombardier grounded all four CSeries prototypes when a Pratt & Whitney engine failed during testing. The extended idleness went beyond Bombardier’s initial prediction that flights would begin again “in the coming weeks.”

On Sept. 7, Bombardier resumed flight testing for the program and reaffirmed its forecast for entry into service. Another prototype had its maiden flight yesterday, the company said on its web site.

“The CSeries flight testing activities are successfully moving ahead, making great progress,” Rob Dewar, vice president of the CSeries program, said in a statement. “We are seeing great results.”

Maintaining Forecast

Bombardier stands by its forecast for a 2015 commercial debut, said Marc Duchesne, a spokesman, in an interview Sept. 12.

“The fundamental architecture of the geared turbofan engine remains rock solid,” said Graham Webb, vice president and chief engineer at Pratt & Whitney, speaking with Dewar in a video posted to the company’s website on Sept. 5.

“Everybody is in show-me mode with Bombardier,” said Don Reed, who oversees C$1.2 billion ($1.1 billion) for Franklin Templeton Investments in Toronto and holds Bombardier stock. “They just haven’t been able to make it work.”

Bombardier’s Class B stock has declined about 20 percent this year, the third-worst performance among Canadian industrial stocks. Of the 25 analysts who cover the stock for financial firms, 11 rate it hold, four say sell and 10 buy. The shares fell 0.5 percent to C$3.67 at 11:29 a.m. in Toronto today.

Five-year credit-default swap contracts on Bombardier debt widened by about 8 basis points to 330 basis points, the biggest increase among members of Canada’s benchmark Standard & Poor’s/TSX Composite Index, according to data compiled by Bloomberg.

Capital Spending

Capital expenditures in aerospace will probably range from $1.6 billion to $1.9 billion this year, then fall to less than $1 billion in 2016, Chief Financial Officer Pierre Alary said in a July 31 conference call.

Bombardier had available liquidity of $3.9 billion as of June 30, according to a second-quarter filing. That’s down from $4.8 billion at the end of 2013.

“We have the liquidity that we need to develop our products,” Chief Executive Officer Pierre Beaudoin told analysts on the quarterly earnings call. The company stands by Beaudoin’s comments, Isabelle Rondeau, a spokeswoman, said yesterday.

In July, Bombardier announced a plan to cut 1,800 aerospace jobs -- which could save as much as $180 million a year, according to David Tyerman, a Canaccord Genuity analyst in Toronto.

The company’s debt is rated BB- by Standard & Poor’s and an equivalent Ba3 by Moody’s Investors Service, three levels below investment-grade. Bombardier’s long-term debt amounted to $7.78 billion as of June 30, according to a July 31 filing.

Marquee Buyers

Bombardier is 97 firm orders shy of its 300-unit sales target for when the CS100 -- the smallest of two CSeries versions -- plane flies commercially. Bombardier has said it’s counting on the plane to generate as much as $8 billion in annual revenue later this decade.

Only one of the plane’s 12 named firm buyers, Deutsche Lufthansa AG (LHA), ranks among the world’s top 20 by passenger traffic.

“I’d have more comfort if there were A-List airlines who were ordering these planes,” Mann said. “There’s Lufthansa, but it’s not enough.”

While Bombardier also has conditional orders, letters of intent and options for an additional 310 units of the CSeries, “if people walk away, these options are worthless,” Mann said.

Geopolitical developments may also hurt Bombardier’s deliveries during the first two years of production, Tyerman said.

Carriers in Russia, Ukraine and Iraq are scheduled to take delivery of 12 CSeries jets in 2016 -- or 18 percent of that year’s total -- and 13 of the 65 deliveries expected the following year, according to Ascend Worldwide data compiled by Bloomberg Intelligence.

International Sanctions

Russia is currently subject to international sanctions over the conflict in Ukraine, and Bombardier would likely suffer if the tensions were to escalate, said Canaccord Genuity’s Tyerman.

Bombardier has already said it will probably have to delay a plan to build a turboprop factory in Russia -- the company’s key commitment in securing an estimated $3.4 billion letter of intent to sell Q400 turboprops to Russia’s state-owned Rostekhnologii. Bombardier said last year it expected to finalize the deal in 2014.

Not everyone is banking on a CSeries delay.

“It’s too early to assume it’s going to slip into 2016,” said Peter Arment of Sterne Agee & Leach Inc. “They lost some of the margin they had in their schedule, and now it’s critical for them to get the planes back up in the air and ramp up the hours. Right now there is some skepticism about the second half of 2015 entry.”

Besides Tyerman and Aboulafia, analysts who don’t expect the CSeries to enter service before 2016 include UBS Securities LLC’s David Strauss and Darryl Genovesi, Goldman Sachs Group Inc.’s Noah Poponak, Scotiabank’s Turan Quettawala, Veritas Investment Research’s Anthony Scilipoti, Konark Gupta of Macquarie Capital Markets Canada and Bloomberg Intelligence’s George Ferguson.

Strauss and Genovesi predict Bombardier will ship 10 units of the CSeries in 2016 and 24 the following year, according to a UBS note published today.

Train Value

The CSeries “will add no value to Bombardier,” Quettawala said in a note published Sept. 8. “We see no reason to get excited until the CSeries is de-risked and advise investors to take money off the table on any strength which may come as flying re-starts.”

Franklin Templeton’s Reed says he’s glad Bombardier makes more than just the CSeries -- trains for instance. Bombardier Transport, the Berlin-based rail division, accounted for half of the company’s first-half revenue of $9.2 billion. As of June 30, the unit’s $37.6 billion backlog represented more than two years of Bombardier’s 2013 sales.

“If it was just rails the stock would probably be trading higher,” Reed said. “The CSeries has probably taken away from the value. Bombardier has to get people happy about that plane.”

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net Molly Schuetz, Ben Livesey

http://www.bloomberg.com/news/2014-...delaying-cseries-again-as-tests-continue.html
 
How Bombardier’s CSeries Woes Have Led to Neglect of Its Learjet Private-Jet Business

FinancialPost.com (Toronto)
Posted: 11.13.14

Having a high-profile customer like U2 lead singer Bono is always a good thing for a company’s brand — until something goes wrong. Bombardier discovered this Wednesday when the baggage door on Bono’s Learjet 60 fell off mid-flight between Dublin and Berlin.

Bombardier spokeswoman Molly Edwards said the company is assisting German authorities and can’t comment on potential causes until the investigation is complete.

Learjet, which was acquired by Bombardier in 1990, has long been synonymous with luxurious private planes. The company’s history is full of famous customers, including Frank Sinatra; John Travolta is an ambassador for the brand.

But Bombardier has come under fire for neglecting its private-jet business while it pours a big chunk of its time and money into developing the CSeries, a commercial jet that has been delayed multiple times amid cost overruns.

“Years and years ago, me and many other analysts said that if they did the CSeries they were going to starve the far more profitable and far more important business unit,” said Richard Aboulafia, vice-president of analysis at aviation research firm Teal Group. “That has come to pass even worse than I expected.”

In 2007, Bombardier decided to develop a new version of the Learjet, known as the 85. The plane will be the company’s first business jet to feature a structure made entirely of composite materials and is bigger than earlier offerings — the first Learjet you can actually stand up in, according to Rolland Vincent, president of aviation consultancy Rolland Vincent Associates and former director of strategy and communications at Learjet.

But, much like the CSeries, the Learjet 85 has been delayed multiple times from its original entry-into-service date of 2013. Mr. Vincent said he expects it won’t be ready until 2017 — while Mr. Aboulafia is even more pessimistic, forecasting that the first planes won’t be delivered until 2018.

On the company’s third-quarter conference call two weeks ago, Bombardier CEO Pierre Beaudoin made it clear that the Learjet 85 is on the bottom of his priority list, behind the CSeries and the larger, higher-margin Global 7000 and 8000 business jets.

Learjets are generally smaller, cheaper planes than Bombardier’s other business brands, the Challenger and the Global. Sales of lower-end private planes fell off during the recession and haven’t fully recovered, as the less-than-ultra-wealthy opted for used planes or got into fractional ownership programs like Warren Buffett’s NetJets Inc.

In 2013, Learjets accounted for 16% of Bombardier’s total business-jet deliveries, down from 22% in 2012.

Bombardier’s decision to develop its ultra-long-range Global 7000 and 8000 ahead of the midsize Learjet 85 reflects this reality.

However, the danger is that Bombardier will miss the upswing in midsize business-jet demand that’s currently underway, said Mr. Vincent.

“I think the demand would be there right now but the product isn’t, so it’s very unfortunate,” he said.

And in the meantime, it gives Bombardier’s business-jet competitors, like Embraer SA and Gulfstream Aerospace Corp., time to catch up and even surpass them, Mr. Aboulafia said.

“They’ve given their direct competitors five years alone in that most promising new market segment, like, ‘Here’s a giant gift, perhaps you’d like gravy on it,’” he said.
 
Bombardier’s CSeries Gamble Is Facing Longer Odds -NY Times

MONTREAL — If all had gone according to plan, Bombardier’s direct challenge to the Boeing 737, the world’s best-selling commercial plane, would be approaching its second year in service. Instead, Bombardier’s grand plan for a new plane, the CSeries airliner, has faced myriad delays.

There have been unspecified supplier problems, design changes and last winter’s horrible weather. Then in May at an airport outside this city, one of the plane’s innovative new engines exploded during a ground test, damaging a prototype.

Now, many analysts expect that the first passengers won’t step aboard a CSeries jet until 2016, although the company is standing by its forecast of late 2015.

While delays are common in the aviation business, the time lost has made it all the more difficult for Bombardier to take on its notoriously aggressive and vastly larger rivals, Boeing and Airbus. Those industry giants have rushed to create versions of their existing single-aisle planes that steal CSeries’ thunder by incorporating many of its innovations, particularly better fuel economy.

“They’re in a street fight,” Addison Schonland, a partner at AirInsight, a commercial aviation consulting firm.

Bombardier’s project has long passed the point of no return. Hundreds of planes have been ordered. Production is slowly rumbling up to speed. The company is on track to spend $4.4 billion to develop the plane.

The bet on the CSeries won’t break Bombardier, which has yearly revenues of about $18 billion. But it does make the company vulnerable. The delays have depressed Bombardier’s share price. And because airlines pay for planes on delivery, any further delays could squeeze the company’s credit.

The payoff for Bombardier could be significant if the plane proves a serious competitor to the 737 and the Airbus A320, the European company’s highest-volume airliner. Already the world’s largest rail producer and a leader in commuter and business jets, Bombardier could become a major player in civil aviation if the CSeries succeeds.

“It would be hard to predict where Bombardier is today if I went back to when I started,” said Pierre Beaudoin, Bombardier’s president and chief executive, who in 1985 joined the company founded by his grandfather. “Investments like the CSeries give us that opportunity again to double the size of the company.”

Bombardier has a history of transformation.

Back home in Quebec, Bombardier is still celebrated as the company that ended rural isolation early in the 20th century when winter cut off many towns outside the reach of trains. The solutions from Joseph-Armand Bombardier, Mr. Beaudoin’s grandfather, was a tracked, scarab-shape snowmobile. After World War II as Quebec introduced widespread road clearing, Bombardier survived and prospered by selling the Ski-Doo snowmobile as a winter toy for adults.

That coincided with this city’s glory years when it embarked on a variety of megaprojects. Laurent Beaudoin, the founder’s son-in-law, father of Pierre and the company’s chairman, reopened a shuttered Ski-Doo factory to build the cars for one of those plans: the city’s new subway. He then aggressively landed a contract to supply New York with subway cars. The $1 billion deal was more than double the company’s total revenue at the time.

Laurent Beaudoin’s biggest gamble came in 1986. Bombardier was the only bidder for Canadair, an ailing aircraft manufacturer that the Canadian government put up for sale. Pierre Beaudoin recalled that Bombardier was widely criticized as overreaching.

“I remember the cartoon in the paper: It was a flying Ski-Doo,” Mr. Beaudoin said. “What do these people know about aerospace?”

Before its sale to Bombardier, Canadair was exploring how to turn its executive jets into regional jets, which could replace propeller planes on routes feeding passengers from small centers into airline hubs. During the 1990s, Bombardier and Embraer of Brazil blindsided the aviation industry by successfully creating that market.

Mr. Beaudoin sees the CSeries as a repeat of its regional jet story. That is, a plane for a market segment that, in conventional aviation wisdom, does not exist.

Bombardier committed to the CSeries program in 2007 after an air travel study that it commissioned. The study showed, according to Mr. Beaudoin, a growing impatience among travelers to route through major hubs on the way to their final destination.

Those hubs give airlines greater economies of scale. But Bombardier calculated that a new efficient airliner slightly smaller than a 737 or an A320 — one with 100 to 150 seats — could carry passengers directly between smaller airports at the same cost per seat as the larger planes.

“Airlines are forcing you through hubs because they’re being forced to have big airplanes,” Mr. Beaudoin said. “The only person that’s not happy there is actually the traveling public.”

The linchpin for the CSeries was a new concept for engines developed by Pratt & Whitney, known as a high bypass geared turbofan. The new engine design promised exceptional fuel savings of up to 20 percent and unusually low noise levels.

A trip out to the 1.1 million-square-foot factory in Mirabel, Quebec, where the CSeries is being built, reveals that the plane is as much a technology gamble as a financial one. Inside the assembly hall, two towering robots join wings, nose and tail pieces made from lightweight carbon-fiber composites to traditional aluminum fuselage sections. Tucked in another part of the plant, a complete cockpit is connected to a room filled with computers. The CSeries is Bombardier’s first “fly by wire” plane; the only connections between the cockpit’s controls and the parts they command are electronic.

As he walks briskly through the plant, Robert Dewar, a Bombardier vice president who is general manager for the CSeries project, acknowledged that the new technologies, particularly fly-by-wire, contributed to the delays. The engine’s failure in May, he added, eventually proved to be caused by a relatively minor fault in an oiling system rather than a fundamental design flaw.

Most analysts agree the plane, which will come in two models of different lengths ranging from 108 to 160 seats, represents an advance in airliner design. But that achievement, they add, is far from the end of the struggle.

“It’s a small company in Canada that has pulled off something that’s very impressive,” Mr. Schonland said. “Now, tell me how you are going to sell it.”

Neither Boeing nor Airbus has ignored Bombardier’s challenge. Tom Williams, the chief operating officer of Airbus, has been particularly open about its plan to keep Bombardier out of the full-size airliner market.

As Bombardier sorted through its problems, its two rivals introduced versions of their smallest planes equipped with similar engine technology. Embraer has also joined the field with a stretched out regional jet.

Bombardier may find it difficult to carve out space, given the preference among many air carriers to stick with a single aircraft maker, according to Richard Aboulafia, vice president for analysis at the Teal Group, an aerospace and defense industry analysis firm. More important, he said, Boeing and Airbus have a significant cost advantage.

But Mr. Beaudoin remains confident that Bombardier will reach its target of 300 orders before deliveries begin. The company currently has about 200 firm orders.

Many of those buyers, he expects, will be new carriers drawn by the plane’s ability to avoid hubs. The program’s credibility has mainly come from an order for 30 planes from the German airline Lufthansa and one for 40 from Macquarie AirFinance.

“The two big manufacturers have spent their time saying that we won’t have an airplane, that the airplane won’t fly,” Mr. Beaudoin said, referring to Boeing and Airbus. “You can imagine now that the spotlight will be on the reliability of the airplane.”

“But, you know,” Mr. Beaudoin added with a small laugh, “I would be doing the same thing as they’re doing.”
 
Ultima modifica:
More on Latest News at Bombardier

Various Sources (The Canadian Press, Bloomberg, AIN)
Posted: 01.15.15

Bombardier is “pausing” the Learjet 85 program in a move that will result in a $1.4 billion pre-tax charge in its fourth-quarter 2014 results and the layoff of 1,000 workers this year, the company announced this morning. …

Bombardier said it is continuing to experience weakness in the light jet market and is scaling back its business jet sales forecast. At the same time, though, the company’s 2014 business aircraft deliveries exceeded its original target of 200. The company said it delivered 204 business jets in the year, up from 180 in 2013. Business aviation analyst Rolland Vincent refutes Bombardier's assertion that the light jet market is experiencing “weakness.” He is forecasting “no decrease” in the light or midsize jet market, and has reallocated the market share for the Learjet 85 to competitors—the Embraer Legacy 500 and Cessna Citation Latitude. “What this move really comes down to is a CSeries cost-reduction program,” he told AIN. “It’s not a light or midsize jet market issue.”

Excluding one-time items, Bombardier’s aerospace unit’s profit margin before financing expenses, financing income and income taxes will be about 4 percent for 2014, short of a 5 percent goal, the company said today. Bombardier is scheduled to release full quarterly results on Feb. 12.

Bombardier blamed the miss on increased provisions for credit and residual value guarantees, pricing pressure on new aircraft sold, and a drop in the fair value of used planes.

Cash flow from operations at aerospace will be about $800 million, short of the target of $1.2 billion to $1.6 billion given earlier, Bombardier said.

Profit in the train unit will amount to 5 percent of sales, trailing the 6 percent target outlined last year, Bombardier said.

Bombardier had about 74,000 employees worldwide as of the end of 2014, Isabelle Rondeau, a spokeswoman, said today in an e-mailed message.

Meanwhile, Bombardier also trimmed its 2015 margin guidance and said cash flow from its Aerospace division will drop to US$800 million from prior estimates of between US$1.2 billion and US$$1.6 billion.

President Pierre Beaudoin insisted the company's access to US$3.8 billion of liquidity, including US$2.4 billion of cash, is sufficient to fund its development programs.

But at least one analyst said the lowest cash position in years raises the possibility that Bombardier may resort to selling stock to improve its financial cushion — a move that would be negative for current shareholders.

David Tyerman of Canaccord Genuity also said the credibility of Bombardier's management is likely to take a major hit from Thursday's announcement.

"We already perceive that investors have a poor opinion of management and this will likely make it worse," Tyerman said. "It also will likely lessen investor/analyst confidence in management's forward-looking guidance. We regard this as a major issue with potential negative implications for the company's valuation multiple."

Aerospace analyst Richard Aboulafia of the Teal Group said the decision to shelve the nearly US$21 million Learjet 85 is really about the need for cash to complete the CSeries, whose costs have increased to about US$4.5 billion.

"They're really getting into crunch time in terms of the CSeries relative to their company finances," he said in an interview.

Aboulafia scoffed at the suggestion that the decision was tied to the market outlook, saying it will help rival Embraer's Legacy 500 to succeed in a segment that is showing signs of recovery.

Beaudoin denied that Thursday's announcement signals that Bombardier is in peril.

"We have a product line where we are the global leaders in business aircraft, regional aircraft and in our train business," he said. " . . . Obviously it's a difficult decision today but it's a necessary decision in relation to the size of the market of the Learjet 85."

Beaudoin said the company also has concerns about the recovery of the market for smaller Learjet 70/75s but has benefited from strong demand for large, long-range Global business aircraft.

But Cameron Doerksen of National Bank Financial says there is a risk that demand for these larger planes could also soften, pointing to political turmoil in Russia, slower demand in China and the impact of lower oil prices on sales in the Middle East.
 
Bombardier Investors Losing Faith After Jet Delays

by hidden line after 'By'Frederic Tomesco

6:01 AM CET
February 3, 2015

(Bloomberg) -- Pierre Beaudoin often cites “flawless execution” as a pillar of Bombardier Inc.’s strategy. Investors say the chief executive officer isn’t delivering.

In 6 1/2 years on the job, Beaudoin has presided over delays in two jet programs; the exit of two senior aerospace sales executives in just over a year; missed profit targets and the worst stock performance among Canadian industrial companies.

“I’ve given up hope,” said Luc Fournier, fund manager at Industrial Alliance Insurance & Financial Services Inc. in Quebec City, who oversees about C$600 million ($474 million) and says he sold the last of his Bombardier shares last month. “I got tired of waiting. Even at this level, I’m not getting back in. There’s a credibility issue.”



Two years of delays and cost overruns on the $4.4 billion CSeries jet have tainted Bombardier’s reputation for execution, and the company took another hit last month after saying it would miss profit goals and halt development of the Learjet 85 business jet. That sparked concern among analysts the Montreal-based planemaker would need to borrow more to provide liquidity.

Bombardier has ample resources for aircraft development, Beaudoin said Jan. 21 in an interview in Davos, Switzerland. He said he was “not surprised there are people questioning the ups and downs” of the CSeries after four postponements for the commercial debut of the company’s biggest-ever model.

“The airplane is performing very well,” Beaudoin said. “So we’ve just got to continue on with this project that we started and do the work.”

Dividend Question

The company isn’t commenting on its performance ahead of the Feb. 12 earnings release, Isabelle Rondeau, a spokeswoman, said in a telephone interview. Bombardier has nothing to add to what Beaudoin said in Davos, she said.

Management should scrap the 2.5-cent quarterly dividend “if they want to look serious and make Bombardier appear as an investor-focused company,” said Troy Crandall, a Montreal-based analyst at MacDougall, MacDougall & MacTier Inc. in a telephone interview. “If you’re in a cash crunch, why are you paying a dividend?”

Bombardier paid out $45 million in dividends in the third quarter, bringing payments for the first nine months of 2014 to $137 million. Bombardier has been free cash flow negative for three consecutive years through 2013, not unusual for a company with big development costs. Through the first nine months of 2014, free cash flow usage was $1.71 billion, Bombardier said Oct. 31.

No Sense

“It doesn’t make sense to pay a dividend,” said Massimo Bonansinga, a fund manager at CI Investments Inc. in Toronto. “It would send a positive message to the market if they cut the dividend” and did a debt issue.

Bombardier’s Class B stock lost 67 percent of its value since Beaudoin took over in June 2008 through Jan. 31, placing it last among the 24 members of the sub-index of Canadian industrial shares. The gauge itself gained 76 percent in the period. Bombardier gained 1 percent to C$2.97 at 10:02 a.m. in Toronto.

Beaudoin, 52, whose father Laurent serves as chairman after running Bombardier for most of four decades, is the grandson of the company founder. Joseph-Armand Bombardier created his namesake corporation in 1942, five years after marketing the first seven-passenger snowmobile.

The company branched into trains -- the rail unit produced 48 percent of 2013’s $18.2 billion in revenue -- before acquiring Canadair in 1986. Bombardier, which invented the regional jet in the late 1980s with the CRJ family, is now the world’s third-biggest maker of civil aircraft, according to the company’s website.

Dual Structure

Beaudoin has been at Bombardier since 1985, when he joined the Marine Products Division. He began his career as Canadian customer service manager for Bic SA’s water sports unit.

Members of the Bombardier and Beaudoin dynasty control the manufacturer through majority ownership of the Class A shares, which carry 10 voting rights each.

“This is a family-run company, so you can’t exactly have an investor coup and overthrow management here,” said MacDougall’s Crandall. “Still, the pressure is definitely on them now. They’ve run out of excuses.”

The stock peaked at C$26 in September 2000, for a market value of C$35.8 billion. On Jan. 31, the shares closed at less than C$3, for a value of C$5.14 billion.

Canada’s second-biggest pension fund manager and Bombardier’s No. 2 stakeholder, Caisse de Depot et Placement du Quebec, trimmed its stake by 18 percent in 2013, the last full year for which data is available.

Debt Ratings

“Bombardier is a very important company,” Caisse CEO Michael Sabia said in an interview Jan. 22 in Davos. “Every business gets to a point where it has issues and has to resolve them. Bombardier is going through some issues, but we’re very confident they are going to get through.”

While Beaudoin said last month in Davos that Bombardier has enough liquidity to fund work on the CSeries and the Global 7000 and 8000 business jets, not everyone is convinced. Some analysts at firms such as RBC Capital Markets and JPMorgan Chase & Co. said they expect Bombardier to borrow more money this year, adding to the $7.6 billion of long-term debt it had as of Sept. 30.

Standard & Poor’s last month cut its rating on Bombardier’s debt to B+ from BB-, saying the company’s performance in 2015 “could remain challenged due to market conditions and the company’s continued large capital spend program.” Under Beaudoin’s stewardship, S&P has sent Bombardier’s debt rating 3 grades lower into junk.

Moody’s Investors Service also last month placed Bombardier’s Ba3 rating under review for a possible downgrade, saying the company will probably need to sell additional debt to “address its weakened liquidity position.”

Both Moody’s and S&P rate Bombardier’s debt junk.

Executive Departures

In July, Beaudoin broke up the aerospace business into three main units -- with Guy Hachey, who was president of Bombardier Aerospace, retiring as part of the reorganization. Last month Ray Jones, who was leading the charge to market the CSeries, left the company.

“This thing has been burning cash and managers,” said Bonansinga, of CI Investments. “It doesn’t give you the impression that the program is really on track. Until the CSeries enters service, I don’t think the market is willing to give them the benefit of the doubt.”

Much is riding on the success of the CSeries.

Bombardier’s biggest line of jets was conceived to compete with smaller planes from Boeing Co. and Airbus Group NV. After initially being scheduled to enter service in 2013, the plane is now slated for delivery by the end of this year.

Profit Outlook

“They just consistently miss,” Wendell Perkins, a Chicago-based fund manager at Manulife Asset Management Ltd. specializing in international equities including Canada, in an interview in Toronto. Perkins and his team oversee about $1 billion, including Bombardier shares.

January’s profit warning also marked the second time since 2013 that Bombardier lowered its margin goals for trains and aerospace. In March of last year, Beaudoin told investors the company was committed to doubling pretax earnings over five years.

Excluding some costs and gains, per-share profit at Bombardier fell to 33 cents in 2013 from 38 cents a year earlier, and is forecast to have dropped again in 2014 to 29 cents. Analysts polled by Bloomberg are forecasting 37 cents this year.

Of 25 analysts covering the stock, 13 have a hold rating; seven say buy and 5 say sell. The 12-month price target is C$3.65.

“It’s a tough business so clarity is really difficult,” Perkins said. “You have to just close your eyes.”

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net

To contact the editors responsible for this story: Jacqueline Thorpe at jthorpe23@bloomberg.net; Edward Dufner at edufner@bloomberg.net Molly Schuetz

http://www.bloomberg.com/news/artic...g-investors-after-jet-delays-corporate-canada
 
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