With only six months to go until the planned first flight of its new CSeries, Bombardier has to deliver on its promises
has long kept silent about the progress made in its development program. Just weeks ahead of this year's Farnborough air show, though, the manufacturer is reassuring the industry that everything is fine and it will clear its hurdles. One of the manufacturer's biggest challenges still looms: strengthening the orderbook.
The first new entrant into the traditional/ narrowbody segment, Bombardier will be followed by the Russian MS-21 and Chinese in subsequent years. With CRJ sales dwindling, the CSeries is in a must-win situation. Bombardier says it plans to deliver the smaller version of the family, the 110-seat CS100, by the end of next year, followed by the 149-seat CS300 a year later. The aircraft will compete with the larger versions of 's —as well as the 737 MAX and the families, which are planned to enter the market in 2016 and 2015, respectively.
A year and a half ahead of the first CSeries delivery, there is little margin for error left, but Bombardier is adamant that the development process is under control. That assessment has been echoed by suppliers and customers. An executive at a major CSeries customer says that from today's point of view, the program may slip by a couple of months, but he does not anticipate anything like the delays in the Airbusand start-up phases.
Bombardier admits that some CSeries suppliers have had “more challenges” in delivering components on time. “We are currently working with suppliers to find the challenges,” says Commercial Aircraft President Mike Arcamone. “We have allocated the right amount of resources to address that; we have mitigation plans in place.” He declines to identify the exact issues or suppliers affected.
Industry executives say the problems relate to three suppliers that are late in developing software that needs to be linked later to the aircraft's main flight management system. According to one, while the software issues have led to a three-month delay, Bombardier is slowly gaining back ground lost and is actually reducing the additional development time. Another official says there is some margin later in the flight-test program that could provide more opportunities to save time.
Arcamone also is not naming a date for first flight, which has been scheduled for the end of 2012, saying only, “we want to fly into the new year.” He stresses that the most important milestones are first deliveries of the CS100 and CS300. “We work margins every hour, every day. We are working toward the milestones. With the information I have now, we are on track,” Arcamone says.
Bank of America aerospace analyst Ronald Epstein is skeptical that the schedule will be met. “We get the sense that Bombardier is trying to shift the focus away from its first flight deadline to its first delivery deadline,” he says.
However, National Bank Financial aerospace and defense analyst Cameron Doerksen writes in a memo that a tour of the Bombardier facilities “gave us comfort that the program is to remain on schedule. . . . Our sense is right now that if the CSeries experiences a delay, it will be in the order of months, not in the years experienced by other OEMs on their new aircraft programs.”
Bombardier plans to use five aircraft in the CS100 flight-test program, plus another two for the CS300 version. Major structures of the smaller CS100 are now in “advanced assembly,” Arcamone says. “Suppliers are making significant progress, . . . demonstrating that they are meeting our requirements,” he notes.
Key performance targets for the aircraft's fuel burn and weight have been confirmed, too. Bombardier expects them to be very close to specification.
But the aircraft maker has identified four key areas in need of particular attention in the run-up to series production. These are: delivery of key structural components, supplier testing, systems maturity, and in-house testing and simulations for final assembly start and production ramp-up.
According to Arcamone, Bombardier expects to have the first static-test airframe ready by the end of September and the first flight-test aircraft completed in December, with the major aircraft structures ready several months ahead of that. The CS100/CS300 is still on budget and the program's cash burn is within the previously defined limits, Bombardier says.
The sluggish sales performance of the CS100 and CS300 is of no concern to Bombardier management—officially. “I'm absolutely satisfied with the CSeries orders,” Arcamone asserts. He says Bombardier has 66% of the market in the 100-149-seat segment, which includes theand the smaller A320 and 737 variants. But the CSeries has 138 firm orders, compared to more than 1,400 for the A320NEO and 1,000-plus commitments and 451 firm orders for the 737MAX, which were launched in part to ward off new narrowbody segment entrants such as Bombardier.
Some customers and Air Lease Corp. Chairman/CEO Steven Udvar-Hazy have urged Bombardier to adopt more aggressive sales tactics and mainline practices such as significant discounting and more extensive performance guarantees. One airline executive says Bombardier also must give its sales staff more freedom in negotiations rather than forcing them to play by a relatively strict rulebook. “At the end of the day, what counts is that you get the order,” he stresses. “But you will be asked serious questions internally when you don't get it.”
Most airlines that have ordered the CSeries appear to be pleased with the technical side of Bombardier's recent program status presentation, but they are concerned by the scarcity of sales. Republic Airways CEO Bryan Bedford has been especially outspoken, saying that the CSeries might be in danger of facing the same fate as the Boeing 717, which was halted due to weak market interest.
Republic is the CSeries's largest customer, with an order for 40 aircraft, though it has since signed for 20 A319NEOs and 60 A320NEOs, feeding Bombardier's worries. Nonetheless, Bedford stated earlier this year, “our intent is to still take [the CSeries].”
Arcamone says Republic has not changed the status of its CSeries order, asserting, “Republic is a valued customer of ours; they are very supportive of our program.” He says lessors are also very interested in the CSeries, and that, in terms of the sales strategy, “we are not looking for the one big customer that is ordering 100 aircraft.”
Doerksen points out that at the time of its first flight, the Embraer 170 had only 112 firm orders and fewer customers than the CSeries, and orders picked up later. “We expect a similar situation for Bombardier, with first flight likely to be the major catalyst for airlines to pull the trigger on ordering aircraft,” he says.
But Bombardier's commercial aircraft business relies heavily on the success of the CSeries. In its most recent market forecast update, the company projects deliveries of 12,800 aircraft in the 20-149-seat range in 2012-13, with the CSeries size category accounting for 71% of that market in terms of revenues.
Whether that forecast will become reality also depends on a relaxation of scope clauses that limit the use of larger aircraft by the regional subsidiaries of mainline carriers. Mairead Lavery, vice president of strategy, business development and structured finance at Bombardier, sees some movement in the U.S. as negotiations on scope clauses are underway at several airlines. But this is far from an industry trend. There has been some relaxation of limits in Europe and more could come as the International Airlines Group,- and Group dig further into the details of their respective cost-savings programs. But scope clauses have not been at the top of their most recent agendas.