's new airliner made its first flight on Sept. 16, but the Canadian airframer faces formidable opposition from and as it tries to gain traction in the 100-150-seat market. Bombardier Aerospace President and Chief Operating Officer Guy Hachey met in Montreal with AW&ST Editor-in-Chief Joseph C. Anselmo and Managing Editor for Technology Graham Warwick to talk about the CSeries and the increasingly competitive landscape his company faces in commercial and business aircraft.
AW&ST: The CSeries is nosing up into the market segment long dominated by theand 737, and Airbus and Boeing are not happy. Does Bombardier have deep enough pockets to see this program through to commercial success?
Hachey: Certainly, we're not in the same league as Boeing and Airbus, but we're not attacking their full portfolios. We're not attacking anything, actually. What we are doing is providing an airplane at the lower end of the aircraft they sell, because that market, in our opinion, is not well served. We designed an aircraft that's optimized for this segment, and we feel we'll be able to capture a sizeable amount [of it]. It's not their bread and butter. We're not going after the 180-seat segment.
They certainly take the CSeries as a threat.
Of course. They have a very comfortable duopoly. There would never have been anor 737 MAX if there hadn't been a new player. We happen to be the point of the spear. There are other players coming in: the Chinese, the Russians. I don't think long-term this duopoly is going to last, whether it's Bombardier that chews at the bottom end or whether it's Comac that goes right at the heart of the A320.
Winning orders has been tough. In hindsight, should you have discounted the CSeries more aggressively to gain market traction early on?
We're being compared to two companies that produce 450-500 aircraft per year. There's no way I'm going to book 500 orders per annum at any point in the program because we're not sizing up for that. We've done what needed to be done. We don't need to give away the aircraft. We have the first three years [of production] almost fully booked. Since the beginning, we've said we wanted 300 firm orders by entry into service with 20-30 customers. And we're on track to do that: We have 17 customers and 182 orders, and 300-plus commitments beyond that that are options, purchase rights or conditional orders. We're not very far, and we still have quite a bit of time.
What is the status for service entry? Bombardier has stopped saying mid-2014. Can you give us a new date?
We're taking our time to assess how [flight-test vehicles] FTV1 and FTV2 are doing and at what rates we can get the [flight-test] hours done. We're [still] pushing the organization to do a one-year flight-test program. It's very aggressive, and we understand that, but we're not [changing] that until we've had a full evaluation of how we're doing. At the right time, we'll come back to you and say, “It's going to be X.”
You have put a $3.9 billion cap on development of the CSeries. Have you boxed yourself in?
We still feel very comfortable with the business case. Now numbers have moved between non-recurring expenses—what you have to spend to develop the aircraft—versus recurring. There's been some movement among the buckets. But when I look at the business case, we're still well within the return on investment we anticipated.
But you have less flexibility than the bigger guys. It doesn't matter whether Boeing spends twice as much as planned on an airplane, because in the end it's just a blip.
I looked at the balance sheet of the 787 and I don't know if it's a blip. They'll make zero money for 10 years. I don't know how many companies can afford to do that. [The overspend] is going to catch up once [the 787] becomes a significant part of their sales and has zero margins. I think it's very significant if you overspend, no matter how big you are.
It seems that the CSeries may be getting backlash from the 787's delays. Customers have a level of skepticism and say, “Fly a little bit more and then we'll talk to you.”
We're not special. We have our own issues and problems. On the whole, we've been able to do a bit better than the average [aircraft development]. But are we going to have home runs all the way? It would be foolish to say that.
Last year, you were forced to bring production of the CSeries forward, center and rear fuselages in-house after your Chinese supplier, Shenyang Aircraft Corp., ran into problems. Have those issues been resolved?
It's progressing very well. We took a big risk because we gave them responsibility for both design and build, which was a big jump forward for them. We probably gave them too much at once. So we pulled some packages back in-house and gave them a breather. We also left some packages behind. We've received all the rear barrels from them on time. Now they're doing other work packages on time, and we're going to be giving them back basically all the packages, but progressively.
Do you have a timetable?
I do, but it's not something we reveal to the outside world.
has decided to refresh and reengine its jets to make them more efficient. They think their existing customers will come back in 5-10 years and want a next-generation airplane. You have an operating cost advantage now, but it looks like you're going to have the same CRJ regional jets when Embraer rolls out the E2s in 2018.
We felt there was much more opportunity for us in the 100-150-seat [CSeries] segment, so we decided to invest there. Does that mean we're going to abandon the CRJ? No. We'll just compete in a different way. We will be the low-cost guy, whereas today we usually are the higher-cost guy in most instances because we've had more sophisticated designs. We're also going to be doing some things to the CRJ. We still can stretch the performance. Will we get half the market? No. But we'll be able to sell quite a few more. I don't see the demise of the CRJ for quite a while.
Is there an economical rate at which you can keep the line going?
During the recession, we ran at quite a low rate, and now we're coming back up because of the surge of orders we've had in North America. We just won an order fromfor 30 , with options for 40 more. We've successfully penetrated China with an order from China Express.The CRJ is starting to sell in places that it didn't sell in the past. So I feel much better about it. Is [production] going to be 100 per year? No. But it's not going to be 20-30 per year, and that's where we've been. We're going to do much better.
Is it a similar situation with theturboprop?
We've had a little resurgence of wins. They're small ones, but the customers are adding up. We've announced the extra seating capacity version by using a tighter seat pitch and changing the interiors, so when you look at the seat-mile cost, the Q400 is extremely competitive. I knowhas been talking about a 90-seater, but for them it's a new aircraft. For us, it's [changing] seat pitch. We have a few other things that we're going to be able to do to the Q400 to keep it competitive. In addition, we've signed a memorandum of understanding with Rostec [that could add a Q400 assembly line in Russia]. So I'm more bullish on the Q400 than I was a few years ago. I see a path.
In the business aviation market, are you seeing continued softness at the light end, like everybody else?
It's still soft. I'm very happy that we decided to develop the70/75. The fact that we have a new product is creating a little more excitement, but it is still tough. Transactions take a lot longer to be completed, there's pricing pressure, availability of used aircraft is high and our competitors aren't doing as well so they're more aggressive. We're very fortunate to have the 70/75, but is it going to be a panacea that generates a huge wave of demand? I don't think so.
You've gone through a renewal cycle with the Learjet 70/75 and the Learjet 85, the Challenger 350 is going through an update, the Challenger 5000 and 6000 are relatively new and the 7000 and 8000 are coming along. But you haven't done anything with the Challenger 605 yet.
Probably, the more vulnerable area we have is the 605, because it's the oldest product. On the other hand, there's a very large installed base—a loyal following that likes the workhorse characteristic of the 605, the size of the fuselage and the reliability. The [market] is not going to be on fire for the 605, but we're going to be able to maintain the production schedule until we do something [to improve it].
But you are well-represented in the larger categories.
Yes, from the 350 on we have very good positioning.
Does the new5X present a threat to Bombardier?
They build good airplanes. It's positioning itself very well against the 5000. We're going to do some things with the 5000 and 6000 that will keep them very competitive. But, yes, it's going to add one more competitor at the lower end of the Global platform. And I'm convinced it will be a good product.
What are your thoughts on when we might see a supersonic business jet?
Let's put it this way: We're watching that space very carefully, but we're not going to lead. We'll let somebody else try that. If it becomes compelling, we'll be a fast follower.
Guy C. Hachey
Education: Bachelor of Commerce degree from McGill University and a Master of Business Administration from Concordia University (Montreal).
Career: Spent 30 years at General Motors and Delphi before taking the top job at Bombardier Aerospace in 2008.
Did You Know? Hachey hired Louis Chenevert out of college as a foreman on a General Motors assembly line in Montreal. Chenevert is now CEO of., owner of Pratt & Whitney, and the driving force behind the geared turbofan engine that will fly on Bombardier's CSeries jet.