Bombardier CEO: We were overwhelmed

Bombardier was “overwhelmed” by its development programs, the company’s chief executive said after the jet and train maker announced a massive write down.
The company is taking a $US4.4 billion charge, mostly related to its larger C-Series jet, which is meant to compete with Boeing’s 737 and Airbus’ A320 in the medium-range airliner market.
That jet, which Bombardier decided it would build in 2004, has been beset by cost overruns and delays. More than a decade after it was conceived, the aircraft still isn’t in commercial service.
The company reported a loss of $US4.9 billion for the quarter. The writedown includes a $US1.2 billion charge for the Lear85 project, which the company has canceled. Bombardier also confirmed reports that the Quebec Government will inject $US1 billion into the C-Series program.

During the third-quarter earnings call, one analyst asked just how the company got to this point financially.

“It’s not as bad as people think,” Bombardier CEO Alain Bellemare said. ” We had multiple development programs running concurrently and that was challenging for the company. The company was overwhelmed.”

The CEO added that most of those programs are either complete, near completion or have been cancelled.

The C-Series is an inflection point. Ratings agencies have been worried about its drain on Bombardier’s cash, and the shares have collapsed this year.

“Bombardier needs to the get the plane into service, prove that it is successful and generate more demand if it wants to correct its cash flow shortage,” said Moody’s analyst Darren Kirk, before Thursday’s results.

According to Bombardier, the C-Series program is expected to be cash flow positive around 2020, but will also require an additional $US2 billion to get there.

Not fast enough

With the jet scheduled to enter service next year, the company has 243 firm orders on the books.

But the concern is that those orders aren’t coming fast enough. A whole year has come and gone since the last time Bombardier announced a new buyer for the C-Series, and one of its largest buyers so far, Republic Airways, could be about to bolt.

Republic, which originally ordered the plane for its now sold Frontier subsidiary, has said it is considering backing off from its commitment to the aircraft amid a slowdown in its own business.

“The Republic Airways planes are never going to be delivered to Republic,” Airways News senior business analyst Vinay Bhaskara said in an interview ahead of the results.

In June, Bombardier flew both the CS100 and the larger CS300 to the Paris Air Show. The planes arrived at Le Bourget airport with great fanfare, but left without booking a single new order.

The painful thing for Bombardier is that there’s nothing wrong with the aeroplane. In fact, the C-Series has garnered generally positive reviews.

“The CS300 kills the Boeing 737 Max 7 and the Airbus A319neo in terms of ability and efficiency,” Bhaskara said.

Bombardier CS300 Republic AirwaysBombardierBombardier CS300 in Republic Airways livery.

At the Paris Air Show, aircraft leasing company, Air Lease Corp.’s president and CEO John Plueger told The Seattle Times that it’s not enough for people to like the plane because what Bombardier needs are orders.

It’s a stark contrast to Bombardier’s other aircraft. The company’s CRJ-Series regional jets are among the most in-demand aircraft of its type with nearly 2,000 examples in service. Its Q-Series turboprop airliner is a staple of regional airlines around the world with more than 1,000 of the planes in service. That’s on top of the company’s iconic Challenger, Global, and Learjet families of private jets.

Part of the problem is that the C-Series is tapping a part of the market that the world’s largest aircraft makers have deemed unworthy because of thin profits. Boeing and Airbus both discontinued their regional jets, the 737-600 and A318.

All may not be lost.

Analysts such as Bhaskara predict room for as many as 2,500 planes in the 100- to 150-seat jet category, and Bloomberg recently reported that Bombardier is in talks about a possible order with JetBlue Airways.

Another major buyer, according to Bloomberg, could be United Airlines, which told pilots it plans to order small jetliners, Bloomberg also reports.

There’s also room for the C-Series to recover as the older Boeing and Airbus aircraft are phased out and need to be replaced, said Tom Capital, Deloitte’s vice chairman and head of global aerospace and defence.

Boeing and Airbus are focusing on larger aircraft with longer range,” Captain said. “This has left an opening for others such as Bombardier to come in with new and efficient equipment.”

The trick for Bombardier now is to turn that optimism into actual orders. And fast.

NOW WATCH: Take a tour of the $US66.5 million private jet that everyone is waiting for

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.