Canada’s Boeing challenger may be about to make a blockbuster deal

Shares of Canadian aeroplane maker Bombardier are surging after reports surfaced indicating Delta Air Lines is close to placing a major order for the company’s C-Series airliner.

Bombardier stock is up more than 11% today.

According to Bloomberg’s Michael Sasso, Julie Johnson, and Frederic Tomesco, a source familiar with the situation said that Delta is about to buy 75 of Bombardier’s critically acclaimed, but slow-selling, C-Series jets.

Representatives from Delta Air Lines and Bombardier were not immediately available for comment.

Delta is believed to be interested in the 160-seat CS300 airliner that could be used to expand the airline’s network, as well as help replace its ageing fleet of McDonnell Douglas MD88 jets.

Should Bombardier close this deal, it would be the company’s first with a leading North American airline that doesn’t have ties to the Canadian government.

An order from Delta would be groundbreaking for Bombardier’s fledgling mainline business; the company has spent most of the past few decades building regional airliners.

With a list price of $82 million, the total value of the 75-aircraft order could reach $6.15 billion. However, Delta is likely to net a healthy discount to the tune of more than 60% off list price.

Bombardier Stock

The Bombardier C-Series has struggled over the past few years to win orders from major airlines. Even though the composite-bodied airliner is generally considered to be a fantastic plane with great performance characteristics, it hasn’t been able to successfully compete with offerings from Boeing and Airbus.

Earlier this year Bombarder lost two orders from United Airlines to Boeing’s 737NG, although the C-Series did pick up a crucial 45-aeroplane order from Air Canada in February. While the Air Canada sale is seen as a major step forward for the C-Series program, critics of the deal cite the close relationship of the airline and the aeroplane maker with the Canadian government as the driver for the deal. As a result, industry observers believe Bombardier still needs to land another order from a major North American airline for the C-Series to gain market validation.

As an airline that has a tendency to zig when everyone zags, Delta may be the blockbluster deal for which Bombardier has been seeking.

Delta Airlines MD88
Delta Air Lines MD88. Flickr/Aero Icarus

“This is a deal that makes sense for Delta,” Airways News senior business analyst Vinay Bhaskara told Business Insider. “This is an airline that has a successful history of seeking out undervalued assets and they are looking to do the same here.”

“Delta has plenty of leverage in this deal, so they are likely to get a great price,” Bhaskara added.

In January, out-going Delta CEO Richard Anderson sent shares of Bombardier soaring when he expressed interest in the C-Series.

“We actually think for the right price, it’s quite an impressive aeroplane,” Anderson said in January during the company’s earnings call. “So we are taking a very serious look at it.”

Bombardier C Series

Anderson was particularly impressed with the C-Series’ highly efficient Pratt & Whitney PW1500G geared-turbofan-engines.

“The geared turbofan is really the first true innovation since the Boeing 787 Dreamliner revolutionised composite structures for aeroplane fuselages,” Anderson said. “It’s an impressive plane, particularly given the engine technology.”

The Bombardier C-Series is expected to enter service later this year with SWISS.

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