Bombardier Inc. T.BBD.A

A Boon Ahead In Aerospace

[jammerh]

If all the ducks line up for CSeries, this program has the potential at least of really soaring.

On the other hand, there are too many variables involved to make an accurate prediction with regard to just what kind of demand CSeries will see. No one can say the development and production of this aircraft won't yet experience some challenges. Even if it does though, Bombardier stands to profit nicely.

That said, the risks are mimimal. CSeries already has firm orders for nearly 100 units and options for about the same number and it has another three years before going into production. So, CSeries has yet to reach its prime period of the two years just prior to the start of deliveries where the greater bulk of orders generally materialize for most new aircraft programs.

That period only begins at the end of 2011 - just 12 months from the end of next month. And Bombardier has publically stated that it expects the signing of at least one large order by the end of this year.

Yes, CSeries could still fail. It could become mired down in delays like Boeing's 787. It could go right through that prime period in which most of its orders should arrive without a single additional order. But that seems unlikely.

To see why, you only have to take a close look at the aircraft and the airlines which have already placed orders. Lufthansa is one of europe's largest and most successful airlines. It didn't get that way by employing low quality aircraft. Republic Airlines is one of America's most successful regionals. These leading airlines recognize a top quality aircraft which will help lower their costs and give them a competitive edge in the years ahead.

Emerging markets boon to Jonathan Ratner, Financial Post · Thursday, Nov. 18, 2010

The rebound in cash flows generated by airlines in emerging markets is a good sign for the Canadian aerospace sector since it suggests new orders of aircrafts and other products are coming in 2011.

In recent years, the relative price performance of the Canadian aerospace group has been highly correlated with the trend in Chinese airline companies' cash flow pool, according to Dundee Securities strategist Martin Roberge. This cash flow is driven by total air traffic in China.

The total cash flow pool for all airlines located in emerging markets has returned to the $4-billion mark, a level that has normally coincided with an expansion in Canadian aircraft orders, Mr. Roberge said in a research note. As a result, he sees a bright year ahead for industry leaders Bombardier Inc. (BBD. b/TSX) and CAE Inc. (CAE/TSX)

Due to the long lead time between cash flow and new orders, the strategist expects to see a significant rebound in aircraft orders next year as airline companies put their money to work. If the 2005-2008 cycle is a good guide, he predicts that order growth for Canadian aircraft and parts will translate into relative earnings and share price strength, "allowing these late-cycle stocks to recapture their valuation premium."

While there is no guarantee airlines will spend their cash on commercial aircraft and Bombardier's C-Series, for example, China's announcement on Wednesday that it will gradually open its airspace to civilian aircraft bodes well for the business and private jet market. Chinese state media reported the country had just 898 private aircraft at the end of 2008, compared to 222,000 in the United States.

"With little Asian competition in this segment of the aerospace industry, needless to say that China could become a key market for our Canadian companies," Mr. Roberge said.

He recommends staying neutral on the group, but use price dips to accumulate shares.

Read more: https://www.financialpost.com/Emerging+markets+boon+aerospace/3853596/story.html#ixzz168bB56tz