Bombardier's situation
MONTREAL
COMPANY NEWS ALERT
Bombardier’s flight plan is full of excuses (RTGAM)
Sophie Cousineau
MONTREAL — Bombardier Inc. has weathered many blows. The aircraft manufacturer laid off thousands of employees in 2009, when the financial crisis morphed into a global recession, and in 2001, after the terrorist attacks all but halted air travel.
Executives at Bombardier Aerospace would have you think the company’s current bind is no different. Its president and chief operating officer, Guy Hachey, blamed the “persistently sluggish” global economy on Monday to explain the manufacturer’s disappointing performance in 2013.
Who doesn’t look for a culprit when things go wrong?
There is no disputing the world economy remains hesitant. But those 1,700 layoffs don’t fool anybody – least of all anyone in aerospace. There are no industry headwinds. This is a Bombardier-made problem.
In a memo sent to Bombardier Aerospace employees, human resources vice-president Sylvie Bourdon remarked that the “aviation industry still faces challenges.” But if there’s a challenge, it is to keep up with aircraft orders after a blockbuster 2013.
With rising demand for air travel, many airlines have made a spectacular comeback and have gone on a shopping spree to acquire fuel-efficient planes. This was notable in the United States, where American Airlines Group became the world’s largest airline by traffic after American Airlines stepped out of bankruptcy and merged with US Airways. At least for now, the dearth days are over.
Airbus SA set records for orders and deliveries. With 1,619 planes sold (gross orders) in 2013, the European manufacturer’s backlog rose to 5,559 aircraft worth a staggering $809 billion (U.S.) at list price.
Boeing Co. also surpassed itself last year, booking 1,531 gross commercial orders. Net of cancellations, the 1,355 commercial orders still made 2013 Boeing’s second-best year on record.
Embraer SA’s final tally isn’t in, but the Brazilian manufacturer raked in impressive orders in the United States, where the regional market that Bombardier once dominated recovered. The new E2 family, whose larger planes will compete with Bombardier’s C Series, took in 150 firm orders since its launch in June. The next generation of Embraer planes thus had a backlog comparable to that of the C Series at the end of 2013 despite the fact Bombardier has been trying to sell its mainliner for more than five years.
Even Bombardier’s own neighbour in the Montreal borough of Saint-Laurent, CAE Inc., has already set a record with the sale of 43 full-flight simulators – and its financial year doesn’t end until March 31.
By contrast, Bombardier is limping. Business aircraft orders fell 11 per cent. Worse, commercial aircraft sales are down 41 per cent. Only C Series sales grew to 34 planes from 15 in 2012. However, expectations were higher following the plane’s first flight.
The company has pinned its future in commercial aerospace on the C Series, the family of two narrow-body jets that will seat between 110 and 160 passengers. As airlines upgrade their fleets with bigger planes, Bombardier had little choice but to try to make it in the big leagues.
Anybody who has seen the first flight test vehicle take off in September knows Bombardier created a graceful, silent plane. What remains unknown is if the C Series will live up to its technical promises.
The manufacturer assured its clients the plane would burn 20 per cent less fuel and cost 15 per cent less to operate than competing commercial jets. Until Bombardier can prove its claims, though, wary airlines will remain on the sidelines. The postponing of the plane’s entry into service, from September of this year to late 2015, will make them more cautious.
Other aircraft manufacturers have not been punctual either; technical problems and delays plagued Airbus A380 and Boeing 787 programs. But with his hand on his heart, Mr. Hachey assured Bombardier clients and investors, time and time again, that Bombardier was “on track,” that the Montreal manufacturer would do better. This, notwithstanding the complexity of developing a plane with a new engine and sophisticated fly-by-wire flight controls, using suppliers based on three continents.
Moreover, while Airbus and Boeing explained why their programs were postponed, Bombardier has said little to justify the lengthier than expected delay.
With this setback, Bombardier has blown off one its main advantages as the manufacturer of an orphan mainliner: the C Series’ lead on re-engineered planes that will also use next generation engines. In a sad irony, the single-aisle jet Airbus revamped to compete with the C Series might even be delivered sooner than Bombardier’s brand new mainliner. And that might create a bigger problem down the road than roughing it until the plane is delivered.
Until the C Series truly takes off, the company’s finances will be strained and development costs, now pegged at $3.9-billion, may well ascend once more.
Try as it always does, there is no way for Bombardier to sugar coat its precarious situation. But being frank instead of deflecting the blame would make for a nice departure.
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