CSeries - Some Questions Remain After Investor DayWith FAA certification freshly announced, I thought a CSeries order would materialize today. It didn't. After the investor day today, I still have questions going into the new year.
- Why did Republic keep their CSeries CS300 order? This order was part of a big bet on expansion when Republic owned Frontier Airlines. But Frontier was sold and shortly afterwards chose the A320 instead. Republic was still betting that scope clauses in the US would loosen and allow them to operate the CS100 instead of the 300, but they haven't. In early 2016 Republic went into bankruptcy protection, which would conceivably have enabled them to cancel the CS300 at minimal expense, but they didn't cancel the order, they simply deferred it. Republic is a regional airline operating American Eagle, on behalf of American Airlines, and United Express, on behalf of United Airlines, as well as Shuttle America on behalf of Delta and United. Republic just sold 24 eJets to United Airlines. My big question is who is going to buy the 40 CS300's Republic still has on order, since Republic doesn't have the scope agreements with the big 3 to fly them. Will it be Delta, United, or American Airlines?
- Which is it going to be - a new business jet or the CS500 beginning in 2018? Today's investor day cleared up questions about cash flow. $750 million - $1 billion in free cash flow usage. $1.4 billion in remaining R&D to put the Global 7000 into service, and then $1 billion in annual R&D going forward. Bombardier also clarified the question of their next aircraft program - it'll be a new business jet or a new CSeries model. And the Learjet 85 will not be revived, so it'll either be another Challenger, Global or CSeries. We should know sooner rather than later, because there should be announced funding by the Federal government by the next federal budget in March. Since Bombardier finally admitted that they're considering a CSeries expansion beyond 160 seats, I firmly believe this wil be the new aircraft program - it'll have the biggest impact to Bombardier's top-line, and bottom line sales in 2020 and beyond.
- Will Lufthansa place a huge order? If you watched the investor day today, you heard the quote from Lufthansa - the CS300 has the same economics as a 180 seat aircraft. Lufthansa was the one that wanted Bombardier to become a competitor to Boeing and Airbus, and with their Swiss division launched the CS100. They've certainly been evaluating the economics, now are they willing to reward Bombardier's excellence in engineering with a huge order?
There was lots to get excited about with the investor's day today, and we need to see more orders on the CSeries this year to confirm that the CSeries will drive continued growth beyond 2020. I truly believe that 2017 will be the year of the CSeries and I'd like to see the order book double by the end of the year.