Bombardier Inc. T.BBD.A

RE:Scotia Bank Update

[Qh1234]

skyplt wrote: They continue with 3.25 with the following update:

Latest Research (21 June 2017)

OUR TAKE: We met with Swiss Airlines' Deputy Fleet Chief for the CSeries and BT's head of global transformation. Swiss is very satisfied with the performance of their new birds and are using it in many of the ways that BBD had highlighted in the past. BT's transformation continues to progress in line with expectations and guidance. 

a little more details about Scocia report on Bombardier.

"Swiss Corroborating CSeries Benefits

OUR TAKE: We met with Swiss Airlines' Deputy Fleet Chief for the CSeries and BT's head of global transformation. Swiss is very satisfied with the performance of their new birds and are using it in many of the ways that BBD had highlighted in the past. BT's transformation continues to progress in line with expectations and guidance.

KEY POINTS

Swiss using CSeries as a tool to compete against LCCs. Swiss Airlines seems to be very satisfied with CSeries EIS which is posting reliability of ~97% with 11-12 hours of daily utilization. The airline is using its newest aircraft - which has a very competitive cost structure and industry-leading environmental/noise benefits - to compete against its LCC competitors that have picked up a lot of market share from Swiss in the last few years. Geneva was an airport where Swiss has lost material market share and the plan is to shift the entire operation to CSeries in an effort to claw back share.

The CSeries has also helped Swiss to start a few new routes. This includes destinations such as Bergen, Figaro and Cork from Zurich which were not profitable with older or larger aircraft. The CSeries will mainly be used to replace the Avro RJs and A319s at Swiss. It was also interesting to hear that Swiss is planning to replace some A320s with CS300s as the smaller aircraft can improve overall profitability. If this is successful, it may lead to option exercises as it would provide room to expand the CS300 operation at Swiss.

More of the same at BT and that’s a good thing. Transformation remains the focal point at BT. This has now moved from operational to structural initiatives with engineering & production centers of excellence being established at various lead sites. This naturally started with engineering but is now permeating to both production and sales as the initiatives are maturing.

Balancing customization & standardization is a risk. In our opinion, the key risk around this strategy is that most BT contracts require customization. As such, BT plans to blend standardized platforms with customer-specific needs. While this can be done, the risks are that it could lead to a more commoditized product and reduced innovation. So far, it seems to have worked well as BT has used the Flexity and Aventra platforms to win several orders such as East Anglia, South Western, Innsbruck & Basel. The standardization, no doubt, reduces execution risk in future contracts and also allows a faster time to market such as the $1.1B South Western contract which should be delivered over a short 18 month period."