I see trouble on the way...Today's Cannacord Morning Coffee:
Bombardier (BBD.B : TSX : $4.04), Net Change: -0.25, % Change: -5.83%, Volume: 27,434,700
I see the bad moon arising, I see trouble on the way – Creedence Clearwater Revival. Canaccord Capital Aerospace & Transportation Analyst Bob Fay believes Bombardier’s regional jet backlog continues to be a concern given the company’s relatively high production levels. The overall backlog stood at 267 aircraft at April 30, 2004. Almost 80% of this backlog is with five airlines – US Airways (UAIR) 39%, Delta Connection (DAL) 18%, Skywest (SKYW) 14%, Atlantic Coast (ACAI) 13%, and Northwest (NWAC) 13%. In addition, Skywest has 30 CRJ 700s on order to provide feeder services for United Airlines. Atlantic Coast’s firm order for 34 aircraft will likely be cancelled given its changeover to low fare airline Independence Air. Given the uncertainty over the airline industry in the United States and in particular the outlook for United Airlines, US Air and more recently Delta Airlines, it raises concerns about the delivery schedule over the next few years while the industry sorts itself out. Canaccord Capital reiterates its SELL rating on Bombardier and $3.50 target price.