Bombardier Inc. (BBD/B) executives are heading to the Farnborough International Airshow next week to sell a plane that promises to do many things -- but can’t currently fly.
That could make for a tough sell by Raymond Jones, chief salesman of the CSeries family, and Mike Arcamone, who runs the company’s commercial aircraft business. Visitors to the Bombardier lounge at the industry’s biggest gathering will be able to see a mock-up of the CSeries flight deck and cabin demonstrator though not the actual aircraft, which is grounded at home in Canada after an engine failure during testing and no firm date for when it will be back in the air.
“If their expectation is to get orders at Farnborough, then to me they have to come out with some positive news,” said Don Reed, who oversees C$1.2 billion ($1.1 billion) for Franklin Templeton Investments in Toronto and holds Bombardier stock, in a telephone interview. “Would you buy a car that you knew had been having problems and the manufacturer hadn’t been able to straighten out?”
Bombardier is about 100 orders shy of its sales target for the jet, which the company has projected will garner $8 billion in sales later this decade, and so far counts only one of the world’s top 20 airlines by traffic among its buyers. The engine mishap May 29 added to the program’s setbacks, which include multiple delays and rising development costs.
Bombardier grounded all four completed prototypes of the CSeries, its biggest ever aircraft, following the sudden failure of a Pratt & Whitney engine and predicted resumption of flight trials “in the coming weeks.”
Six weeks later, while static testing has resumed, the CSeries remains grounded. Marc Duchesne, a spokesman, said again yesterday that flight trials will begin “in the next few weeks.”
Bombardier may update the status of the flight-test program during the air show, Konark Gupta, an analyst at Macquarie Group Ltd. in Toronto, said today in a note to clients.
Bombardier’s widely traded Class B shares have declined 18 percent this year. That trails the 12 percent gain of the sub-index of Canadian industrial stocks for the period, Bloomberg data show. Bombardier was little changed at C$3.77 at the close in Toronto today.
The company’s last sale of CSeries aircraft was Feb. 9, when an unidentified customer ordered three units of the CS300 model at the Singapore Air Show.
Bombardier has said the CSeries, which features the new geared turbofan engine from United Technologies Corp. (UTX)’s Pratt & Whitney, will cost about 15 percent less to operate, cut fuel burn by about 20 percent and produce less noise. It’s the Montreal-based company’s answer to Boeing Co. (BA) and Airbus Group NV (AIR) aircraft.
Bombardier’s lack of success in selling its newest commercial jet contrasts with that of its bigger rivals, though they’re targeting a larger market segment.
By the time the CSeries took off for its first flight on Sept. 16, Bombardier had signed firm agreements to sell 177 units of the CSeries. As of its first flight in 2009, Boeing’s 787 Dreamliner had racked up 840 orders.
Bombardier and Pratt & Whitney have been investigating the engine incident -- in which one of two geared turbofan engines caught fire. Engineers from both companies are testing a fix.
“They have to get the aircraft flying again, and they have to get more flight test hours,” said Chris Murray, an analyst at AltaCorp Capital, by telephone from Toronto. “That’s the fundamental issue. You can shake all the hands you want, but buyers want Bombardier to show them they are going to deliver on time. ’Prove it to me’ is the attitude.”
A dearth of sales at Farnborough wouldn’t necessarily spell doom for the CSeries, Macquarie’s Gupta said.
“Although there appears to be some concern that the lack of CSeries’ static display could impact potential orders, we tend to disagree because we think order decisions are formed much before the announcement,” the analyst said.
When taking into account the last six annual air shows, Bombardier has announced firm and conditional orders for an average of 50 aircraft worth $2.6 billion, with the CSeries accounting for most of them, according to Gupta.
Investors such as Franklin Templeton’s Reed say that while developing the CSeries is probably the right call for Bombardier’s future, the company can’t afford more missteps.
“On a long-term basis, if they can get the CSeries going, and I’m convinced they can, Bombardier is a decent company,” Reed said. “I give them the benefit of the doubt, but please get that CSeries going, and get something in the air that people can look at.”
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