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Bombardier Says Economy Clouds CSeries Order Outlook

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Guy Hachey, president and CEO of Bombardier Aerospace
Guy Hachey, president and chief operating officer of Bombardier Aerospace, speaks during a meeting in Montreal. Photographer: John Morstad/Bloomberg

July 19 (Bloomberg) -- Bombardier Inc. said some prospective buyers of its CSeries jet, aimed at the lucrative single-aisle market of Airbus SAS and Boeing Co., are still hesitant to place orders as the economy takes time to rebound.

“A lot of our customers right now are waiting to see if the economy is going to recover, if they can get healthy financing, if they can afford to take on a couple of billion dollars worth of orders,” Guy Hachey, president of Bombardier’s aerospace unit, said in an interview yesterday.

Hachey’s comments contrast with predictions by Airbus and Boeing of winning more business at the Farnborough Air Show starting today in England. The CSeries is due to enter service in 2013, competing in a narrow-body jet market that Boeing estimates will reach $1.68 trillion in the next 20 years.

Bombardier fell 31 cents, or 6.5 percent, to C$4.43 at 4:10 p.m. in Toronto for the steepest one-day decline since April 1. The drop was the worst among among 229 companies in the S&P/Toronto Stock Exchange Composite Index.

Chief Executive Officer Pierre Beaudoin said in a Bloomberg Television interview in Farnborough that the Montreal-based company is in “advanced discussions” with leasing firms for CSeries orders, and is targeting a 50 percent share of the market for jets carrying 110 to 130 passengers. Bombardier has said lessors may account for half of orders for the model.

Boeing, Airbus

The planemaker is marketing the CSeries as more fuel-efficient alternative to the single-aisle models of Airbus and Boeing, which dominate the market for single-aisle jets. Hachey said he’s in negotiations with about 65 potential buyers worldwide, and in “advanced discussions with a handful.”

Bombardier won support from Deutsche Lufthansa AG, which placed an order for 30 jets in February 2009, followed by accords with Republic Airways Holdings Inc. and lessors, pushing the backlog to 90.

“There is serious interest and there have been serious conversations with a number of customers, and we’ll see what happens at the show,” David Hess, president of engine maker Pratt & Whitney, said in an interview July 18. Pratt & Whitney’s geared turbofan engine is the sole choice on the CSeries.

The CSeries will come in versions with 110 to 130 seats or 130 to 145 seats and have a list price of $52.4 million to $60.9 million, depending on the model. Airbus and Boeing have both said they may attach new engines to their older A320 and 737 planes to gain fuel efficiency and fend off the challenge.

Qatar Interest

Qatar Airways Ltd. CEO Akbar al-Baker, who may be in the market for as many as 30 CSeries planes, said in Farnborough today that a potential order is hung up on talks with engine maker Pratt & Whitney over “commercial issues.”

Al-Baker declined to elaborate, saying he was in discussions with the United Technologies Corp. unit via Bombardier.

“Bombardier, Pratt & Whitney and Qatar are actively engaged in finding a mutually acceptable way forward with the CSeries,” Katy Padgett, a Pratt & Whitney spokeswoman, said without elaborating.

Some buyers may be waiting to see what Airbus and Boeing do about their engine options before committing to the CSeries. Pressure is also building on Bombardier from Brazil’s Empresa Brasileira de Aeronautica SA, which has said it may create a commercial jet with more than 100 seats as well.

“Bombardier has been saying for years that they have a window of opportunity to get into the market,” said Richard Aboulafia, vice president of consultant Teal Group in Fairfax, Virginia. “This aperture doesn’t get any bigger, and it starts closing as Airbus and Boeing and Embraer start to react.”

Airbus Chief Operating Officer John Leahy said July 17 he aims to double the 131 orders his company has won so far in 2010 during the Farnborough show. Jim Albaugh, the head of Boeing’s commercial division, said yesterday Airbus and Boeing will probably win more orders “than anyone would have expected.”

“We’ll see what happens during the show,” Bombardier’s Hachey said. “We’re very pleased with our position, we still have tremendous interest in the aircraft.”

To contact the reporter on the story: Andrea Rothman in Farnborough, England, at aerothman@bloomberg.net;

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Ed Dufner at edufner@bloomberg.net

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