Nov. 26 (Bloomberg) -- Bombardier Inc.’s CSeries jetliner, which has won orders from only three customers, is a leading contender for a contract from SAS Group as the biggest Nordic airline prepares to add as many as 55 planes over six years.
SAS, already one of Bombardier’s biggest European clients, is evaluating the CS300 variant of the CSeries, seating 120 to 145 people, Niklas Hardange, the carrier’s fleet-planning chief, said in an interview at its headquarters in Stockholm.
“Bombardier is the one offering the newest technique, and has a plane that’s a lot more fuel efficient than Airbus and Boeing have today,” Hardange said yesterday. “If the CSeries keeps its promises it’ll be a very successful product.”
SAS is weighing the single-aisle CSeries against the competing 737 from Boeing Co. and Airbus SAS A320 family. The airline plans to phase out 37 older 737s and Boeing MD-80s over the next few years while adding capacity to meet anticipated annual passenger growth of 4 to 6 percent through 2016.
Montreal-based Bombardier has so far secured 90 orders for the CSeries; 30 from Germany’s Deutsche Lufthansa AG, which is buying the planes for its Swiss unit, 40 from Indianapolis-based Republic Airways Holdings Inc. and 20 from Lease Corp. International Aviation.
SAS and its units own 12 Bombardier CRJ900 regional jets and 28 Q-series turboprops, including seven Q400s. The carrier got more than 1 billion kronor ($143 million) in compensation from the Canadian company and Goodrich Corp. in 2008 after Q400 landing-gear problems caused three crash-landings in six weeks.
The CSeries model is attractive because of its lighter composite-based construction and more fuel-efficient engines from United Technologies Corp.’s Pratt & Whitney unit, Hardange said. Still, the technology is untested and the CS300 probably won’t be available to SAS until 2014, he said.
Bombardier spokesman John Arnone said the company doesn’t comment on potential customers, while adding that it is “involved in discussions with many airlines and operators regarding the CSeries aircraft.”
Buying Boeing 737s would “simplify” the SAS fleet as there are 83 planes from the Chicago-based manufacturer among the 193 that the airline currently operates, Hardange said. SAS is also interested in Airbus’s A320 and A319 variants, he said, and is looking at the European company’s planned “Neo” upgrade, which would feature a new, more efficient engine.
The Scandinavian airline, half-owned by the governments of Sweden, Norway and Denmark, has yet to decide to what extent it will buy or rent planes, and is also talking with lessors.
“Historically it’s been better for us to own than to lease,” Hardange said. “Today we’re not so sure. We’re flexible and want to grab the best opportunities we can. We’ll do it gradually and don’t see a big bang ahead of us.”
The fleet-renewal plan comes as SAS is deep into a 7.8 billion-kronor cost-cutting program, and the carrier wants to improve cash flow and boost credit ratings before committing to a purchase, which “is not coming tomorrow,” said Sture Stoelen, its head of investor relations. Selling more shares to help fund new planes is not an option, he added.
SAS has been unprofitable in all but one of the past 12 quarters after struggling with declining traffic, strikes and airspace closures following a volcanic eruption in Iceland.
Qatar Airways Ltd. Chief Executive Officer Akbar Al-Baker said yesterday that Bombardier needs to resolve “commercially sensitive issues” regarding the CSeries or risk seeing it eclipsed by Airbus’s re-engined Neo. Pratt & Whitney said Sept. 17 it aimed to iron out a “misunderstanding” that prompted the Gulf carrier to delay an order for as many as 30 planes.
Bombardier was trading down 0.4 percent at C$4.82 as of 11:24 a.m. in Toronto. The stock is up 0.5 percent this year.
SAS closed 3 percent lower at 22.80 kronor and has declined 55 percent this year for a value of 7.50 billion kronor.
To contact the reporter on this story: Ola Kinnander in Stockholm at firstname.lastname@example.org.
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