- CSeries sales are `serious risky unknown,' Canaccord says
- Tardy, over-budget jet has been focus of investor concern
Bombardier Inc. tumbled the most since August after talks fizzled with Airbus Group SE on a potential business collaboration, damping speculation that the struggling CSeries jetliner program might get a cash infusion.
The companies announced the end of discussions following a Reuters report on Tuesday that Montreal-based Bombardier had approached its larger rival to sell a stake in the CSeries. The aircraft has been a focus of investor concern because of the drain on Bombardier’s finances and the scant interest shown by airlines.
“Liquidity and CSeries order challenges are the main reason why the stock has been such a poor performer so far in 2015,” Canaccord Genuity Inc. analyst David Tyerman said Wednesday in a note to clients. “The CSeries sales issue remains a serious risky unknown. It is imperative that Bombardier make this program a success.”
Development costs for the CSeries have ballooned more than $2 billion to $5.4 billion amid delays that have left the plane running two years late ahead of its 2016 commercial debut. Bombardier, a pioneer in the regional-jet industry, has bet on the plane to crack the Airbus-Boeing Co. duopoly in the narrow-body airliner market.
Bombardier’s Class B shares slid 13 percent, the most since Aug. 24, to C$1.54 at the close in Toronto. Bombardier is Canada’s worst-performing industrial company this year, slumping 63 percent through Wednesday.
Airbus was the first to acknowledge the contacts with Bombardier, saying in a statement that “such discussions are no longer being pursued.” Bombardier separately confirmed that account, while repeating previous comments that it will “continue to explore initiatives such as a potential participation in industry consolidation.”
Neither company mentioned the CSeries. But with Bombardier already having acknowledged the need for cash, the confirmation of possible collaboration with Toulouse, France-based Airbus may add to doubts about the jet.
New Chief Executive Officer Alain Bellemare, who took over in February and raised more than $3 billion in debt and equity, plans an initial public offering for Bombardier’s rail unit this year to further bolster the balance sheet. The company had $3.1 billion of cash and cash equivalents and about $9 billion of long-term debt at the end of June.
Bombardier is trying to succeed in a narrow-body niche where other planemakers have failed. The least-expensive CSeries seats 108 people, fewer than in the smallest Boeing and Airbus offerings.
The CSeries has secured few orders from top-tier carriers and lessors among its 243 firm sales, shy of a 300-plane goal by the time the plane begins commercial flights. Bombardier’s CSeries deal came in September 2014, when a unit of Australia’s Macquarie Group Ltd. agreed to buy 40 of the jets.