Bombardier Seeks Plane Orders to Avoid Output Cutbacks
Bombardier Inc. (BBD/B) needs to win more regional jet and turboprop orders this year to avoid curbing production in 2013, the aerospace unit chief said.
“We are pretty satisfied with the level we have this year in terms of production rates,” Guy Hachey, president of Bombardier Aerospace, told reporters in Montreal after the company’s annual shareholder meeting today. “We need to win more orders for next year to achieve what we had planned.”
Bombardier, which drew almost half of last year’s $18.3 billion in revenue from its aerospace unit, reiterated today that airliners will make up 23 percent of this year’s estimated 235 plane deliveries. The company doubled its commercial aircraft sales force in 2011 and is focusing on emerging markets.
“Our efforts in terms of dispersing our sales force, augmenting our sales force, the marketing support, the financing support are paying off,” Hachey said today. “In emerging markets you can see that we are starting to win head-to-head with the competitors.”
The world’s third-largest maker of commercial aircraft, Bombardier garnered 28 orders for the planes in the first three months of the year, compared with five in last year’s first quarter. On May 1, Canadian discount carrier WestJet Airlines Ltd. (WJA) awarded the Montreal-based company a contract for as many as 45 turboprops with a list value of about $1.35 billion.
Commercial aircraft shipments in the first quarter were curbed when a customer failed to secure financing, the company said today. Bombardier expects the problem to be solved by the end of next month, Hachey said.
“We should have a little bit more deliveries in the second quarter that will just carry over,” Hachey said. “Financing in the last few years has been a challenge in general.”
Bombardier climbed 7.3 percent to C$3.96 at the close in Toronto, their biggest one-day gain since Oct. 28. The shares have declined 2.5 percent this year.
The manufacturer had 36 firm orders for turboprops as of March 31, representing 10 months of production, according to a filing. That’s short of Bombardier’s goal of having a backlog equivalent to 18 to 21 months of production.
The planemaker cut its regional jet output starting in January to “align with market demand” and now has 52 firm orders for regional jets, which represent 20 months of production, in line with a goal of 18 to 21 months’ worth.
Competition among planemakers has increased in the last few years as airlines purchase fewer regional jets or turboprops, Hachey said. Carriers such as PT Garuda Indonesia, Ethiopian Airlines and Alaska Air Group Inc. (ALK)’s Horizon Air committed this year to buy jets and turboprops from Bombardier.
“Each campaign is very competitive,” he said. “Manufacturers are trying very hard to win the few orders that are being given out.”
Chief Executive Officer Pierre Beaudoin later said he’s “quite bullish” about commercial aircraft sales for the year.
Bombardier has “good momentum” and is taking part in “many more” sales campaigns for regional jets and turboprops, Beaudoin told analysts on a conference call.
“Many” U.S. carriers are looking to replace their 50-seat jets with larger aircraft, and Bombardier plans to bid on the business, Beaudoin said. Orders will be placed “in the near future,” he said, declining to be more specific.
Bombardier is “well positioned for potential large-scale new orders” from U.S. carriers such as SkyWest Inc. and American Airlines Inc., Cameron Doerksen, an analyst at National Bank Financial in Montreal, said today in a note to clients.
Doerksen raised his rating on Bombardier to outperform, a type of buy recommendation, from sector perform, saying that the stock’s 9.1 percent drop this year through yesterday reflects “an overly negative view” from investors.
“One of our key concerns for Bombardier was its low backlog for regional aircraft, but orders so far in 2012 give us confidence that Bombardier will meet its delivery target,” Doerksen said.
Bombardier’s CEO also said he’s “very enthusiastic” about prospects for the CSeries, the company’s largest ever jet, which is due to enter service late next year. Beaudoin reiterated his expectation that the first flight will take place by the end of this year.
“No red flags, nothing indicates that indicates we won’t be on time,” he said. “These are very complex projects and we have to take it step by step, but so far I feel very good about the CSeries and the progress we are making.”
Bombardier will probably book more orders for the plane before production begins, Beaudoin said without elaborating.
Bombardier’s net income in the first quarter was $185 million, or 10 cents a share, the company said today. That compares with $220 million, or 12 cents, in last year’s first quarter, which ran from February through April, before the company completed its switch to a calendar-year earnings schedule.
Sales dropped 25 percent to $3.51 billion, trailing the average estimate from analysts of $4.5 billion.
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