China CSeries Lease Deal Buoys Bombardier Sales Effort, CEO Says
Bombardier Inc. (BBD/B)’s agreement to sell as many as 30 CSeries aircraft to a Chinese leasing company may prompt fresh deals with customers from the Asian nation for the world’s third-largest airplane maker, Chief Executive Officer Pierre Beaudoin said.
The conditional deal with CDB Leasing Co., whose identity was revealed last week, will help Bombardier woo more buyers in China by offering a leasing option, Beaudoin said yesterday in an interview at the Mexico Business Summit in Guadalajara, Mexico. The company has “a lot of good conversations going on” with Chinese airlines, he said.
“You’re able to offer a complete product to the airlines, you sell them airplanes but you can also lease them airplanes,” Beaudoin said. “We did that in Russia and it’s really starting to work well with airlines coming on. So I expect the same thing in China. It’s a good first step.”
A sale to CDB Leasing would be a boost to Bombardier, which is depending on the CSeries to almost double annual revenue toward the end of the decade. The CDB Leasing deal, which Bombardier announced in 2012 without disclosing the name of the customer, includes a conditional purchase agreement for five CS100 and 10 CS300 jets, with options for an additional five CS100 and 10 CS300 planes, Bombardier said Oct. 18.
There’s a high probability that the current conditional agreement with CDB Leasing will be converted into a firm order, according to RBC Capital Markets.
Beaudoin said Bombardier would probably add more work to the company’s aviation-related manufacturing operation in Mexico, without specifying a timetable. He said Mexico could potentially handle final assembly of a plane in the future, dependent on an agreement between Mexico and the U.S. Federal Aviation Administration.
“There is a day where I can see an airplane coming out of Mexico,” he said.
Bombardier is likely to bid in all the major passenger rail projects proposed by Mexico President Enrique Pena Nieto, Beaudoin said. Tenders on new proposed lines connecting Mexico City with Queretaro and Toluca, as well as a tourist train on the Yucatan peninsula, will probably be offered early next year, Deputy Minister of Transportation Carlos Almada said Oct. 8.
Beaudoin declined to identify the partners Bombardier may join with in the bidding. Investment in the projects will total about 97 billion pesos ($7.6 billion), Almada said.
“We feel like we can participate in all of them,” Beaudoin said “We feel we can put a very compelling offer on the table that will permit these projects to open rapidly and on time.”
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