Bombardier Keeps First-Flight Goal as CSeries Aces TestsFrederic Tomesco
Bombardier Inc. stuck to its goal of first flight for the CSeries in June after the delayed jetliner performed well on safety tests that included bending the wings to gauge structural integrity.
“Critical” trials are now under way on the fly-by-wire cockpit control system, Bombardier said in a filing today. The CSeries previously responded “as expected” on evaluations of areas crucial to a flight-safety permit, including static airframe testing and on-the-ground checks, the company said.
Chief Executive Pierre Beaudoin’s confidence at such a late stage in the testing is “a good sign,” said Cameron Doerksen, a National Bank Financial analyst. That may help dispel investor pessimism after a six-month postponement on a plane the company is spending $3.4 billion to develop and says will eventually double revenue.
The CSeries backlog was 145 firm orders as of March 31, the Montreal-based planemaker said in its first-quarter earnings report today. Bombardier is targeting 300 firm orders by the time the plane enters commercial service in mid-2014.
Reaffirming the June goal for a first flight “is the key near-term catalyst,” said Walter Spracklin, an analyst at RBC Capital Markets in Toronto. “This will continue to help to lift sentiment, particularly if it is matched with new orders going into the Paris Air Show next month.”
Bombardier’s Class B shares jumped 5.7 percent, the most since November, to C$4.47 at the close in Toronto. That pushed the year-to-date gain to 19 percent, beating the 0.9 percent advance for the Standard & Poor’s/TSX Composite Index.
The CSeries will be Bombardier’s biggest-ever plane. The aircraft, which will feature the new geared turbofan engine from United Technologies Corp.’s Pratt & Whitney, will be about four times quieter than existing jets and cost about 15 percent less to operate, the company has said.
Bombardier has finished assembling the first of the CSeries flight-test vehicles, and testing on a so-called “virtual” aircraft -- one of three types of tests now under way -- will probably finish in early June, Guy Hachey, president of the aerospace unit, said after the company’s annual shareholder meeting today.
“Most of the issues that could trip us up are behind us,” Hachey said. “We’re still feeling very good about flying in June. Obviously there are always some risks until the end. I don’t anticipate any major delays if something were to happen.”
The backlog reflects the termination of an order for three CSeries jets from an undisclosed buyer “due to financial difficulties,” Bombardier said. The customer also had options for three more planes.
The delay in first flight, announced in November, followed unspecified issues with suppliers and mirrored challenges encountered by Airbus SAS and Boeing Co. Chicago-based Boeing delivered its 787 Dreamliner more than three years behind schedule, then grappled with a three-month grounding by regulators because of overheating batteries.
Airbus’s A380 jumbo jet was almost three years late in initial deliveries, while its A350-900 model is already 18 months behind schedule.
“Many investors and customers remain skeptical given one previous delay and the broader sector’s development fumbles in recent years,” Steve Hansen, an analyst at Raymond James Ltd. in Vancouver, said May 6 in a note to clients. He rates the shares outperform, as do National Bank’s Doerksen and RBC Capital’s Spracklin.
A successful first flight will probably spur potential clients to place orders, Hachey said.
“First flight will be a key event,” he said. “We have opened our doors to clients. They see the progress in our factory. They see it’s a very advanced plane. So possibly, the first flight will help.”
Bombardier delivered 53 planes in the first quarter, 43 percent more than in the same period a year ago. The total includes 39 business jets, up from 29.
Bombardier reiterated a February target for aircraft deliveries in 2013 to increase to 245 from 233 last year. The full-year goal includes 190 business jets and 55 regional planes.
A recovery in the global market for business jets is probably one year away as demand in regions such as Europe remains weak, Hachey said.
“There a few large markets that aren’t doing so well right now, and that has an impact on orders,” Hachey said. “Europe is very quiet. Also, you are seeing fewer orders for small planes.”
Excluding some costs and gains, profit in the three months through March rose to $156 million from $150 million a year earlier, Bombardier said. That’s in line with the average estimate in a Bloomberg survey of 20 analysts.
Revenue soared 25 percent to $4.34 billion, beating the average estimate of $4.16 billion.
Earnings before interest and taxes for the aerospace unit amounted to 4.5 percent of revenue in the quarter, compared with 6.7 percent for the aerospace division. On the same basis and excluding one-time items, aerospace profit will climb to 6 percent of revenue by 2014, while the train business’s margin will reach 8 percent, Bombardier said.
Bombardier’s backlog of orders fell to $63 billion at the end of March from $64.9 billion three months earlier, the company said.
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