Bombardier Surges as United Mulls Jet Order in Pilot Talksby and
CSeries is among options for carrier considering small planes
Embraer also is listed as alternative in airline contract
Bombardier Inc. surged the most among Canadian industrial stocks, buoyed by fresh prospects for a sale of its CSeries model as United Airlines ties the purchase of new small jetliners to a contract extension for pilots.
For Bombardier or Brazil’s Embraer SA, a deal with United would be a significant victory as they try to place their biggest narrow-body planes at major U.S. carriers. A United order would also shore up investor and industry confidence in Bombardier’s marquee model following a drought of more than a year.
“The big knock on the CSeries so far has been the lack of blue-chip clients,” said Benoit Poirier, a Montreal-based analyst with Desjardins Securities Inc. “Getting United would be a huge coup for Bombardier. It would change the momentum.”
United told pilots that it plans to order a fleet of 100-seat jetliners from either Bombardier or Embraer SA, provided it can agree on terms for a two-year contract extension in expedited bargaining. An airline spokeswoman, Megan McCarthy, confirmed the overture to the Air Line Pilots Association but declined to discuss the possible negotiating terms.
Bombardier’s widely traded Class B shares jumped 6.4 percent to C$1.66 at the close in Toronto. That was the biggest advance on the S&P/TSX Composite Industrials Sector Index. United parent United Continental Holdings Inc. rose 6.6 percent to $55.71 in New York, while Embraer’s American depositary receipts climbed 1.6 percent to $28.11.
Reaching a deal with United’s pilots would assure labor peace with a crucial union for new Chief Executive Officer Oscar Munoz and bring back some flying now done by regional partners with cramped, less-efficient 50-seat planes.
“This time of senior leadership change is a unique opportunity for us,” United Senior Vice President Douglas McKeen wrote in an Oct. 2 letter to union chief Jay Heppner, in a reference to Munoz’s hiring last month after the ouster of predecessor Jeff Smisek. McKeen proposed capping the talks at 45 days and limiting discussions to six items that include pay, furloughed pilot benefits and some work rules.
Dave Kelly, a spokesman for United’s chapter of the Air Line Pilots Association, said: “We cannot discuss offers or proposals.”
Even if United favors the CSeries -- and McCarthy declined to discuss prospects for either planemaker -- a win for Bombardier would also rest on Heppner’s ability to persuade pilots to accept accelerated talks that will leave some contract issues unresolved.
Buying new 100-seat planes for mainline flying would be a lure for pilots, because it would generate jobs and appeal to their interest in cutting-edge aircraft -- an affinity jokingly referred to in the industry as “shiny jet syndrome.”
Bombardier and Embraer are both mentioned in a clause in United’s current contract: Taking their largest new narrow-body airliners, the CSeries and E2, would allow United to also add more larger regional planes in 2016 to replace the 50-seaters. McKeen wrote that any contract extension “will also include a firm order” of new, small narrow-bodies. He didn’t identify a manufacturer.
Bombardier spokeswoman Marianella de la Barrera said she couldn’t discuss any contacts with potential customers. “We are aggressively pursuing campaigns,” de la Barrera said by telephone. “We know airlines take their time to make fleet purchases.”
Embraer already supplies 320 aircraft to United’s regional affiliates, and its share of the carrier’s regional fleet is poised to reach 80 percent by 2018 from 60 percent now, said Alyssa Ten Eyck, a spokeswoman for Embraer North America.
“The introduction of 100-seat aircraft to the United mainline fleet represents a big opportunity for the two companies to develop an even deeper partnership,” Ten Eyck said in an e-mail.