Bombardier Sees Continued Discounts to Expand C Series Backlogby
Pricing for Delta aircraft deal was aggressive, jetmaker says
Canadian company seeks to line up lessor for marquee plane
Bombardier Inc. plans to continue to offer discounts on its new C Series narrow-body jets even after winning a 75-aircraft order from Delta Air Lines Inc., one of the planemaker’s top executives said.
“Aggressive” pricing was part of the strategy that allowed the Montreal-based manufacturer to secure the Delta deal, Fred Cromer, president of Bombardier Commercial Aircraft, said Friday in an interview. He wouldn’t provide financial details of the accord, which also comes with options for 50 more aircraft.
Carriers placing large jet orders typically negotiate discounts with aircraft manufacturers. Discounts on the CS100 jets that Delta bought -- which carry a list price of $71.8 million -- may have been as high as 75 percent, according to Aviation Week.
“Sure, I would use the term aggressive,” to describe the pricing offered to Delta, Cromer said in Mirabel, Quebec, after the Bombardier annual meeting. “Let’s face it -- we are still in the beginning stages of the program. The plane isn’t even in service yet, so a company that’s going to come in and place a volume order is going to expect a discount.”
Bombardier’s second-quarter results will include an “onerous contract provision” to be recorded as a non-cash charge of $500 million in conjunction with 127 C Series purchase agreements booked this period, Bombardier said Thursday in a filing. The 127 orders include the 75 aircraft that Delta is purchasing, as well as 45 that Air Canada agreed to buy in February.
Deutsche Lufthansa AG’s Swiss International unit in the third quarter will become the first carrier to operate the C Series.
Bombardier has already heard from other carriers intrigued by the prospect of ordering the jet after Delta’s commitment, Cromer said. He wouldn’t name them.
“Now with Air Canada, with Delta, names that people recognize around the world, that’s an endorsement,” he said. ”Not everybody has the same fleet planning resources as Delta, so maybe that was the endorsement they were looking for. This is the momentum that I keep referring to, and it’s building.”
Bombardier is also continuing efforts to sell the C Series to a major leasing company, which would then place the aircraft with a wide range of airlines, Cromer said, without identifying the lessors that Bombardier is targeting. Bombardier’s leasing clients so far include Australia’s Macquarie Group Ltd. and Russia’s Ilyushin Finance Co.
“Bombardier’s job as a manufacturer is to get the plane with recognizable customers and to start broadening that footprint,” he said. “Then, the next opportunity is to target some leasing companies that are in the business of placing orders and placing those aircraft. There are a handful of companies that do that.”