Bombardier Ready to Stem C Series Discounting After Delta Deal

  • Planemaker says it can afford to be less aggressive on pricing
  • Embraer claims contract was ‘subsidized’ and has hurt market

Bombardier Inc. said it’s ready to curb a discounting policy that helped secure vital contracts for its struggling C Series jetliner from Delta Air Lines Inc. and Air Canada.

“It’s clear that we took a more aggressive position on the recent orders,” Alain Bellemare, Bombardier’s chief executive officer, said in an interview in Dublin, adding that the C Series is now “at the right stage” for a higher-margin approach to its sales pitches.

“We want to keep trading-value for customers, while at the same time being responsible for managing our business properly,” he said. “It gives us a bit more flexibility.”

Bombardier last year signaled a new willingness to offer bigger discounts on the C Series in a bid to end an order drought and help the model compete with Boeing Co.’s 737 range and the Airbus Group SE A320 family.

The switch helped the manufacturer seal an outline order for at least 45 CS300s from Air Canada in February, followed in April by Delta’s agreement to buy at least 75 smaller CS100s worth $5.6 billion at list price.

Embraer Concern

The deal with the U.S. carrier gave the delayed and over-budget program its biggest customer to date and means Bombardier will have met its target of achieving at least 300 firm commitments for the C Series by the time it enters service in the third quarter.

Embraer SA Chief Commercial Officer John Slattery said in Dublin that the Delta deal has weighed on pricing expectations from airlines for similar planes, including the “E2” upgrades of the Brazilian company’s E-jets range.

“The kind of numbers that are being discussed at which Delta perhaps procured their aircraft are causing airlines to consider what that means for the marketplace,” said Slattery, who like Bellemare spoke in advance of the International Air Transport Association’s annual gathering.

Slattery said a $500 million onerous contract added to Bombardier’s order book “would lead us to believe that the aircraft were heavily subsidized,” and that Embraer is considering all options open to it at the World Trade Organization.

Bellemare said talks between Bombardier and Canadian Prime Minister Justin Trudeau’s government about federal participation on the company’s bailout remain ongoing.

The government has asked Bombardier’s founding family to loosen control and issue $1 billion in new stock in return for joining the province of Quebec in supporting the manufacturer, people familiar with the plan said last month.

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