| TORONTO, June 13
TORONTO, June 13 Canada's Bombardier Inc
is hoping to carve a new niche in the cutthroat
airplane market with a fuel-efficient, medium-haul jet that
makes its first flight this month, but its all-new CSeries needs
an avalanche of orders to stave off bigger rivals.
Bombardier's narrow-body CSeries, aimed at a gap in the
market, offers a lightweight carbon-composite frame like Boeing
Co's 787 Dreamliner, and new, fuel-saving Pratt & Whitney
But there are two big challenges: Persuading the market
there's room for a plane positioned midway between regional jets
and bigger commercial planes, and tempting customers to abandon
the big players who have dominated for years.
"You're going up against some serious entrenched competition
and if you have the balance sheet to get through that, and gouge
out a position in the market, there's something here," said
Richard Aboulafia, vice president of aviation consultancy Teal
Group. "If you don't, then you're jumping into a volcano with an
armful of money."
Bombardier invested $3.4 billion to create the CSeries,
which has between 110 and 130 seats, plus a tightly packed
version that can seat up to 160.
It expects 300 firm orders worth $19 billion by the time the
plane enters service in mid-2014, up from 177 at present.
Next week's Paris Air Show offers a chance to boost the
still-slim order book, although the jet won't be on display. Its
maiden flight won't come until the end of June, following a
six-month delay that Bombardier blamed on supplier issues.
Bombardier insists its CSeries is now on schedule. "I'm very
comfortable with the first flight, I'm very comfortable with the
entry into service," said Mike Arcamone, president of its
commercial aircraft division.
Airbus and Boeing rule the world of bigger
commercial jets, and will defend their turf with discounts and
revamped planes, while Brazil's Embraer SA, the
world's No. 3 planemaker, leads in sales of smaller regional
Embraer has 142 firm orders for its E195, with 110-120
seats, and 556 firm orders for the E190, with 100-110 seats.
Boeing and Airbus have sold 3,449 of their rival planes
seating around 150 people, although only a sliver of the sales
are for smaller models that compete head-on with the CSeries.
It's a sign either that Bombardier has found a promising
niche, or that the market simply wants different-sized planes.
Montreal-based Bombardier says the CSeries can corner about
half of the 6,900 single-aisle 100- to 149-seat jets that
airlines are expected to buy over the next 20 years,
contributing $5 billion to $8 billion in annual revenue starting
It's a badly needed boost for Bombardier. Plane sales were
flat at $8.6 billion last year and train sales for the world's
biggest trainmaker fell 17 percent to $8.1 billion.
Bombardier is betting buyers will bite once the plane starts
flying and especially once it enters service.
Chet Fuller, sales chief of Bombardier Commercial Aircraft,
argues the whole industry has been bruised by delays that
plagued planes like Boeing's 787 Dreamliner and the Airbus 380
and has become more conservative.
But Airbus officials dismiss that.
"They have long winters in Montreal. They are obviously in
denial," Airbus sales chief John Leahy said of the Bombardier
targets. Also, the performance claims were too optimistic, he
The CSeries is the first all-new, narrow-body plane in
decades, and Bombardier says it will cost less to buy and
operate than rival jets.
Rather than compete with a new plane, Boeing and Airbus have
added new engines to existing aircraft to create their
next-generation 737MAX and A320neo narrow-bodied jets.
The CSeries plane is newer and lighter, but the added
efficiency from the new engines on Airbus and Boeing jets has so
far convinced most airlines to stick with established suppliers.
The two big players are betting their upgraded models will
hold the CSeries and other competitors at bay until around 2030,
when they may bring out completely new designs. They insist that
the familiarity of existing jets will be a major selling point.
But experts say new engines won't be enough for the heavier
Boeing and Airbus planes to match the long-term fuel efficiency
and lower operating costs of new aircraft like the CSeries.
Analysts say discounts in the range of 50 percent from
Boeing, Airbus and Embraer will help. At list prices, the
110-seat CS100 costs $63 million and the 130-seat CS300 $72
The 126-seat Boeing 737 MAX 7 costs $82 million, and
Airbus's 124-seat A319neo $92 million.
Two finance sources, who asked not to be named, said the
CSeries would have to sell for something closer to $35 to $40
million to win big orders.
WON'T GIVE IT AWAY
Bombardier Chief Executive Pierre Beaudoin says he will not
"give away" the CSeries, and the company has rejected deep
discounts and other sweeteners.
If Bombardier gets a firm footing with the current CSeries,
it could stretch the plane to add more seats and has trademarked
the names CS500 and CS900, just in case.
Bombardier hopes the plane can reignite its stock, which is
languishing at 2002 levels and a fraction of its 2000 peak of
C$26.70. The stock was up 7 cents to C$4.74 on Thursday.
"Clearly, the CSeries is quite pivotal in terms of the
short-term price reaction of the stock," said Greg Kocik,
managing director of TD Asset Management, a top-10 shareholder
that owned 11.25 million Bombardier shares at April 30,
according to Thomson Reuters data.
"And definitely the long-term success of the company hinges
on good execution of the CSeries program, but it's not like
they're betting the farm on this one program. They're a
(Additional reporting and editing by Tim Hepher, Alwyn Scott,
Brad Hayes and Cyril Altmeyer; Editing by Janet Guttsman and