Bombardier's CSeries Lost in the Fog

Depending on who you listen to, Bombardier's proposed 100- to 150-seat CSeries jets are either poised to take off, or permanently grounded.

First -- for all of you who have actual lives and don't obsess about proposed new airplanes -- here's the backstory:

The CSeries would be the Canadian regional jet builder's largest planes, big enough to compete with Boeing and Airbus's top-sellers, the 737 and A320. With a new generation of fuel-sipping engines and a lighter, partly composite airframe, Bombardier has billed it as quieter, more-efficient alternative.

The company has talked for more than a decade about entering this market, particularly since Brazilian rival Embraer brought its 110-seat E-195 model to market in 1999. It kicked around a couple different concepts, until in 2004, Bombardier first proposed the CSeries.

Bombardier succeeded in getting Canadian government support for the project, as well as the go-ahead to build major components in China and Northern Ireland. But it didn't suceed in selling any, so in early 2006 it suspended development indefninitely.

But then in 2007, Bombardier's board brought the project out of mothballs and began shopping around a retooled plan for a family of 110- and 130-seat jets. Finally, at last summer's Farnborough Air Show outside London, with the whole aviation industry watching, Bombardier and Lufthansa inked a letter in which the German airline stated its interest in ordering at least 60 CSeries jets -- but didn't actually buy any.

Fast forward to this week, when Teal Group analyst Richard Aboulafia -- in his monthly newsletter that's widely read in the industry -- noted that its been eight months since the air show, Lufthansa still has not moved to close the deal and no other series buyers have emerged.

"The CSeries isn't dead," wrote Richard (who will eventually post the newsletter on his Web site). "But there are obvious reasons why it's taking off like a senile chicken. Oil was pushing $150 (a barrel) last July, but is now about $40. This has drastically changed the risk/reward equation for any airline looking at new technology. There's less of a pressing need to invest in fuel efficient equipment. Falling traffic makes airlines even more cautious."

Aboulafia has long been a CSeries doubter, saying the 2004 version was "less an aircraft and more a generic and cynical effort to tap into government funding from Ottawa and Quebec" as well as "a poster child for the evils of government-funded pipedreams" that "re-defined mediocrity."

But today he worries that the successfully revamped CSeries will be just the first of several innovative new jet programs to fall victim to the global recession, alongside a couple of business jets now in development, and possibly Airbus' proposed new A350XWB.

Or maybe not. In an appearance on Canada's Business News Network this week, analyst Chris Sears, the vice president of research at Montreal-based MacDougall, MacDougall & MacTier (or "3Macs") let slip that according to industry scuttlebutt, Bombardier is at long last poised to announce its first firm order for the Cseries. (Most of the segment is devoted to discussion of Canadian telecom giant Rogers Communications; the Bombardier bit is at the very end.)
In an interview last month, Bombardier CEO Pierre Beaudoin told BNN anchor Howard Green (my friend and former classmate) that the CSeries will be a winner if investors will just be patient. "I believe it's the right investment for the long-term for Bombardier," he said.

Meanwhile, in the hear-and-now, Bombardier signed a major deal with Delta Air Lines this week, an order for 60 of its 76-seat CRJ900 regional jets. The deal has a list price of just over $1 billion, but it's likely Delta negotiated a discount in the range of 25 to 35 percent.