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Airline survey suggests order delay for Bombardier's CSeries

RBC survey found fleet commonality key concern for potential buyers


September 16, 2011
by CANADAN PRESS

MONTREAL: Interest remains high in Bombardier’s new CSeries aircraft, but many airlines are feeling no pressure to place orders in the face of a weakened global economy, says an RBC Capital Markets survey.

“We know that airlines like the product,” said analyst Walter Spracklin. “(But) the airlines today are finding no sense of urgency to place new CSeries orders.”

Most of the 26 airlines surveyed—representing more than a third of airlines around the world that fly similar-sized 100- to 149-seat aircraft—had favourable views of the plane, which offers an estimated 20 percent in fuel burn savings and 15 percent lower operating costs. But the airlines have preferred to take a “wait-and-see” approach, said Spracklin.

Delta Air Lines decided this week to put off an order for about 100 mid-sized aircraft. The RBC telephone interview survey found fleet commonality was the key concern for potential buyers. Airlines worry about the added costs for training, parts and maintenance that come with introducing another aircraft type to their fleets.

That’s an especially important issue for mainline carriers, which are less receptive to the aircraft’s yet-unproven performance promise, said Spracklin. On the other hand, regional or new carriers can focus on the aircraft’s advantages of lower fuel costs, low noise and ability to use shorter runways.

Bombardier has received orders from airlines such as Korean Air and Lufthansa. But the survey pointed to lower interest in the CSeries currently than in the Boeing and Airbus alternatives that are being modified with new engines. Bombardier spokesman John Arnone said the manufacturer hasn’t heard any dominant concerns about the CSeries, which has been designed from scratch for better fuel and operating costs.

“A soft or uncertain economy has an impact on business in general and there’s no reason to exclude aviation from that,” he said. He added Bombardier’s discussions with customers don’t necessarily reflect the concerns expressed in the survey.

Spracklin said the lack of urgency expressed by airlines and emerging macroeconomic headwinds suggest the Montreal-based manufacturer may not be able to achieve its goal of 300 orders by late 2013, when the first plane is set to enter into service. Instead of receiving large orders for 30 or more planes, smaller deals for about 10 planes will likely be the norm, and some may come after the planes begin to be delivered, Spracklin said. In the long-run, however, he sees no reason to believe that Bombardier won’t win enough orders to ensure the $3.4-billion program has a positive return on investment.

Bombardier has received 133 firm orders, 119 options and 10 purchase rights for the two sizes of CSeries. It also has a letter-of-intent signed last month for up to 30 additional aircraft.