Bombardier CSeries Is Tough Sell as Cheap Oil Revives Used Jets
- Small Airbus, Boeing models rack up almost 1,000 sales, leases
- `Fancy technology that saves you fuel’ loses some appeal
Bombardier Inc. packed the CSeries airliner [website here] with new features to help carriers cut operating costs. What it didn’t count on was cheap jet kerosene giving new life to older fuel guzzlers.
Secondhand Airbus Group SE and Boeing Co. planes are being snapped up by airlines, crimping Bombardier’s efforts to stir demand for its marquee $5.4 billion program. Data compiled for Bloomberg by Flightglobal’s Ascend Fleets show almost 1,000 sales and leases of used A319s and 737-700s since the start of 2011 — about four times as many as the CSeries’s firm orders ever.
“Lower oil prices are not conducive to selling fancy technology that saves you fuel,” said Adam Pilarski, senior vice president for aerospace consultant Avitas Inc…
The CSeries is a pillar of the growth strategy at Montreal-based Bombardier, which predicted last year the model would produce as much as $8 billion in new annual revenue by decade’s end. While firm orders are stuck at 243, Bombardier is seeing “fresh momentum,” Commercial Aircraft President Fred Cromer said last week, reaffirming a target of 300 by the the time the jet enters service next year.
“Some discussions are maybe a little bit slower” because of the slump in fuel prices, Cromer said in an interview. “But most planning departments are looking at these decisions for the long term.”
Cromer is among the leaders brought in by new Chief Executive Officer Alain Bellemare, who took over in February. He reorganized his management team and set in motion an initial public offering for the rail unit to help bolster cash holdings drained by at least $2 billion in overruns on the CSeries [see “Bombardier Plans for Splitting Off Rail–Engineering Sell-Off?“]. But even after a rally last week that was the most in Bloomberg data dating to 1988, the Class B shares were down 59 percent this year through Wednesday [Sept. 16, see also “Bombardier’s (200ish) Penny Stock: Québec Inc. to the Rescue? And Feds?“]…
“All eyes will be focused on the introduction, how well it goes, how well the initial dispatch reliability is,” said John Plueger, president of Air Lease Corp., the jet lessor he co-founded with Steven Udvar-Hazy.
“That’s the first major component,” Plueger said. “The second is a few more significant, large-scale orders with significant airline customers. If both of those things happen, the CSeries will be under way. If one or more of those things does not happen, the CSeries is a great airplane, but there’s more of a wait-and-see attitude.”
Earlier, note final comment on learning how to sell planes: