Mark Collins – CSeries Jetliner: Bombardier Desperate

Further to this post,

Canadian Election: Bombardier Nightmare for Conservative Government? Part 2

the company sure looks like fading fast–fast enough to come begging before the October 19 Canadian federal election?

Bombardier shares plunge after talks fail with Airbus on ‘business opportunities’

Bombardier’s C-Series100 takes off on its maiden test flight at the company’s facility Monday, September 16, 2013 in Mirabel, Que.

Bombardier Inc. and European plane maker Airbus Group NV held talks about “certain business opportunities,” but both companies said the discussions have ended.

Montreal-based Bombardier confirmed the talks late Tuesday [Oct. 6] after Reuters reported the discussions involved a possible sale of a majority stake in the C Series jet to Airbus. The partnership would have effectively ended Bombardier’s independent efforts to break into the 100- to 160-seat plane market dominated by Boeing Co. and Airbus, the news agency said.

“Bombardier confirms that such discussions occurred and are no longer being pursued,” the company said in a press release. “As previously mentioned, Bombardier will continue to explore initiatives such as a potential participation in industry consolidation [ouch! emphasis added].”

Airbus issued a similar statement, saying that the two companies had “been exploring business opportunities” and that such discussions “are no longer being pursued.”..

A bigger question is why Bombardier would feel the need to sell a controlling stake in an aircraft development program that’s so close to fruition. The C Series is Bombardier’s big bet to drive revenue over the next decade.

“Why would you sell the asset that’s going to bring you about $8-billion annually of revenue once it gets into full production?” said Mr. [Ernie] Arvai [of aerospace consultancy AirInsight], noting the first C Series is scheduled for delivery to a Lufthansa subsidiary. “They’re just on the cusp of making money with the airplane. So the timing doesn’t make sense unless you’re hurting so badly that there is no other way to do it.”

Bombardier shares plunged about 15 per cent in early trading Wednesday on the S&P/TSX composite index on news that the talks had failed.

…industry observers noted any deal would face political hurdles at both the federal and provincial levels. The Canadian and Quebec governments have both provided funding to help Bombardier develop the aircraft…


9 thoughts on “Mark Collins – CSeries Jetliner: Bombardier Desperate”

  1. At AvWeek:

    ‘Bombardier C Series Concerns Grow As Talks With Airbus Collapse

    Following the collapse of talks between Bombardier and Airbus about possibly joining forces on the C Series program, industry experts are becoming increasingly worried about the future of Bombardier’s main new commercial aircraft program.

    “Since Bombardier lacks the resources to make the C Series a commercial success on its own and since we can’t foresee a partner, Teal Group expects the program to be canceled,” the firm’s Vice President-Analysis Richard Aboulafia said. “The very fact that Bombardier was talking to Airbus implies that they badly needed to talk with someone and that there was no one else. This does not look good at all.” ICF SH&E Vice President Kevin Michaels believes that “the odds [of cancellation] have gone up considerably,” but he still sees other options for Bombardier that may save the program.

    “While [cancellation] has been discussed as an outside consideration in the past, we think it is now a far more realistic possibility,” Credit Suisse wrote in a note to clients. The analysts believe that the remaining cash burn, until production of the C Series is in full swing, could be up to $2 billion in the coming 2-3 years. The company burnt through more than $800 million in the second quarter alone. As Credit Suisse estimates cancellation costs to be well under $1 billion, “potential savings appear significant enough to warrant serious consideration at this point.”..’

    Big “Ouch!”.

    Mark Collins

  2. Truly desperate:

    ‘Bombardier to target Brazilian giant Embraer for possible partnership

    Spurned by Airbus Group SE, Bombardier Inc. intends to approach Brazilian aerospace competitor Embraer SA to discuss forming a partnership to prop up the Canadian company’s C Series passenger jet.

    A senior aviation executive close to Bombardier said Tuesday that the company had not approached Embraer yet, “but I know they intend to.”

    He said Bombardier may also approach Boeing, Airbus’s American rival. “Bombardier will not leave any stone unturned,” he said.

    Bombardier would neither confirm nor deny that Embraer was on its contact list but has made it clear that it is looking for deals that could bolster both the C Series and the company’s finances. “As we mentioned earlier this year, we are exploring initiatives such as potential participation in industry consolidation, but we will not discuss our activities in this regard,” said communications director Isabelle Rondeau.

    Embraer has been Bombardier’s arch-rival in the regional jet market and its aircraft have become ubiquitous..’

    Mark Collins

  3. Feds next?

    “Bombardier to book major charges, outline aid from Quebec: sources

    Canada’s Bombardier is set to book a writedown on its C Series program and announce that the government of Quebec will be investing in the narrow-body jet program, according to several sources familiar with the matter.

    The embattled Montreal-based company will also permanently mothball its Learjet 85 program, the sources said.

    Bombardier, which has been looking at a wide range of options to help it fund its long-overdue and over-budget C Series jet program, will form a joint venture with the Quebec government on the C Series, said the sources, who asked not to be named as they were not authorized to discuss the matter.

    To form a joint-venture, Bombardier will write down billions of dollars it has already sunk into the C Series, said the sources. If a deal is reached, the government would be on the hook to fund half the final development costs on the new jet, which is slated to enter service next year.

    A Bombardier spokeswoman declined comment. A spokeswoman for Quebec’s economy minister was not immediately available for comment.

    A similar deal with European aircraft giant Airbus Group SE fell apart earlier this month when news of the talks leaked.

    In a note to clients on Tuesday, Sterne Agee analyst Peter Arment noted that C Series program development costs have already topped $5-billion and he expects that another $2-billion in cash will be required to finish certification and absorb the ramp in production in the first three years.

    That would mean Quebec would potentially front up to $1-billion or more in order to fulfill its side of the deal…”

    Another Canadian industrial dream fading.

    Mark Collins

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