Farnborough Air Show, July 13: CSeries program analysis

The unexpected pre-Farnborough Air Show announcement by Bombardier for letters of intent for up to 24 CS100s is welcome news for the company and the program.

Although an announcement by Falko Regional Aircraft Leasing of a firm order would have been more welcome, history shows that LOIs tend to be converted into firm orders eventually, whether these are from Airbus, Boeing, Embraer–or Bombardier. With the Falko LOI, BBD now has 471 firm orders and commitments for the CSeries.

Hand-wringing headlines and stories over May’s engine incident in which a Pratt & Whitney P1000G Geared Turbo Fan during a CSeries ground test and the assumed hugely negative impact on the program these stories and headlines suggest are way overblown.

The ground test of the engine was a follow-on to a problem that emerged a week earlier. PW and BBD have been mum about the details, but the event did not involve the gear box, which is the key component to the engine that the industry worried would be the issue. Instead, our information from a couple of sources indicate the issue was far more mundane: an oil seal or flange that failed in a pipe that ultimately allowed too much oil to accumulate, causing the failure. This is similar to the Rolls-Royce Trent engine failure, we’re told, on the Boeing 787 test stand program. While embarrassing, tests are supposed to reveal problems.

While early reports suggested this was an “uncontained failure” on the PW engine, we understand that the cowling was open during the test, which may have been a factor in parts from the engine hitting the wing, causing damage.

With the flight test fleet grounded during the investigation of the event, it’s been suggested that BBD will have trouble obtaining orders for a plane that isn’t flying. We think this has little to do with BBD’s continued dry spell for orders.

Customers fully understand test programs, and it emerged rather quickly the gear box wasn’t an issue. BBD’s challenge is not the airplane-on-ground (AOG)–it’s going up against the muscle and vastly stronger balance sheets of Airbus and Boeing, who can sell into their existing customer bases and wrap A320/737 deals into larger, “global” transactions involving other equipment types or even recasting previous, undelivered orders. Embraer can sell its E2 jet to its existing E-Jet customer base. These existing customer bases for airplanes that are derivatives of current, in-production models give Airbus, Boeing and Embraer a huge advantage.

Bombardier, on the other hand, has to create a customer base for the CSeries; there is no commonality with its CRJ family. BBD has a balance sheet that simply doesn’t match those of its competitors, giving it less financial flexibility, and because there is no existing customer base for CSeries, BBD doesn’t have the ability to offer “global” deals as inducements.

We’re confident BBD will wind up converting most if not all of its commitments to firm orders in the months and years to come. While a couple of the current firm order customers may be questionable, the 471 firm orders and commitments already suggest to us that CSeries will be a commercial success (we never had any doubt about the prospect of it being a technical success). Most new airplane programs target 400 sales as break even (the 787 and A380 being notable exceptions). Airbus forecasts a requirement for around 4,000 airplanes in the 100-149 seat sector and BBD’s forecast is around 6,900. We expect the sector to be somewhere in between. BBD and EMB will split the lion’s share of this sector. If BBD sells only 1,000 (and we think it will do better than this), there’s no question CSeries will be a commercial success.

7 Comments on “Farnborough Air Show, July 13: CSeries program analysis

  1. Exactly six years ago Bombardier announced at Farnborough that it was launching a new aircraft called the CSeries. Many said at the time that this was a brave move considering that BBD was up against Boeing and Airbus.

    Four aircraft have since taken to the air and the order book totals 471 orders, including 203 firm. The aircraft is a complete success technically and will more than likely become a commercial success as well.

    Everyone expected one of the prototypes to show up at Farnborough this week but that will not happen because the fleet is grounded. The incident is unfortunate but is not considered serious. Most observers expect the aircraft to be back in the air soon. And the fifth, and last, CS100 prototype is expected to join the first four flight test vehicles not long after.

    There are many reasons to be optimistic. To begin with, the problem that led to the grounding of the fleet is not considered serious. It is a drawback, but with no serious consequences to the programme. Everything else is progressing normally, if at a somewhat reduced pace in comparison with what giants like Boeing and Airbus can achieve.

    The only major problem with suppliers is (was) related to software. The slow pace of the flight test is actually reducing the pressure on most of the suppliers. In the meantime BBD has build a brand new assembly building that will be operational later this summer, just in time for the beginning of production.

    Yes the programme is late, but this is not dramatic. Not yet anyway! Flight testing is slow compared with the majors, but the accumulated delays are not as serious as they have been with those same majors on some of their previous programmes.

    So overall the CSeries is doing quite well despite the setbacks and relatively slow sales. We have to keep in mind that we are still at the beginning. It is still very early. But nowadays people are anxious and nervous, and their expectations are sometimes a bit too high. We live in a time when people are fused with their iPhones and riveted to their screens. They expect everything to happen instantaneously, or at least overnight…

    Just relax folks and enjoy a good cup of British tea. 😉

    • BBD are wise to take their time and get it right. I think they are also smart to get the testing done before they build a lot of aircraft needing re-work. I doubt if anybody will ever make that many unsalable airframes again. Over a 20-30 year program a 2 year delay will eventually be forgotten.

  2. I think BBD and P&W lack of transparency and almost non-existent detailed information about the UNCONTAINED engine failure just casts doubts about the real issue with the engine. A few weeks ago they said it would take them just a fews to correct the issue, so far those weeks seem to becoming months, not what would be expected on what basically LN is mentioning an oil seal issue. I guess they will wait until after FIA14 to reveal that once more the program EIS will be delayed…after all that’s BBD. Even the Russians had a far more successful testing program with the SSJ100 (the Mt.Salak disaster was not during testing and completely unrelated to the aircraft), not to mention they never had any issues with their engines.

    I guess BBD and P&W took a too big of a bite with this one, let the choking begin.

    • Mr. Rodriguez, [Edited] do you understand the amount of engineering that goes into putting a plane like this in the air. Yes they are late however they will succeed [Edited] There is no need for them to disclose all the details (you might not realize but there is competition that might be watching). [Edited]

  3. Almost all flight and ground test programs have hick-ups. This event is just one of those. The CS-100/-300 will turn out to be a great aircraft with 1000-1500 orders, eventually.

  4. BBD could be well served to offer a BBJ version of the C-Series. Both Boeing and Airbus have had reasonably good success with their BBJ/CJ/VIP programs.

    • I am quite sure this is already in the works. It is almost a certainty that Bombardier will offer a “BBJ” version in due time. After all BBD is the world’s largest business jet manufacturer. And the CSeries would fill the gap nicely between the smaller Global and the larger 737. But its limited range could be an impediment for some buyers who might prefer the smaller, but much longer ranged Global.

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