BBD faces skyline challenges in 2016: Russia, Ukraine, Iraq customers

Note: The CSeries resumed airborne flight tests Sept. 7.

The announcement two weeks ago by Sweden’s Malmo Aviation that it won’t be the first operator of Bombardier’s CSeries is an unneeded image hit for the program, but not one we’re particularly concerned about. We think there are other early operators who potentially raise more concern.

Malmo was scheduled to receive its first CS100 in the second half of next year. The program’s entry-into-service will possibly slip into 1Q2016 as a result of the May 29 engine failure with a Pratt & Whitney P1000G on CS100 Flight Test Vehicle 1. Engines are being redelivered and we expect the first of the FTVs to return to the air very soon.

As we wrote last week, Malmo is a small airline, with just a dozen airplanes, and may not have the full resources to be the lead operator of a new technology airplane and engine—even with the support its parent, Braathens, Bombardier and PW. The second operator scheduled to take delivery of the CS100 next year is Swiss Airlines, a company with much deeper resources and experience in taking new designs into the fleet.

We’re more concerned for Bombardier about several other operators scheduled to take delivery of the CSeries in 2016:

• Iraqi Airways
• Ilyushin Finance Corp (IFC), a lessor, of Russia
• Odyssey Airlines, a start up with an odd funding scheme
• UT Air of Ukraine, leasing the aircraft from IFC
• VIM Airlines of Russia, another IFC lessee

We don’t think we need to express why we are concerned over the near-term future of Iraqi, IFC, UT and VIM.

Odyssey is using Crowdfunding to raise some of its money. To be sure, the airline has also uses bonds, equity and venture capital. But Crowdfunding is a first (as far as we’re aware) for an airline. Crowdfunding has raised $5bn for all projects worldwide, according to one website. We’re skeptical of this source of funds for airlines.

Commitments to proceed with production are typically made about 18 months in advance. This means Bombardier is facing decisions for the three Russian/Ukraine customers and Iraqi Airways very soon. The five customers above account for 17 of 70 firm orders in 2016, or 24% of the planned production. Malmo, which didn’t say what its rescheduling will look like, has six airplanes scheduled for delivery in 2016 (and four from 2015). The 17+6 is 33% of the deliveries listed in the Ascend data base.

We’re not so sure Bombardier was going to be able to meet a production of 70 airplanes in 2016 anyway. Production ramp up was unlikely to meet the 6/mo delivery of 70 aircraft implies, although the 70 could be inflated somewhat from the early production spill-over from 2015—at least in theory.

Still, there are some risks to BBD’s skyline for 2016. And there are no early answers.

13 Comments on “BBD faces skyline challenges in 2016: Russia, Ukraine, Iraq customers

    • Oops !!! Sorry, didn’t see the small footnote under the subject line…..

  1. Although I wasn’t there, this sounds a bit like Douglas in 1965-67. Sound, popular design, but quality and ramp up problems. Douglas merged with McDonnell to increase muscle & push through. I guess that’s what BDD misses and e.g. Fokker before them. They can’t quickly free up additional billions and excellent staff to overcome hick-ups while retaining customer confidence..

    • I guess Comac will now go for maximum cockpit commonality with the A320..

  2. I do not think BBD will have any problems filling their skyline. There are a number of airlines waiting to see the hard performance data from FTV 5 and also if BBD will overcome the fly by wire issues. Prior to the grounding, there was also some doubt about if the plane could fly in Normal mode. Once these issues are resolved, the orders will come in. Boeing and Airbus’ skyines are maxed(no pun intended) out for years to come so BBD will have an opportunity with closer delivery dates for at least the next few years. BBD problem is can they accelerate the ramp up. If a few big 50 -100 plane orders come in, they have the option of setting up the second assembly line to double production from 120 to 240 a year.

  3. The tragedy is this crusial CS100 is now under heavy competition too, by first of all the E195E2 wich is in reality a stretched E200 1:1 competitor to the CS100 and the SukhoiJet, ARJ, MRJ, build in crusial CS markets.

    Many are waiting for the better CS300 which will have a sweatspot position competing against heavier 737 and A320 models. I think many see their CS100 orders as CS300 slots, just like many of the A350-800 and 787-8 customers and have this right to upgrade included in their contracts.

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