Air Canada orders up to 75 C Series; announced with BBD 2015 financial results

Feb. 17, 2016: The long drought is over.

2000px-Air_Canada_LogoAir Canada has ordered up to 75 Bombardier C Series.The press conference is at 11am EST today. These will replace 25 Embraer E-190s. BBD now has orders and commitments for 678 C Series.

The announcement comes with the company’s fourth quarter and year-end financial results and a 90-seat version of its Q400 turboprop.

The Air Canada deal is a Letter of Intent for 45 CS300s and options for 30 more, including conversion rights to CS100s. Deliveries are from 2019.

The earnings call webcast summary is below the jump.

Alain Bellemare, CEO of BBD, called the Air Canada LOI a “strong endorsement” of the C Series and a “fantastic win for Bombardier.”

“We are now building great momentum…for the C Series,” he said. “We are turning Bombardier around.”

Bellemare said BBD now has the liquidity needed ($6.8bn pro forma) for the future.

“We are now shifting our attention to 2016,” he said. This will be a year of transition and the ramp up of the C Series will put pressure on earnings. Bellemare previously said the C Series won’t be cash flow positive and profitable until 2020. Earnings will be reduced in 2016 during the ramp up.

The large number of job cuts is a result of adjusting business aircraft demand, ramping down Transportation to match future workload, and through gaining “traction” through the Transformation Plan that is seeing improve efficiencies.

“In 2016, our focus will be on discipline and execution,” Bellemare said.

John Di Bert, the CFO, said that Transportation (rail) is “solid” for 2016. Revenues at the Commercial Aerospace unit will grow with the delivery of C Series but losses on the early deliveries will result in “negative margins,” and a loss of more than $500m. The first half will be “materially” negatively impacted before improving in the second half.

“Our guidances reflect the necessary and appropriate actions,” Di Bert said.

Q&A (Statements are paraphrased.)

  • Di Bert said the company is very focused on cash flow and working capital. Some of the benefits began in 4Q and will continue into this year.
  • Di Bert said BBD won’t provide guidance on capital expenditures this year. But he said that cash flow will be stable over the aerospace programs this year.
  • Bellemare sees a solid skyline for all commercial lines this year.
  • Bellemare said spending on C Series this year is shifting from development to production. By the end of 2016 about half of the $2bn needed for the transition will be spent.
  • The full impact of the jobs reductions should be fully felt in one year, impacting 2017 but there will be a 100bp benefit this year.
  • Q12016 will be the most pressured quarter during the transition of C Series into production.
  • Bellemare said the prospective investment by the federal government remains “very important” to BBD, reflecting a “strong endorsement” in C Series. The Quebec investment is benefiting discussions with customers. The federal government investment is “very critical.” The nature of the investment is subject to continued negotiations. Bellemare did not answer a question whether governance of the family investment in BBD may be changed with federal investment.
  • Bellemare said the Air Canada deal had been worked on for months, and it injects “significant momentum” into the program. He did not answer a question whether a Residual Value Guarantee was part of the commercial terms.
  • Bellemare said that “so far” the Pratt & Whitney GTF is performing well on the aircraft and BBD hasn’t seen similar issues on the engine that Airbus has seen on the larger version of the GTF on the A320neo.




45 Comments on “Air Canada orders up to 75 C Series; announced with BBD 2015 financial results

  1. Congratulations for this hand very opportunely reached out to BBD by the national flagcarrier in recognition that C Series is a fine airplane ! Well done, Alain Bellemare ! Congratulations for the reconfirmed Membership to the eminently select and envied Club of OEMs in the 125+ seats airliner segment ! Now, Good Luck with the EIS and a successful ramp-up ! My hat off to BBD personnels !

  2. It was only one major airline in North America obtains CSeries for us to attend a snowball effect. Air Canada will become a laboratory. By imitation, no doubt, other procurement will be based a certain number of criteria, including comfort. How many times have we heard that Ejets of Embraer were more comfortable than the CRJ. I believe that the customer experience is a key variable in the decision to purchase the aircraft. Then transcontinental travel experiences will slowly validate a paradigm shift in regional aviation with the opening of new destinations in aircraft comfort. See this

    Otherwise, I think Bombardier also just hit a home run with the Q400 with 90 seats.

    • There may be a very few customers who will bite on a 28 inch pitch, I can see some low cost carriers in Asia deploy such a craft on short segments. But this is not a very exciting offer — BBD already had an 86 seat variant with a 29 inch pitch on offer.

      • Flew with United LAX-Hawaii, awfully uncomfortable; can’t beleive Cseries could be worse.

        • My comment was re: Scarlet lauding the Q400 turboprop going to 90 seats. That’s the aircraft that would have a knee-crunching 28″ pitch (ie: noticeably worse than your UA experience).

          If airlines actually seat the new CS300 per BBD’s plan, it should be quite comfortable. Even if they tighten the pitch somewhat the seat width should be at or above industry best.

          (I’m anticipating that IF an airline like Delta were to order, they’d go with 30-31″ pitch for coach, 34″ for Comfort+, and perhaps 36″ for First).

  3. Was time that AC order something good after that desastrous shift to the 737. Note that the E190 is with the A320s the most confortable aircraft in their fleet. The C-series should ba as good and may be more profitable (although the higher cost may eat the advantage)

    About the Q400, at what pitch cost are they achieving 90?

    • What I was saying earlier with large seating comfort of the CSeries and the Washington Post article on the consumer complaint to the space reduction of seats, it was irony in making a wink with aircraft to 90 seats ! One may think that this release is intended, among other things, to win the contract for SpiceJet its order of 50 to 100 regional aircraft …

    • Glad they decided to augment their brilliant purchase of B737s with the spectacular C-series, and move those janky A320s to the boneyard.

    • The Q400 seat pitch is unchanged at 28″. The space for the extra row of seats is found by moving the rear bulkhead and reconfiguring the right-hand door.

    • CBL: Pitch stays the same at 28 inches. Moving bulkhead and a door re-locate.

      They are also looking at retrofit.

      Along with an emphasis that you can fly the bird slower and get close to ATR economics (with vastly better high, hot and or engine out performance) there is hope BBD is turning that corner as well.

      Lot of mountainous terrain is an issue for ATR ops and not for the Q400

  4. Cheers to Bombardier and Air Canada, I expect to see AC push WestJet out of long and skinny routes where the Q400 lacks the legs and the MAX7/8 is simply too much plane, especially as oil prices rise (who knows where they will be in 2019)

    Surprised by the lack of CS100 orders.

  5. Good, excellent airplane: 140 passengers in comfortable single class with 32″pitch. Wouldn’t you expect Bombardier to stretch to 160-170 single class, 32″pitch, 4-6 more seat rows — about same MTOGW, reduced range and / or cargo OK — by early 2020’s? A very nice “NSA” with low fuel burned and low carbon emissions per seat. Note: first class should soon disappear for the same reason as smoking — higher emissions per seat are harmful to all.

    • You just outlined the inevitable CS500, although I doubt they will add 6 rows. I bet the general design is already done and the CS500 is flying in the computer as I write this.

      • The CS500 is a still-born, pipe dream that will never see the light of day. Ever.

        This is a much needed commitment for the C-Series, but it’s hardly going to touch the sides of the hole that BBD has dug itself. Wake me when they have another 20 orders like this one.

  6. In fact, it worries me a little is the number of engineers who will be laid off . What happens there with the CSeries development projects? Does this mean that a CS500 is already developed ?

  7. About DAMN TIME!!

    YAY for Bombardier! Finally some good news for the awesome C-Series! Can’t wait to see it!

    This is awesome news!

  8. First great deal for BBD. Porter has also not cancelled their orders as they think they can deploy it on other routes though tougher for them with their hub in Toronto.

    And of some interest in the next new aircraft form AV Week.

    Work by NASA, Boeing (Lockheed as well I think) show that they can get a 40%+ fuel improvement in the single aisle/small twin aisle with proven tech and GTF. Not strut braced wing. That’s another kettle of fish (not proven tech but interesting)

    It does indicate that Boeing could get a serious fuel jump for the MOM aircraft. Keeping in mind efficiency improvements also mean less weight to haul in conceptual 5000 miles range (realist more 4200)

    The biggest jump is close to 50% with a large wide body BW design, but Boeing does not see a civilian application for it due to the supposed issues. Military cargo and tanker right now.

    I understand Boeing take, but having sat in the middle of a wide body you can’t see anything anyway.

    Not sure on the up and down of the roll.

    Just because it is better does not mean people will fly it or bad press kills it.

    People don’t like prop jobs now and there is nothing wrong with them. Perceptions do play a role.

  9. Gouvernement de Sa Majesté to Air Canada: You buy a shedload of CSeries and we will continue refusing to grant new Canadian landing rights to the United Arab Emirates and Qatar. Comprenez-vous? 😉

    • What I understand is that the FTV8 (second CS300 used for certification ) will Air Canada colors in Farnborough next summer and it will be parked in front of an aircraft Qatar Airways !!! 🙂

    • The Queen’s absolutely nothing to do with that!
      I guess you mix political vs business!

        • Who’s this ‘Canada’ ?
          If you are talking the most formal terms, its Dominion of Canada

          canada is an iroquoian word for village or land.
          They used to use the french word puissance for dominion but now use the english word as it comes from Old French

  10. A bit of background here: Part of this is a deal between Air Canada and the Government of Quebec over the failure of the airline to (by some accounts) to continue its heavy maintenance centre in Montreal. But that does not diminish the quality of the aircraft nor the obvious need by Air Canada for a high quality replacement for its smaller aircraft.

    There is no evidence that the Government of Canada is involved but the previous government (ruined at the last election) did protect Air Canada by a gratuitous failure to allow Emirates bi-landing rights in major Canadian cities. There is some suggestion – gossip is a better word – that the new Liberal government has leaned with the implicit suggestion of reversing the old decision. Which needs reversing anyway – Air Canada was privatised long ago and needs no protection.

    • Air Canada is supported in many ways.

      “By taking this action, we are ensuring that Air Canada remains viable, that thousands of jobs are protected and the service is there when Canadians need it,” said Jim Flaherty, Minister of Finance. “Air Canada is the country’s largest airline and contributes significantly to the Canadian economy.”

      Your national carrier failing is always unfair so justifies support.

  11. Great for BBD. Though not a nationalistic people, Canadians and Canadiens should be proud. It is hard to design, build, certify and produce a modern airliner (look at Japan, China, Russia and even the big two) and Canada is a small country population wise.

    Too bad Southwest (I mostly fly on them) won’t buy these to replace retiring 737 700s and ordered max 7s. Trouble is, once the customers had been on the CS it would be hard to get them back in a 737 800/max 8.

    • “Trouble is, once the customers had been on the CS it would be hard to get them back in a 737 800/max 8.”

      I wish this were true, but I suspect that many passengers have no idea what aircraft they will be flying on when they buy a ticket. There are of course AvGeeks and frequent fliers who know what bad PaxEx planes to avoid (Delta FTers widely pan their 739ers, but do they book away from them? I did yesterday, but can’t always manage that myself). Even experienced travellers often get stuck with uncomfortable aircraft due to work-schedule imperatives.

      • sadly, for most of us who travel for business, schedule is everything, and you are pretty much stuck with whatever plane your frequent flyer airline is using on the flight that meets your schedule. your frequent flyer airline is often dictated by most frequent city pairs. for me that means AA is the only choice as they are the only ones with multiple daily routes from my home to my usual destinations. which sucks.

        there is some flexibility if you are flying day before/after your business activity, but more and more companies are demanding same day travel for off site activities, which means you get what you get.

    • Speaking as a Canadian I am enormously proud of Bombardier’s great achievement (although I’ll admit most of my country men/women are probably indifferent). For a country of only 37 Million we really punch above our weight in the aerospace sector.

      As for Southwest – I wouldn’t be surprised if they place a big order. It was only a few weeks ago that the President of Air Canada told media that A/C couldn’t find a “business case” for the CSeries and looked what happened. The C Series would be such a perfect fit for many of Southwest’s routes . When an airline becomes as big as Southwest – fleet “commonality” has to become less important. Time for them to diversify away from an all 737 fleet.

  12. As an aside, Bomabardier also completed the sale of 30% of Bombardier Transportation (the rail bit) last week. With the layoffs also announced today (not good for those laid off of course) definitely looks like they are making definite steps to get their house in order.

    • Bombardier Transportation is really a german company, its HQ is in Berlin but the sell off of 30% is to CDPQ, yes their old friends the pensioners of Quebec!

      Along with the 49.5% of the aviation side under CDPQ ‘ownership’, the buying of the trains unit is just a round about way of pouring more money into the Cseries.

      Goodbye CS100/300 , hello CDPQ100/300!

  13. Not sure if possible, but in the same way that Boeing and Airbus are offering deals on their smaller 737 and 319 variants if you buy the larger versions, I wonder if BBD could do the same thing to Embraer and the MRJ from Mitsubishi. Shorten the CS100 and get down to MRJ size. So you are selling a combination of CS 100’s, 300 and a new smaller CS 90. Ultimately you do not want Mitsubishi to get any traction.

    • Probably not as you get into a fuselage optimized for 300, 100 is a loss but livable and any lower the optimizes 90 seaters should win

      See what Bjorn has to say of course.

  14. I have to crow a bit here. Just a foreign investor here.

    A couple of weeks ago after the United debacle, when it was all bad news as it had been for 2 years, I did my research again, one of the key questions was who is going to get the buys of this CSeries they desperately need running? And the answer was, in this dark situation, it had to be Air Canada, not Delta, not any of the other rumored Top 20 airlines.

    I just didn’t see it, how Air Canada would not step up, assuming what had already been written in the trade press that the plane itself is a good product, technically. The fact is Boeing and Airbus were running Bombardier out of town using nothing but muscle and someone had to stop the bleeding, its like a elder assisting his kid brother being bullied in a school yard.

    I didn’t know what non-market considerations of such a deal would be, but I knew there would be something that could be leveraged. I thought perhaps it might mean a deal where Porter would be the one holding the bag (no Toronto extension for you), but that is already a fait accompli anyways. But now I see the knowledgeable posters mentioning airport landing rights etc, and of course the Quebec settlement was announced with the deal as well (which I don’t think in itself is big enough to make AC do this but a natural clearing of decks to reset things to zero). But the bottomline is Air Canada wouldn’t be there- I counted several Quebecers on the board and senior management – and watch the Canadian Aerospace industry go down the tubes while they go and buy Boeing, I knew it wouldn’t happen, no way Bombardier wouldn’t be able to reach these people.

  15. Canada Inc. did what’s best for Canada Inc.

    Like most countries do.

    I wonder if Boeing will still take the AC E190s.. or does Delta get them directly now.

  16. There are roughly 2400 A319 and B737-700 out there, which are ideally replaced by A CS300. Both MS-21 and C919 are too large, the SJ100 and E2 too small. Hence, there is a potential. Just, as many A319/737-7 operators are low cost carriers or small airlines, they don’t walk in front.

    • No. The low price of oil is not a significant element as it will not last. The payload is required for how many flights ? For how many airlines? A plane at the end of the cycle, what is the value, how much the market will be pay ? There is residual value is an important factor in your equation …

      • The price of fuel won,t change anything, C-Series is still 20% more economical in that class.

  17. The think the rest value of an Aircraft determined by the sum of its LRU’s Engine, LDG, etc. Probably better for a A320 series, more demand.

    AC flies A319′ s to hot Carabien / South America’s. There it is important.

  18. With the recent filing by Republic into Chapter 11, the credibility of another sales contract logged in Bombardier’s order book becomes ‘questionable’ the more so as apparently Republic have ceased honouring the contractual predelivery payments … Speculations are being vented over the Web that Republic might be trying to trade off the whole C Series Purchase Agreement (40 x C100, with delivery slots early in the programme …) to “another Mainline” not named but guessed to possibly be Delta, t.b.c. ?

    • Isn’t part of the CSeries challenge that if falls between regional and mainline scopes at many airlines in the US?

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