Welcome news for Bombardier, Mitsubishi

Introduction

Bombardier, which has been trading as a penny stock and viewed by some in the marketplace as a bankrupt company, announced welcome news last Wednesday with its year-end earnings call: the Letter of Intent from Air Canada for a firm order of 45 CS300s along with 30 options. There is a provision to convert some of the orders to the smaller CS100.

This is the first order since September 2014. It’s from a blue-chip customer as well.

The order, its size and who it’s from are all important positives for Bombardier. It’s hoped by many that this will pave the way for more blue-chip orders. United Airlines, Delta Air Lines, JetBlue and British Airways have all been mentioned recently with varying levels of prominence as near-term, potential C Series customers.

But clearly BBD has a long, uphill climb.

Alain Bellemare, CEO, acknowledged what’s been obvious for years: the CRJ program is in trouble. The CRJ 1000 isn’t selling, nor for that matter, are the other CRJ models, in any substantial numbers. The Q400 turboprop has a sliver of the market, holding on only by its flaps. ATR “owns” about 90% of the market today and there are plans to go after the Q400’s last stronghold, North America.

Embraer is pondering whether to get back into the turboprop market. It had been rumored that Alenia (Finmeccanica), a 50% partner with Airbus, was talking to Embraer about a new 90-seat turboprop. Alenia has been frustrated Airbus would not green light such a program. But when we checked recently, Alenia said there were no talks. Embraer earlier wouldn’t comment.

BBD’s Bellemare says it’s critical that the Canadian federal government invest another $1bn into BBD to see the company through to 2020, when it predicts the C Series will break even. Profits are forecast the following year. This is five long years away.

Bombardier is a long way from being out of the woods, Air Canada notwithstanding.

Mitsubishi

One of the few order announcements to come out of the Singapore Air Show was an LOI between Mitsubishi and lessor Aerolease of Miami (FL).

The LOI, for 10 firm and 10 optioned MRJ90s, is the first from a lessor. This will help diversify the customer base, assuming Aerolease doesn’t place all of the aircraft with one operator.

As welcome as this transaction is for Mitsubishi, it’s not a blue-chip lessor that placed the order. Aerolease, which has been around for 20 years, has been a used airplane trader and lessor. This is the first speculative, new airplane order it’s placed.

The MRJ90 is now three years late and its customer base is too concentrated. But this deal from a lessor who will presumably place aircraft with multiple customers is a piece of welcome news, too.

 

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