Bombardier’s Delta deal looking good, but don’t celebrate yet

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Introduction

Air Baltic CS300

Air Baltic will be the first operator of the Bombardier CS300. Source: Bombardier.

April 18, 2016, © Leeham Co.: Bombardier, if it didn’t dominate the news cycle in commercial aviation last week, must have come close. Consider:

  • The Wall Street Journal, and then Bloomberg, reported that BBD was near to winning a big order for 75+50 from Delta Air Lines for its C Series.
  • Reuters reported that BBD rejected demands from the Canadian federal government in Ottawa as conditions for investing US$1bn in the company. (Officials tried to walk this back some, saying talks continue.)
  • The head of corporate strategy for BBD came forward to forcefully argue for the investment as good for taxpayers, breaking what largely has been a cone of silence over the perceived merits of a deal
  • The US$1bn the Quebec provincial government agreed to invest last year remains unfunded.
  • BBD stock, which last year dropped to less than C$1, threatening the listings on the Canadian exchanges, jumped to C$1.75 at one point in anticipation of a Delta order.

While on balance, it seems likely Delta will order the C Series, Bombardier has been down this road before. Only a few months ago, the market and others were excited over the prospect that BBD was close to landing an order from United Airlines, only to see Boeing swoop in and grab the deal.

Summary

  • This is the second try at a major contract with Delta Air Lines.
  • The primary competition is against Embraer, not Airbus or Boeing.
  • We revisit our Skyline Risk Assessment, dormant for the extended period in which BBD had no sales of the C Series.

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