By Bjorn Fehrm
July 28, 2017, ©. Leeham Co: Bombardier presented its 2Q2017 results this morning. Performance followed guidance, with stronger than expected margins in business aircraft and trains. Overall the business tracks the turnaround plan, presented end 2015.
Because of constrained delivery of Pratt & Whitney GTF engines for 1H 2017, only seven CSeries got delivered. A full year delivery of around 30 CSeries is still the target.
The Bombardier (BBD) revenue 2Q2017 was slightly down at €4.1bn (€4.3bn). Net loss declined from $490m to $296m (of which $279m is restructuring costs, mainly for the trains specialization project).
The revenue and results follow the presented transformation plan from 2015. Positive from the quarter was that trains and business aircraft returned higher margins than planned. Year guidance for the divisions were raised from 7.5% to 8% as a result.
The group’s 2017 guidance was reiterated with some upward potential for Free Cash Flow.
BBD Transport (trains) is restructuring its global footprint, to focus each major site on one type of trains. To get there will cause 80%-90% of the expected restructuring charges for the year (of $250m-$300m). The streamlined product setup has a good forecast, with revenue and margins increasing. This supports a revised guidance for the division, with increased revenue and margins.
Business aircraft delivered 65 aircraft YTD, tracking to 135 deliveries for 2017. The mix of margin-rich Global 6000 was higher than planned for the quarter. Sales of business aircraft is picking up. Development of the Global 7000 is going well with “excellent performance in flight tests. It will be the world’s best large business aircraft when it enters the market in 2H 2018” according to BBD CEO, Alain Bellmaire.
The 16 CSeries in-service with SWISS and Air Baltic are performing beyond expectations, both for aircraft overall performance and reliability. BBD will issue a revised performance specification for the CSeries in 3Q.
No CSeries sales were announced for the quarter. Deliveries for the year are back-loaded with seven aircraft delivered so far. Another ~23 to follow in the third and fourth quarter. BBD expects Pratt & Whitney to enable this plan, based on a revised delivery schedule for the GTF engines.
Deliveries of CRJ and Q400 was 38 aircraft YTD, tracking to a full year target of 55 aircraft. Sales for the Q400 has picked up (12 orders and 50 LOI during the quarter), leaving a healthier backlog for the type.
No comments were made about the Boeing petition to US Department of Commerce, other than that BBD disagree with the claims and will respond to the petition.
LNC: “Deliveries for the year are back-loaded with 6 aircraft delivered so far. Another ~24 to follow in the third and fourth quarter.”
In fact nine aircraft have been delivered so far this year: 3 CS100 and 6 CS300. If we go by quarters then it is 7 C Series in the first two quarters plus 2 so far in the third quarter. Therefore at least 21 aircraft remain to be delivered if Bombardier is to reach its goal of delivering at least 30 (30-35) aircraft this year.
In my opinion it is impossible to achieve and here is why:
1. There are only 22 weeks left in the calendar.
2. Production is now closed for three weeks and all the employees are on vacation. And one more week remains to ne taken at Christmas when again production will be closed and all employees will be on vacation.
3. Pratt & Whitney has made similar promisses to Airbus and the result is that there are about 50 White Tails on the tarmac at various locations.
Bombardier are making their own promises based on dubious promises already made by P&W and proved to be false.
In an optimistic scenario I would not take into consideration the engine problems and would not account for vacation time, and it would still mean that BBD needs to deliver 21 aircraft in 22 weeks. That is a rate of one a week when we are presently at one every two weeks at best.
But if I were to take a more realistic scenario I would arbitrarily not take the engine delivery problems into consideration but would account for vacation time. And that would mean that BBD has to deliver 21 aircraft in 18 working weeks. Does anyone in this room sincerely believe that this is physically and humanly possible? As far as I am concerned it is not.
Next year might be a different story though. So 30-35 aircraft delivered before the end of the year? No problem at all. But that year would have to be 2018.
Before anyone jumps on me about my use of the expression “White Tails” let me just say that I use the term in a loose sense. I know that technically they are not because they do have an owner.
Its a difficult business, it would be rare for a new plane to not have delivery difficulties of one sort or another.
The C series worst days may already be begind it. Fantastic aircraft. If they used LEAPs they’d be unstoppable but as it is it may already be unstoppable once PW straighten out any remaining issues with blades. No wondee Boeing are worried the 737-8 MAX is no match.
Let’s just call them “Blank Pylons” instead.
Gliders may be a more accurate term than White Tails in the case of CSeries airframes already assembled and hv firm customers but waiting only for engine delivery+installation a la 320Neo with PW1200G.
Didn’t you read my comment ABOVE: “Before anyone jumps on me about my use of the expression “White Tails” let me just say that I use the term in a loose sense. I know that technically they are not because they do have an owner.”
We should applause such a great 2nd Quarter achieved by Bombardier !
Great peoples, great products, stong team with financial background and great knowleges on Aerospace management !
No doubt they will achive the 2020 Objectives and probably…….. exceed it !
“No doubt they will achieve the 2020 Objectives and probably…….. exceed it !”
I don’t know if they will exceed their objectives, but there is a good chance they will reach them earlier than expected. For it seems that every quarter they report being increasingly ahead of the Recovery Curve.
In their 2015 recovery plan forecast they said they would be cash flow positive in 2018. But they might actually already be there.
The most important programmes to watch are the C Series and Global 7000.
While the Global programme as a whole is doing fine, the 7000 in particular is apparently doing also quite well in testing and is still on schedule for certification in the second half of 2018, with possible first deliveries before the end of the year.
On the other hand the C Series programme is slowed down by engine delivery problems. This could have an impact on BBD’s profits because there is a good chance they will deliver fewer airplanes than expected this year.
But they can always recover some of the lost time in the following years when P&W will have sorted out their production problems. In the meantime Bombardier can always build up inventory and wait for engines, while hoping the customers will take delivery of their aircraft later on on a compressed schedule.
In my opinion the success of the 2015 Recovery Plan rests on the C Series ramp up schedule. For it looks like the customers will want to take delivery of their aircraft as fast as Bombardier will be able to produce them. There are essentially three reasons for this:
1. The airplane is more reliable than expected at this stage.
2. The C Series, especially the CS300, is an instantaneous money maker.
3. The customers love the airplane.
This is a pretty good recipe and there is no doubt in my ming that it will attract more customers in due time.
If it is such fantastic airplane proving himself is Swiss Air , and Baltic Air how come No-one ordered it this year ? Embraer booked 18 in Paris. SSJ booked 20 in Maks.
Your question is legitimate, but the first question you should ask yourself is the following one: Why is it that Boeing is trying to block the C Series?
The reality is this: Regardless of its performances it is a new aircraft and it will take some time to establish itself.
I think the answer to that is pricing, I think there is a stand-off between Bombardier and the market. I expect that the first place where the market will crack, if it does crack, is at LCY (especially the NYC all business class route?) where the value proposition is entirely unique, and no other plane can undercut them on pure technical capability for that airport. The other big matter, especially for US carriers, is of course the Boeing petition. I don’t know what happens there, and I have the question below on that.
OTOH, I think there is still a worst case scenario out there where after a few years Bombardier sees that they are not going to make money off this thing, because A&B simply will not allow them to enter (plus it is sorta getting crowded on the lower end with all sorts of upstart entrants). A&B might take turns via implicit collusion(perfectly legal as long as you don’t compare notes) to fend Bombardier off and continually delay the day they can make money, forever; what happens then? I think from a management perspective, the guys at Bombardier they will like to push that into the future as far as possible, while working rapidly to ensure that their Global 7000 gets off the ground and provides a cash cushion in a worst case scenario for the CSeries, whatever that is.
Looks like P&W in their rush to enter the narrow body engine market have hurt Bombardier and Airbus with their over-promising and lack of follow through on design and execution.
“If they used LEAPs they’d be unstoppable but as it is it may already be unstoppable once PW straighten out any remaining issues with blades.”
Bombardier is in a better position than Airbus with the GTF engine. That is because the C Series was designed around the engine, as opposed to Airbus who had to adapt the engine to the aircraft. This gave Bombardiers’s engineers more freedom and they were able to find a better geometry to attach the engine to the pylon.
The end result is that the compressor shaft is held in place more rigidly and does not have this tendency to bend like it does on the A320 engine where thermal bowing is a major issue. And this explains why the C Series engine has experienced fewer technical issues than the engine mounted on the A320.
Moreover, it is my understanding that because the PW1500G was designed first it was overbuilt. In other words it is stronger than it needs to be and this gives more margin to some of the engine components, like the reduction gearbox for instance.
The C-series design around the PW1500G made them design the pylon to allow a optimal Engine mount placement. INTC and TEC. For the Airbus the pylon did not change much and hence PWA needed to move the aft mount forward to the Inter Turbine Frame to fit the pylon due to the gear making the Engine longer. That can cause problems as on the CF6-6 and CF6-50. PWA managed to add the problem with rotor bow as well forcing them to put PW4000 HPT type of blade tip treatment to make some stages of the HPC work. With time we will see if the DC-10-30/A300/747-200 CF6-50 TMF problems pop up on the PW1100G. GE even changed the name of the TMF to the TCF of the GE90 (it has the aft mount on the TRF) not to cause Customer Flashbacks…
this is incorrect I believe. The aft engine mount is on the TEC (turbine exhaust casing, same as TRF which is GE’s name).
I was involved in prel design of the TEC for all GTF engines to date and there were early thought on having the aft engine mount on the TMF, but they were abandonded even before the PW1200 design was frozen, i.e. in 2009 or so.
The fwd mount oth did move to the IMC (intermediate casing) on the PW1100 so that the IMC houses both fwd engine mount and thrust lug mount. This because Airbuses so-called greyhound mount did not change from CEO to NEO.
Normand: There is no indication that the gearbox has been an issue on the higher thrust aircraft.
I have heard of at least one case where the gearbox had to be removed on an A320neo in service.
In regards to CSeries production ceiling for 2017, is it not possible for Bombardier to shift some Global 7000 resources to CSeries in the backend of the year, assuming PW make good on their promise to deliver the engines? It seems from a lay reading that they are building some Global 7000 planes ahead of needed schedule, and so could later use this as a buffer, and if indeed PW turns out to be unreliable, well, they just have a few Global planes ahead of schedule in 2018?
In regards to CSeries successes, while it is now clear that it is technically a success, what is the opinion on likely impact of the Boeing petition. I saw that Bombardier made a show of (re)approaching the Chinese after that, I guess as some sort of signal to the United States, but what are the credible scenarios of how that ends, will Boeing/Trumpers be satisfied with merely delaying the CSeries a bit, or are they really trying to go for the jugular here? If so, is Bombardier’s Chinese approach truly credible (I see no other alternate for them, if they are shut out of the U.S. market).
Very, very poor performance by Pratt & Whitney.
OW: “In regards to CSeries production ceiling for 2017, is it not possible for Bombardier to shift some Global 7000 resources to CSeries.”
No, because the Global is assembled in Toronto while the C Series is assembled in Montréal. Besides, priority should in my opinion be given to the Global because it is a high-margin programme and its customers have been waiting for their aircraft for so long already.
OW: “They are building some Global 7000 planes ahead of needed schedule.”
In fact the Global 7000 is two years behind schedule. Just ask Niki Lauda when he would like to receive his plane.
OW: “What is the opinion on likely impact of the Boeing petition.”
My own opinion on this is that the Boeing petition is only detrimental for the short term and may end up being quite beneficial over the long term. So far I have not seen a single comment anywhere in the world that sided with Boeing on this case. In fact all observers are unanimous in condemning Boeing. So it should be very difficult for a judge, even an impartial one, to condemn Bombardier. The net result so far is that Boeing looks like a fool and made the C Series look like a serious threat. Except that for Boeing the threat does not exist on the short term and would only affect them over the long term.
OW: “I saw that Bombardier made a show of (re)approaching the Chinese after that.”
Because the fuselage of the C Series is made in China I always thought they would buy the C Series in great numbers. Well, so far they haven’t placed any significant order. It looks like the Chinese have their own agenda.
OW: “Will Boeing/Trumpers be satisfied with merely delaying the CSeries a bit, or are they really trying to go for the jugular here?”
I think that Boeing’s strategy is to slow down the C Series for as long as possible until they will have committed to the NSA. I don’t think they will succeed though because they don’t have much of a case here. But even if they did the C Series will eventually be very popular around the world. Today it is Swiss and airBaltic and next month it will be Korean Air; and next year it will be Air Canada, who intends to use the aircraft for the United States market because of its long range capabilities. In the meantime Delta is preparing itself to receive the aircraft also next year and will likely operate it before AC, unless Boeing prevails. One thing is for sure though: the C Series can be slowed down but it cannot be stopped.