Bombardier created the regional jet when it used its Challenger business jet as the basis for the CRJ100/200.
Passengers disliked small turboprops. The crowded field included the de Havilland/Bombardier Dash 7 and Dash 8, Embraer EMB-120, Saab 340, Beech 1900 and Fokker F-27. The technology in those days was somewhat primitive by today’s standards, which includes advanced propellers, vibration and sound-dampening techniques.
The turboprops, while better than piston engines, nevertheless were noisy and vibrated compared with jets.
Bombardier created the 50-passenger regional jet in the CRJ 100/200. Embraer followed, using the basic EMB-120 fuselage to develop the ERJ 135/145 jet. Bombardier was able stretch the CRJ (ultimately to the 100-seat CRJ-1000).
Embraer couldn’t stretch the narrower fuselage ERJ. Instead it developed a clean-sheet design, the E-Jet. Embraer discontinued production of the ERJ, although it lives on as the Legacy business jet.
The E-Jet provided superior passenger experience over the CRJ. The lighter CRJ was somewhat more economical.
Embraer’s E-Jet, despite slightly worse economics, eventually became the preferred airplane in across the globe. It captured more than 70% of the North American market, where the US-dominated Scope Clause requirements restricted how US majors could outsource flying to regional partners.
The number, size and weight of airplanes operated by partners were limited.
Outside the US, where Scope was largely absent, Embraer still came to outsell the CRJ.
Bombardier squandered its historic market leadership.
One-by-one, the turboprop manufacturers dropped out until only Bombardier was left with the Dash 8 and the ATR-42, which entered service in 1985 and later was expanded with the larger ATR-72.
Bombardier dropped its 40-passenger Dash-8-300, offering only the larger Dash-8-400, later renamed the Q400.
The Q400 evolved into a high speed, 1,500 mile-capable high capacity airplane that does what it does very well. And very expensively. Its capital cost is much higher than the ATR-72 and the operating expenses are about 25% more at specification cruising speed. (It’s more competitive slowing the airplane down to the ATR’s speed.)
But by dropping the Dash 8-300, the Q400 had become an orphan. The market had not yet shifted dramatically to the larger ATR-72 and Q400 that exists today. ATR had a two-solution offering at a lower capital and operating cost. Few carriers needed the high speed, hot-and-high airport performance of the Q400.
ATR eventually captured as much as 80% of the sales vs the Q400. Bombardier squandered this lead, too.
It’s clear Bombardier officials recognized that the CRJ and Q400 were losing sales to the competitors.
There wasn’t much that could be done with the turboprop. Bombardier’s production costs precluded restarting the Dash 8-300 line to compete with the ATR-42; it costs as much to build the -300 as it did the Q400 and Bombardier couldn’t cut the price to reflect the fewer seats.
Bombardier in 2004 designed the C110 and C130, seating—as the names imply—110 and 130 passengers. In size and design, these were the forerunners of what became the CS100 and CS300. However, the engines were no different than those on the E-Jet and the economics were not a real improvement. It was an all-metal, me-too airplane.
Bombardier shelved the designs until Pratt & Whitney launched the Geared Turbo Fan engine with the Mitsubishi MRJ. (It’s a myth the C Series was the launch platform.) The GTF offered the leap in economics needed to restart the C110/130 project.
Bombardier added composite wings and the tail section and aluminum lithium to the design, providing a new airplane that now had major economic improvements over the E-Jet. The project was renamed the C Series.
The C Series was also a step up from the E-Jet. It was a direct shot at the smallest Airbus and Boeing A319 and 737-700. Embraer avoided taking the giants on directly with the smaller E-Jet.
Bombardier took on a huge gamble. Officials also made giant miscalculations.
They thought Airbus and Boeing were going to abandon the 100-150 seat market, or at least continue with the A319 and -700 designs, leaving he market for the C Series.
It was a calculation that was partly right.
Boeing was content to offer the -700 at cut-rate prices, because the airplane was fully amortized.
Airbus’ aggressive super-salesman, John Leahy, remembered his history well. Boeing didn’t take Airbus seriously and allowed it to grow to a point where it couldn’t be stopped. Leahy vowed to stop Bombardier, belittling the airplane at every opportunity (which became awkward history when Airbus in 2017 agreed to acquire a majority interest in the program).
Leahy responded by dropping the price of the larger A320 in key competitions to below what Bombardier was asking. Then Airbus launched the re-engined A320 family, which forced Boeing to do the same.
Embraer followed with its re-engined E2 series.
Although neither company tried to sell many A319neos and 737-7s, the competing airplanes to the CS300, the prices on the larger A320 and 737-800/8 became competitive weapons. Embraer’s E190/195 E2 took its share of sales as well.
Compounding the competitive pressures were a series a bad management decisions.
The CEO at the time, Pierre Beaudoin, had unrealistic expectations about pricing the C Series. Insiders said he took the position that the airplane was so good, steep launch customer discounts and aggressive pricing wasn’t necessary. The airplane was sold for the mid-$30m, when the market said it needed to be sold for about $10m less.
The problem: at the time, it cost about $33m to produce the airplane. Early production models are routinely more expensive until the learning curve kicks in.
But Bombardier had expensive supplier contracts and failed to address this on the C Series—and on the CRJ and Q400, both of which were losing money. (The CRJ did contribute to cash, but lost money when total cost allocation was made.)
Additionally, Beaudoin launched new corporate jet programs at the same time: the Learjet 85 and the Global 7000.
Bombardier’s balance sheet simply could not support three new aircraft programs at the same time.
With a neglect of cost-cutting for the C Series on top of the neglect of the CRJ and Q400 cost and sales, the absence of cash flow from the latter two programs to support development of the C Series became critical.
Failure to “mind the store” with the trains division also became a big problem.
Deliveries fell behind on several contracts. Profits fell. Even as late as the first quarter of 2019, Beaudoin’s successor—picked to save the company from bankruptcy—discovered the performance at the Trains division was far below expectations of the five-year Transformation Plan.
By 2015, Bombardier teetered on bankruptcy. Direct and indirect government bailouts of nearly $3bn became necessary. Beaudoin was ousted, replaced by Alain Bellemare of United Technologies.
The crisis wasn’t over, however.
In 2016, Boeing filed a trade complaint with the US Department of Commerce alleging price dumping in connection with a CS100 order by Delta Air Lines. Brazil filed a trade complaint with the World Trade Organization alleging the government bailouts violated WTO rules.
Bombardier lost the trade complaint in the US. It sold 50.01% of the C Series program to Airbus, which renamed the airplane the A220. A subsequent ruling by the International Trade Court essentially reversed the US DOC decision. The WTO case is in its infancy.
Last year, Bombardier agreed to sell its Q400 program to Viking Air, a Canadian company that previously bought all the licenses and tooling for other Bombardier aircraft. This deal is to close mid-year.
At the first quarter earnings call, Bombardier announced plans to sell its Belfast, Northern Ireland, C Series/A220wing factory and another facility in Morocco. This announcement came a week after Bombardier previewed its 1Q numbers were falling short of previous guidance, with Trains taking a big hit.
And, as previously said, Bellemare reiterated Bombardier is “exploring strategic options” for the CRJ program. Read this as this program is for sale, too.
Bombardier will almost certainly be out of the commercial aviation business within a year.
It went from begin the No. 3 commercial airplane producer in the 1990s to nothing this decade.