Leeham News and Analysis

Bombardier CSeries in focus

Bombardier’s CSeries is one of three new or derivative airliner to take to the skies, along with the Airbus A350-900 and the Boeing 787-9. But its flight test program is going at a pace far behind the Big Two. Only a handful more flights occurred since its first one on September 16, with a full 27 days between the third and fourth flights.

.

The latter occurred on October 30, the day before Bombardier’s third quarter earnings call. Thus it was with great anticipation that aerospace analysts who follow BBD, and the media, hoped for some clarity about the pace of the program and whether entry-into-service would be delayed.

.

Those listeners and participants on the earnings call were disappointed. Pierre Beaudoin, president and CEO, said the testing program is what Bombardier laid out from the beginning and that the paucity of flights isn’t of concern or indicative of anything amiss.

.

But aerospace analysts weren’t convinced. Stock traded down 10% and a few analysts downgraded the stock. It must be noted that there were other factors: aircraft and train deliveries were short of target, contributing to the disappoint. And Embraer, which reported earnings the same week, also missed targets and suffered similar stock declines and some analyst downgrades.

.

Beaudoin continued to maintain the target for EIS is 12 months from the first flight. With 2,400 flight hours required, even with five CS100 and two CS300 Flight Test Vehicles, Bombardier will be challenged to meet this target.

.

The CSeries Flight Test Vehicle #1 has had a dearth of flying compared with the Boeing 787-9 and the Airbus A350-900. So how does BBD, so far, believe it can stick to its entry-into-service timeline of 12 months from first flight on September 16?

Because it will have seven FTVs (five CS-100s and two CS-300s) in the flight test program instead of the five for Airbus and the initial plan of five or six for the Boeing 787. This, plus the ground time in the CIASTA iron bird.

Beaudoin left plenty of wiggle room for an EIS delay. He said conversations were underway with customers. He said some customers wanted to swap the 110-seat CS100 orders for the larger, 135-seat CS300. He said a program assessment in a few months would tell what the timing will be.

.

Even before the earnings call, analyst consensus concluded that EIS will slip from September 2014 (the 12-month target) to 1Q2015 or later. We concluded several months ago that a first quarter 2015 EIS was likely.

.

Should this timeline emerge to be correct-or even if it slips to 2Q2015-these delays will still be a far better performance than those of Airbus and Boeing on their A380, A350, 787 and 747-8 programs. But a slip to 2015 will narrow the advantage Bombardier had over Airbus with its New Engine Option, which was a direct response to Bombardier’s clean-sheet CSeries design.

.

The Airbus A320neo, who is the next size up from the CS-300 and not truly a direct competitor, is planned to enter service in October 2015. The A319neo-which is the direct competitor to the CS-300-is slated to follow by six months. This, of course, assumes Airbus doesn’t have a delay on its NEO program, but nothing we’ve heard suggests one is in the offing.

.

How serious a threat is the narrowing gap to Bombardier? We don’t believe it is much of one. Airbus and Bombardier are already sold out in the near-term, so customers are locked in. There have been on 45 A319neos ordered; we have to wonder whether customers will swap these for the larger A320neo. The A319neo, which is heavy for today’s standards, is a question mark whether it will be built. If so, will it be the next A318, a poor sales model that proved so unpopular that there is no secondary market for this sub-type and it’s already headed for the scrap heap.

.

Nor is there much of a threat from Embraer’s E-Jet E2. The E-195 E2, which is sized midway between the CS-100 and the CS-300, doesn’t enter service until 2019 (if on time). The E-190 E2 is the first planned for EIS, in 2018, and this is somewhat smaller than the CS100.

.

Nor is Boeing’s 737-7 MAX a threat, despite Bombardier’s EIS slip to date and likelihood for an additional one. The 7 MAX EIS is planned for 2019. Only a handful of these have been sold to two customers, WestJet and Southwest Airlines of the USA. Like the question looming over the A319neo, we wonder if the 7 MAX will be swapped for the larger 8 MAX, or whether the 7 MAX becomes Boeing’s 737-600, another poor-selling sub-type.