Nearly one year has passed since Bombardier's CSeries narrowbody entered revenue service, and since then the aircraft has apparently met performance and reliability expectations and received certification to operate at London City airport. Executives at the Montreal manufacturer say the CS100 and larger CS300 have proved capable of meeting the rigours of airline service – an accomplishment that will not escape notice from prospective customers.
That message comes as Bombardier faces several high-profile challenges, including a salient lack of recent orders, molasses-slow 2017 deliveries, financial losses, supply-chain problems, a pending US trade investigation, and an investor and labour backlash over executive compensation. Still, Bombardier commercial aircraft president Fred Cromer insists the company remains on track. Deliveries, he says, will ramp up this year and the CSeries' performance in airline service has spurred additional interest.
"The entry-into-service successes that we are having fuels the conversation," Cromer tells FlightGlobal. "Now there is more confidence from an industry standpoint that the airplane can handle the airline environment."
Get all the coverage from Paris air show – check out our dedicated event page
Cromer declined to speculate about potential upcoming sales, but stresses that the programme continues gaining momentum as more CSeries enter service. Meanwhile, the sales staff continues promoting the type's efficiency and, specifically, its ability to help carriers defend existing markets and develop new markets. Cromer says: "It's always difficult to predict if and when you will get to the finish line. We are educating the market on what this airplane can do."
He also expects that airlines will take notice when Swiss begins operating CS100s to London City – flights the carrier intends to begin in the third quarter of 2017. In April, Canadian and European regulators approved the CS100 to operate the airport's steep approach, making the CS100 one of the largest aircraft with such approval.
The company reported a $31 million net loss for the first quarter of 2017, although the result marks an improvement from a net loss of $138 million in the same period last year. The commercial aircraft unit lost $56 million before interest and tax in 2017's first quarter, while the business jet division posted a pre-interest, pre-tax profit of $74 million. Despite financial challenges, executives stood firm during the company's annual shareholder meeting in May, insisting that Bombardier had the right executive team and remained on track to reach goals of $25 billion in annual revenue and a 7-8% earnings margin by 2020.
The CSeries orderbook currently stands at 360 aircraft, but Bombardier has not announced a significant order since Delta Air Lines became the first major US customer with a deal for 75 CS100s, plus 50 options, in April 2016. That news followed an announcement in February 2016 that Air Canada had signed a letter of intent for 45 CS300s plus options for 30 additional aircraft. (Air Canada converted that intention into a firm order in June.)
Bombardier delivered its first CSeries – a CS100 – to Swiss in June 2016, and met its 2016 goal of delivering seven CSeries jets. (Swiss received five CS100s and Air Baltic two CS300s last year.) The manufacturer set a goal of delivering 30-35 CSeries aircraft in 2017, but as of the end of May it had delivered just six, comprising three Swiss CS100s, one Swiss CS300 and two Air Baltic CS300s.
Vice-president of customer services Todd Young told FlightGlobal in April that the aircraft had been performing at dispatch reliability rates "around" 99%.
This year's slow delivery start resulted from a shortage of the CSeries' Pratt & Whitney PW1500G geared turbofans. P&W has attributed its delays to problems manufacturing the engine's titanium-aluminium fan blades, although it has opened new factories and says it is addressing the problems.
There have been other unexpected engine issues. Bombardier confirmed in April that Swiss and Air Baltic were performing precautionary borescope inspections of PW1500Gs – a development that followed reports of in-flight shutdowns of PW1100G-powered A320neo-family aircraft.
Bombardier has confirmed that PW1500Gs require upgrades similar to those required for PW1100Gs. In April, Greg Hayes – chief executive of P&W parent United Technologies – said P&W had redesigned a carbon air assembly in the PW1100G and was redesigning the combustor lining.
Cromer says inspections have shown CSeries engines to be "as expected". He downplays engine issues, saying that, unlike Airbus and its A320neo, Bombardier designed the CSeries from scratch to be paired with the geared turbofan. "The in-service experience for the CSeries application has been much smoother with far less disruption than what we have seen on the Airbus product," he says.
Supply-chain issues aside, executives insist that Bombardier will meet 2017 production goals. The company has aligned its production with that of P&W, and deliveries will accelerate in the second half of 2017. "We've got confidence in Pratt's ability to deliver the revised engine schedule," Cromer says. "We have a ramp-up that we think is manageable."
Other challenges this year include decisions by the US Department of Commerce and International Trade Commission to investigate Bombardier for potential violations of trade rules. The investigations result from a petition filed by Boeing in April claiming that Bombardier, after receiving more than $2.5 billion in Canadian government subsidies, sold CS100s to Delta at a significant loss – thereby "dumping" the aircraft in the USA – in a move to gain market share.
Using information in financial reports, Boeing estimates that Delta paid about $20 million each for aircraft that cost Bombardier $33.2 million to produce. Boeing alleges Bombardier's sales tactics threaten the viability of its competing 737-700 and 737 Max 7.
Bombardier denies the claims, insisting the CSeries does not compete with Boeing's larger 737 and that the US manufacturer's price calculations are incorrect. Cromer says Bombardier has ensured that financial transactions comply with trade rules. "Every OEM has some form of support coming to them," he adds.
"We are well aware of what is required – what the rules are – and we are fully compliant with the rules," he tells FlightGlobal. "Discounting in our industry is common, especially in the early days of the programme. Costs will come down as production moves along."
The investigation could potentially result in import duties, and US authorities could issue their preliminary determinations as soon as this month, they say.
Back home, investors and labour groups have criticised Bombardier for executive compensation packages. The controversy was ignited in March when Bombardier released documents showing compensation paid to six executives jumped about 50% in 2016 to $32.6 million – even as the company posted financial losses and benefited from government aid.
Bombardier responded in April, announcing that it had trimmed executive chairman Pierre Beaudoin's compensation and delayed by one year – to 2020 – performance-based incentive payments due to six executives.
But the company remained under pressure, particularly from a vocal pension fund investor, and in May announced that Beaudoin would step down as executive chairman, effective 30 June. During the shareholder meeting, the company defended the altered executive compensation plan as necessary to retain top employees. Bombardier also noted that its compensation aligned with industry standards.
Still, shareholders expressed frustration during the meeting. One criticised Bombardier for comparing itself to companies that were profitable, while another accused Bombardier of "playing with public money".
Get all the coverage from Paris air show – check out our dedicated event page
Source: FlightGlobal.com
