CSeries faces catch-22 on engine

Bombardier receives authority to offer new twinjet family despite lack of support from powerplant manufacturers

Bombardier's risky first move into the small airliner market last week was hardly confidence-boosting. The company now has received authority to offer (ATO) the 110- and 130-seat CSeries mainline twinjets to airlines, which means Bombardier's board of directors endorses the plan to break out of the regional and business aircraft market by 2010.

But key risk-sharing partners, including engine manufacturers, still have not endorsed Bombardier's concept. In addition, Bombardier is moving forward despite having no financing agreements with the Canadian and UK governments. Risk-sharing suppliers and government loans constitute two-thirds of Bombardier's plan to finance the programme – which has projected development costs of $2.1 billion – yet remain largely undefined as the company launches its sales campaign.

More efficient

To achieve the CSeries project's ambitious performance goals, it will be crucial to gain the engine makers' support. A key theme in the CSeries sales pitch is delivering an aircraft that is at least 15% more efficient to operate than the offerings of Airbus, Boeing and Embraer, which now form the margins of the 100- to 150-seat market segment. Bombardier is basing its efficiency projections on an aircraft that features a clean-sheet design for a 23,000lb (102kN)-thrust class engine.

"The aircraft that we will be taking out on proposal [to airlines] will be based on new centreline engines," says Gary Scott, Bombardier's president for the new commercial aircraft programme.

It is normal practice to secure an engine supplier's support before giving authority to offer, but Bombardier has chosen to press on without such a commitment. "Nobody has indicated willingness to launch anything at this point," says Scott.

Indeed, one of the two interested propulsion suppliers – CFM International – flatly rejects the possibility of launching a new engine development programme to support CSeries production. "We haven't offered them a new centreline engine," says CFMI, adding that such a proposal is "off the table" in discussions with Bombardier.

International Aero Engines says nothing has been ruled out in talks with Bombardier, and says that a new centreline engine is "an option along with the V2500 derivative". Inside sources at IAE say the new engine design is based on the proposed RB255 two-shaft concept, featuring a single-stage fan, nine-stage high-pressure compressor and single-stage high- and low-pressure turbine.

However, sources within IAE say that although the engine maker allowed Bombardier to use the RB255-based engine as a baseline on which to calculate the predicted performance of the CSeries, it could not agree to give the full go-ahead for the estimated $700 million-1 billion engine development because Bombardier had not undertaken a full market requirements survey on which to base a complete business case assessment.

IAE is, in addition, believed to have rejected a request from Bombardier to become a formal signatory to the CSeries project until the business case is proven. Faced with backing a costly project without evidence of a sufficient business case to date, IAE shareholders have so far declined to sanction development of a new centreline "V2000" engine.

Fuel consumption

In the meantime, the only engines officially offerable on the aircraft are Tech 56-based derivatives of the CFM56, a "tech insertion" V2500 or a V2500 "lite". None of these is capable of offering anything like the 15% specific fuel consumption reductions target required by Bombardier and "leave the project around 8% adrift", according to one insider.

Bombardier's decision to continue into the ATO phase without an approved engine design has puzzled some market analysts. UBS Warburg analyst Peter Rozenberg, in Toronto, says the situation is like "three chickens running in circles for three different eggs". CFMI and IAE want Bombardier to show a proven customer base before starting a complex engine development project, says Rozenberg. Meanwhile, the airline buyers may be put off by the new aircraft concept being based on a non-existent engine. Thirdly, the combined uncertainty makes it more difficult for government officials to commit taxpayer funds in the form of launch aid, adds Rozenberg.

Flight International sister publication Air Transport Intelligence reports that the Canadian government's $400 million loan package for CSeries is on hold because of a dispute about the financing terms for a year-old Air Canada deal to buy 15 CRJ200s and 15 CRJ700s – both Bombardier products. Bombardier is uncertain about the government's plans to honour the Air Canada loan guarantees. It wants government officials to clarify its commitment to the C$1.5 billion ($1.25 billion) loan package, with ongoing talks stalling progress on the CSeries deal.

Meanwhile, Bombardier's competitors are also dubious about the CSeries strategy. Randy Baseler, Boeing's vice-president of marketing, said in February that Boeing would not reconsider an earlier offer by Bombardier to join the project, even after shutting down the 717 production line late last year. Airbus chief commercial officer John Leahy said earlier this year that he did not see the new twinjet as a major threat to the A320 family's market.

Making a mistake

Baseler says Bombardier is making a mistake in entering the same competitive range as the Airbus A318 and Boeing 737-600. That warning has been echoed by Embraer chief executive Mauricio Botelho, who says the strategy for the Embraer 170/175-190/195 aircraft family, ranging from 70 to 118 seats, is designed to avoid engaging the industry's two airliner giants in direct competition.

Rozenberg says the competitive landscape can be affected by Bombardier's choice of an engine supplier – in particular the CFMI candidate. The CFMI consortium is backed by General Electric's powerful aircraft financing arm, GE Capital Aviation Services (GECAS).

"Taking on Boeing and Airbus is one thing, but to go against GECAS – that is a whole different game," Rozenberg adds.

Nevertheless, the CSeries concept of introducing a new aircraft family to fill the gap between regional jets and mid-size airliners has its supporters. "I think it's a sweet spot right now in the marketplace," says analyst Doug Abbey, a partner in The Velocity Group. Commenting on the competitive environment, he says: "I think that's the positive. The A318 has been a lacklustre seller."

Competing directly

Bombardier's Scott is also quick to dissociate the five-abreast-seating CSeries family – dubbed the C110 and C130 – from other existing products. "We really don't believe we are competing directly with Boeing or Airbus," he says, adding that the CSeries is targeted at the "underbelly" of the A320-family and 737-family market range. "As they've demonstrated so far, they have not really focused on this lower segment of the 100- to 150-seat market," says Scott, adding that the CSeries is also different from Embraer's four-abreast product line.

"We're filling the gap between the two," says Scott. "That's the value proposition of the CSeries."

But most analysts agree the CSeries will be thrust into competition for two major orders coveted by all four aircraft manufacturers. Lufthansa is looking for a successor to its defunct Fairchild 728 order (which was more than 60 firm plus 60 options), while Northwest Airlines may need to replace its inventory of more than 160 ageing McDonnell Douglas DC-9s. Neither airline is expected to move quickly on a replacement decision in the current aircraft financing climate, leaving only a handful of small orders to sustain the demand for 100- to 150-seat aircraft.

STEPHEN TRIMBLE/WASHINGTON DC & GUY NORRIS/LOS ANGELES

ADDITIONAL REPORTING BY DARREN SHANNON IN WASHINGTON DC

CSeries Specifications
	C110	C130
Dimensions (m)
Length	35	38.2
Span	33.7	33.7
Height	11.3	11.3
Cabin height	2.1	2.1
Mak take-off weight (kg)
Standard	54,700	59,800
ER	60,400	66,200
Range (km)
Standard	3,330	3,330
ER	5,550	5,550
Seating
(one class @32in pitch)	110	130
(Two class)	99 (16/83)	119 (16/103)
Entry into service	2010	2011

 

Source: Flight International