Bombardier’s new management team expects the recovery from the CSeries programme’s long sales drought to occur slowly over three to five years, but the impact will be softened by recent plans to adopt a more gradual production ramp-up of the CS100 and CS300.
The new timeline has emerged from the comprehensive review of Bombardier’s businesses, which launched shortly after Alain Bellemare became chief executive last February. He arrived at the company’s lowest point, shortly after conceding yet another delay for entry-into service of the CS100, which had slipped to early 2016.
Over the next six months, however, the flight test programme for the CSeries appeared to stabilise, as Bombardier released better-than-expected performance levels and dramatically displayed both models on the global stage of the Paris air show in June.
But the progress on the aircraft’s operational performance has increased the scrutiny on the programme’s sales figures, which now risk missing Bombardier’s target of achieving 300 firm orders by entry into service in early 2016 with Swiss International Air Lines.
“I’m glad the focus has shifted to orders now,” Bellemare says. “We’ve made significant progress in nailing down some of the questions that we had in the past, and we feel good about the schedule and supporting Swiss.”
Bellemare says “half a dozen” customers are in active sales discussions with Bombardier’s new sales team, including recently appointed Commercial president Fred Cromer and chief salesman Colin Bole. As longtime airline and leasing company operators, Cromer and Bole have re-energised the programme’s sales momentum, Bellemare says, but results will not be immediate.
“It takes a bit of time. It’s not going to happen overnight,” Bellemare says.
Bombardier is looking for “win-win” deals, he adds. They must work for the airlines, but they almost must work for Bombardier, he says. That echoes statements by Bombardier’s predecessors, justifying an unwillingness to offer steep discounts to win big deals.
Meanwhile, Bellemare’s review also has led to adjusting the production ramp-up for the CSeries with a more gradual growth rate. In 2012, Bombardier executives openly discussed the possibility of raising production to as much 120 aircraft per year within three years of entry into service.
The company is likely to move at a slower pace now. A more gradual ramp-up minimises the costs to retrofit aircraft that have already been delivered with reliability or performance improvements, Bellemare says. Above all, Bombardier is focused on improving the rate of learning, making it as steep as possible at the very beginning for the production ramp up.
“The focus we have with the team is, one, to look at volume and, two, how do we speed up the cost learning curve looking forward so we can reduce the negative pressure we see with the early deliveries,” Bellemare says.
The reference to “negative pressure” addresses a common problem with commercial aircraft manufacturing. It can take hundreds of deliveries before a new aircraft programme breaks even, so every aircraft in the early part of a production ramp-up is sold for a loss. Some companies, such as Boeing, use a programme accounting method that amortises the losses over a long production run. But Bombardier has traditionally expensed losses with each unit delivered, so the losses appear on the balance sheet as deliveries of early models are made.
“On the CSeries, the challenge there … is the learning curve to bring your costs down as quickly as you can,” he says. The programme is now “in line with where it should be”, he adds. “I think this is going to be okay moving forward.”
Source: Cirium Dashboard
