Wednesday, 28 November 2007

Bombardier Discusses CSeries Launch and Remarketing of SAS Q400s

Key notes from Bombardier's third quarter earnings conference call:

1) Don't expect an update on a CSeries launch this year. Bombardier, which recently selected P&W's GTF geared turbofan for the CSeries, is updating its business case given that the product has evolved and the latest variation in currency. Continue to expect a launch decision in 2008. Bombardier's plan to have components made in Belfast and the aircraft assembled in Canada remains unchanged.

2) Development costs for the CSeries have changed, however. "For sure costs have changed over the years," says Bombardier, declining to discuss a "specific increase" until next year's update.

3) Bombardier continues to see negligible financial impact from the three SAS Q400 prangs. These kinds of events are insured and are mainly the responsibility of suppliers (Goodrich supplies the Q400 landing-gear). The third incident appears maintenance-related. In this case, the manufacturers would not be liable.

4) Bombardier is working with SAS to remarket the batch of Q400s grounded by the carrier. The manufacturer doesn't own these aircraft - they are leased and the responsibility of SAS. The demand is very high for these aircraft and Bombardier is looking to reach agreement with SAS on which would-be customers should be focused on.

5) Despite some predictions that SAS's decision to dispose of its 27 Q400s could reduce market values by 10%, Bombardier management "don't view that the Q400 will take a hit".

6) Production of CRJ700s and CRJ900s is being stepped up due to very high demand. Bombardier will produce one aircraft every three days (compared to the current four-day rate).

7) Bombardier's CRJ1000 development costs total about $300 million dollars. This is spread through 3.5 years. "That’s our cost, and we would have some supplier contribution in that," says Bombardier.

8) There is no order activity or campaigns arising in the 50-seat RJ sector. "We do not anticipate that in the US or outside of the US," says Bombardier. Overseas, larger RJs will be more effective for regional general travel.

(Photo from Bombardier)

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