Monday, September 16, 2013

New Bombardier Jet Takes Flight: Canadian Aircraft Maker Seeks to Make Inroads Against Boeing and Airbus

Updated September 16, 2013, 7:26 p.m. ET 

The Wall Street Journal 

MIRABEL, Québec—Bombardier Inc.'s new CSeries jet made its maiden flight here Monday, a major milestone in the Canadian company's bid to take on giants Boeing Co. and Airbus in the market for small passenger jets.

The 120-passenger jetliner landed safely about 2½ hours after taking off under clear skies from Bombardier's factory here north of Montreal in front of thousands of employees, customers, and others who had gathered to watch.

The single-aisle CSeries makes Bombardier the first new entrant in the market for the smallest category of mainline passenger jets since 1987, when Airbus, now a unit of European Aeronautic Defence & Space Co., first flew its A320. Airbus and Boeing have been the only Western producers of larger commercial jets in the market since 1997, when Boeing merged with McDonnell Douglas.

The CSeries could be the last all-new aircraft from a Western manufacturer to enter the market for some time.

Companies in Japan, China and Russia are all working on new jets. But while Airbus, Boeing and Embraer SA—a Brazilian manufacturer that like Bombardier has focused on smaller, regional jets—all plan major modifications to existing models, they aren't known to be working on all-new designs now, meaning they're unlikely to bring any new planes to market before the middle of the 2020s.

The CSeries version that flew Monday lists for $63 million, with a larger version at $72 million, before discounts, compared with about $70 million to $92 million for comparable models from Boeing and Airbus, which have offered aggressive discounts to keep Bombardier from gaining traction, according to industry officials.

Bombardier has also set aggressive performance targets for the CSeries, including what it claims is 20% better fuel efficiency than competing models, to woo cost-conscious airlines.

Monday's takeoff was nearly silent, highlighting another of Bombardier's selling points for the CSeries, which it says is engineered to be quiet so that it can be used at smaller, noise-restricted airports.

Customers have ordered 177 of the CSeries jets. But airline executives are still looking for more evidence that the jet will deliver the company's touted performance—and waiting to see how much Bombardier plans to discount the plane.

The maiden flight give Bombardier "another element for their sales team to go and sell it," said Nico Buchholz, executive vice president of Deutsche Lufthansa AG, which has an order for up to 60 CSeries for its Swiss International Air Lines unit. But whether it will sell well, he said, depends on how aggressively Bombardier will use discounts and other incentives.

Guy Hachey, chief executive of Bombardier's aerospace division, said the company hopes to collect data over the first 100 hours of flying the aircraft to feed to sales executives to validate its claims to customers. "We'll be able to back up all the performance guarantees we've been making all along," he said.

Mr. Hachey said Bombardier hopes the CSeries will help the company's aerospace division to increase its annual revenue by an estimated $5 billion to $8 billion—it was $8.6 billion in 2012—once it reaches production of 120 jets a year.

The CSeries program is running roughly nine months behind schedule—the first flight was originally scheduled for last December—but that pales in comparison with the delays and cost overruns suffered by Boeing and Airbus in developing their newest jets.

Bombardier expects the development to cost $3.9 billion, said Mike Arcamone, president of Bombardier Commercial Aircraft, a unit of the aerospace division. The company had previously estimated the cost at $3.4 billion. A spokesman attributed the difference to new financial reporting standards that took effect in 2011 that prompted Bombardier to factor in interest costs.

Bombardier has said it plans to deliver the first CSeries after it completes certification by regulators, which itself could take a year following Monday's flight. Bombardier said it will evaluate the timing of the planned first delivery in coming weeks as the CSeries progresses in flight testing.

It has declined to identify who its first customer for the jet will be, but one person familiar with the company's plans says that Malmö Aviation of Sweden, a unit of Braathens Aviation Group, will take the first jet.


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