Despite claiming significant performance and operating economic advantages over its narrowbody competitors, top lessors appear unwilling to embrace the Bombardier CSeries on two criteria outside of the control of its engineers: Price and residual value.
"Something's missing I can't explain it," says Steven Udvar-Hazy, chairman and CEO of Air Lease Corp.
"We've had offers. They're not attractive compared to Embraer," which has successfully sold 30 aircraft to ALC, says Hazy, who believes there's a disconnect between what the market is willing to pay for the CSeries versus what Bombardier believes the aircraft's capabilities are worth.
Bombardier says the PW1524G-powered CSeries improves fuel burn by 20% and cash operating costs by 15% on a per seat basis compared to its Boeing and Airbus competitors and provides a range up to 5,500 km (2,950 nm).
"The the fuel consumption on the airplane looks very, very good. Looks like we're going to make exactly the right thrust with right [specific fuel consumption] at entry into service. Program weight is going to be at spec, basically, at EIS," he says.
Bombardier has garnered 138 firm orders for the CSeries, plus 134 options and purchase rights and 45 commitments - including two lessors - for the aircraft and JP Morgan aerospace industry analyst Joe Nadol sees a coming Chinese CSeries order, causing him to list Bombardier's stock as his top pick for April.
"When you build an airplane with all those capabilities, can you get paid a premium for them? The counter argument to those capabilities is to only build and charge what customers really need and perhaps this is why the Embraer 190/195 program has been so successful." says Jeff Knittel, CIT president of transportation finance.
Boeing's all-new 787 and its composite materials and more-electric architecture did not receive a premium
during the first several years of its sales run, building a backlog that has hampered near-term unit profitability of the program.
Embraer's own focus for growing its market share has centered around acquisition cost, for example arranging a financing deal
with Flybe to ensure trip-costs of its 75-seat E-175 were able to match those of Bombardier's more fuel efficient Q400 turboprop.
Knittel explains the performance of the CSeries is attractive: "I've never had somebody not take an airplane from me as a lessor because it's had too much range," says Knittel, "they may not pay extra for the capability, but they'll always take it."
The conundrum for Bombardier is two-fold, say industry officials. The first, they say, Bombardier believes a drop in price could tarnish the value of the aircraft's new technology, irreparably injuring the profit potential.
Bombardier CEO Pierre Beaudoin have reiterated his comfort with the company's pricing strategy, which places the list price for the CS100 and CS300 at $58.28 and $66.57 million, respectively, says the airframer.
Both figures remain below the list prices for the smaller aircraft in the Airbus A320 and Boeing 737 families, and their re-engined Neo and Max equivalents. However, both airframers have sufficiently deep pockets to pitch their offers well below those levels. Embraer's list price for its E-195 stands at approximately $47 million, albeit with older powerplants than the CSeries.
Yet, Hazy sees the airframer caught between two difficult positions about establishing the aircraft in the market: "What's going to be the residual value in 10 years, 15, I don't know? It depends on the customer base. They've got to build the customer base. Even if it means sacrificing pricing, because if they don't, they won't have a successful program."
The second centers on the cost of production:
"The question is can you produce an airplane cheap enough to make sense in that space? Because it is about economics, when you shrink airplanes, it tends to be expensive," says Knittel.
For Boeing and Airbus and its existing customer base, the trend toward larger narrowbodies, have moved away from smaller 737-700 and A319 models, heavily weighted to the larger A320-200 and 737-800. On a per seat basis, a larger aircraft can garner a higher price compared to the cost to build each model.
Sandwiched between Boeing and Airbus' duopoly pricing and high rate production, Hazy says Bombardier all-new CSeries will be further pressed as Embraer charts a re-engined 4-12 seat stretch
of the E-190 and E-195 model E-Jets.
Hazy says the incremental development strategy Embraer has adopted for its next generation E-Jets allows the Brazilian airframer to compete on price, by adopting the newest generation of engines for a comparatively lower cost to design and industrialise with its existing infrastructure.
Photos Credit Airbus, Boeing & Bombardier