Canada special: Believing in Bombardier

Canada's biggest aerospace concern has had to throttle back recently after breakneck expansion. Bombardier president Pierre Beaudoin explains where priorities lie

Somewhere within Bombardier Aerospace's Dorval complex outside Montreal, a team of 50 engineers is keeping alive a project that could see the Canadian manufacturer bridge the gap between regional and mainline airliners. The problem is that potential customers - and the company's own board - remain unconvinced. So while Boeing's mid-size 787 - unveiled around the same time in 2004 - rakes in the orders, Bombardier's 110- to 130-seat CSeries languishes on the drawing board.

Last week, unveiling its annual results in Montreal, Bombardier said it would continue the same level of research and development funding for the CSeries in its 2007-8 financial year as it did in the previous year. But the company said it did not need to make a launch decision until 2013 to hit its 2013 service entry target.

A few revamps and stretches of existing models apart, the CSeries would be the first all-new platform from Bombardier since the Challenger 300 super mid-size business jet flew in 2001. Following rapid expansion in the 1990s, the company has been consolidating for much of this decade. It even sold the Ski-Doo recreational products business which made its name to focus on its core divisions of aerospace and rail.

The company also shed jobs and in 2004 reinstated veteran Bombardier family head Laurent Beaudoin as chief executive after the departure in quick succession of outsiders Robert Brown and Paul Tellier. With restoring shareholder value the watchword, and aerospace revenues fairly flat, with a good performance from business aircraft last year offset by lower deliveries and selling prices for regional aircraft, the board is in no mood to gamble $2 billion on developing an airliner for which there may be no market.

Pierre Beaudoin - son of Laurent and president of the aerospace business - has the tricky job of talking up CSeries prospects while keeping the potential window for launch as wide as possible, with the earliest entry into service now 2013. "We feel quite confident compared with the product we had last year," he says of the latest iteration of the proposed airliner. "It takes time because we are talking about entering a new market, rather than choosing to develop something in the business aviation or regional sector. We need time to fully develop our business case."

The CSeries would be Bombardier's way out of a regional airliner market that has slumped since its heyday in the 1990s. Sales of 50-seat jets have all but collapsed and the company suspended the CRJ200 line last year (the platform has found a limited new role as the Challenger 800 business jet). Meanwhile, production of the larger CRJ700 and CRJ900 has slowed. The only bright spot has been a pick-up in orders for the Dash 8 turboprop, particularly the Q400, as cost-conscious regional airlines return to a technology written off in the civil aviation world a few years ago.

Market revival

But Beaudoin does not rule out a revival in the regional jet market, particularly in the USA, where the drop-off in the sector has been most marked. "We have delivered 600 airplanes into that market. The last couple of years have been more challenging, but I see a comeback. To have a robust regional jet business you need a solid US market. Airlines are talking about fleet replacement and I think it will rebound this year." He also holds out promise of resurgence in Europe, saying: "There is good potential. Big anchor airlines are looking again [at fleet replacement]."

One of the ways Beaudoin hopes to tap into the European market is with the 100-seat CRJ1000, the planned stretch of the CRJ900. With its potential in the USA limited by the union scope clauses that restrict regional pilots from flying aircraft above a certain size, Europe is the target Brit Air of France and My Way Airlines of Italy are the two launch customers. The plan is to compete more effectively with Embraer's largest jet, the E-195, without jeopardising possible future sales of the CSeries.

The revival of the turboprop market has taken many in the industry by surprise. In 2004, turboprops represented just 15% of orders in the regional aircraft market. Last year the figure was around two-thirds, as Bombardier's Q Series and rival Franco-Italian ATR won a slew of orders. Beaudoin believes the Q400's design has helped seduce sceptical airlines that 10 years ago were deriding turboprops as dated technology in which passengers were reluctant to fly.

"I came in at a low point in aerospace, when everybody was saying turboprops are dead," says Beaudoin, who moved to aerospace from recreational products in 2001, initially heading the business aircraft operation. "But our team always believed in that product. With 350nm [650km] being almost as fast on a Q400 as on a jet - in fact 5min slower with 25% less fuel - the numbers become compelling. We are seeing airline chief executives starting to look again at how they can increase their margins on shorter routes."

Such has been the revival in fortunes for the Q Series that Bombardier is considering a bigger version of the Q400, but Beaudoin says it is still a design project. "We have a modern platform that can be stretched, and some customers are asking for it," he says. "The engines are capable, although the wing would have to be modified, but it qualifies as a simple stretch. It's not something we will do tomorrow morning, but we will certainly look at it in the future."

Bombardier's business aircraft arm has been its star performer in recent years as the market has recovered strongly in North America and begun to take off aggressively in emerging markets such as India and Russia. Bombardier's game plan in developing (or acquiring through Learjet) a business jet in almost every category from superlight to ultra-long-range looks to have been the right one, as the company has been able to develop new products - such as the Global 5000 and Learjet 40 - from existing platforms to gain a foothold in every emerging gap in the market.

Four years ago, prospects for business aviation looked grim, with deliveries plummeting to just 75 units. Last year, Bombardier handed over 212 business jets and Beaudoin says the challenge now is to balance capacity and demand and not get carried away by the current orders surge. "We have got to keep orders ahead of deliveries. This market has its peaks and valleys. People were telling me three years ago why it would never come back. Now they are telling me why it will never go away again," he says.

Beaudoin believes the main reason Bombardier has been more successful than most in the emerging markets is the work it has put into developing an international sales and support network. "This year 60% of our deliveries will be outside the US. The industry average is 50/50. We have better distribution outside North America and the product - especially with the strength of the Global Express at the high end - is particularly suited to international markets."

He sees India as the most exciting immediate prospect. "Infrastructure is being developed. Business aviation makes so much sense there, and we will quickly see a market." China's still-nascent market will take longer to develop. "It's a 10-year horizon, but eventually we will see a huge change. The economic demand is there, but deregulation is happening slowly."

Ultra-long-range plans

Unlike the CSeries, there is no big business aircraft project on the cards, although Bombardier has been mulling over a larger-cabin, more-powerful jet in the ultra-long-range sector, where Airbus and Boeing have the market to themselves. "There is scope for a larger aircraft. We have customers that want even more range than 6,500nm and to go a bit faster than the 0.88 Mach maximum cruise of a Global Express," he says.

The only real hole in Bombardier's portfolio is at the other end of the market, where very light jets such as the Eclipse 500, Cessna Citation Mustang and Embraer Phenom 100 have been carving out a whole new segment. "We are going to build Learjets and we are not looking at a VLJ in terms of a specific product," he says. "It's our job to stay interested and monitor the market, but it's not a priority. We would have to invest almost as much in a VLJ as we would in a new Learjet" - with its higher price tag and profit margin.

Acquisition of niche German aircraft builder Grob Aerospace, which makes the all-composite SPn light jet now in flight test, has been mooted, not least because ExecuJet - whose owner also owns Grob - is Bombardier's sales and service agent in a number of territories. But Beaudoin is guarded. "There has been a lot of talk about Grob because ExecuJet is a big partner," he says. "We will stay interested in the SPn project - it is intriguing to us because of the composite technology. In the future there will be more composites used in manufacturing, so it is the right thing to monitor the progress of an all-composite aircraft."

Rethinking manufacturing resources has been a big part of Bombardier's restructuring in recent years, with jobs going both in Canada and at the former Shorts plant in Belfast, UK, which the company bought in 1989. Like all airframers, Bombardier is looking at outsourcing manufacturing to low-cost countries - it has opened a plant in Mexico to make flight controls and electrical harnesses and is moving some fuselage work on the Q400 to China - but Beaudoin believes the progress the company made in developing global risk-sharing partners for programmes in the 1990s has helped it avoid some of the pain Airbus is currently going through.

Outsourcing "is part of the reality of our industry today", he says, adding: "If we are going to be competitive and keep jobs in Canada and the UK, we need to build partnerships with low-cost countries. I know it's controversial and challenging, but what we have presented to our employees is that it's a reality which other industries like automotive are facing and, if we ignore it, it will jeopardise every­body's job."

The company will retain high-end design and engineering in Montreal, Toronto, Wichita and Belfast, he says, with lower-tech jobs moving to lower-wage countries. "We have a lot of expertise in Canada and the UK and, if we do it right, there will be enough work for everybody." The era of labour-intensive vertical manufacturing - where "we put big metal in one end and an aircraft out the other" - is over, he says.

Niche markets

Two niche markets that have shown promise are amphibious aircraft and special missions. It has restarted production of its 415 waterbomber, albeit at a modest rate of around four a year, at its facility at North Bay, Ontario. With forest fires becoming a bigger risk around the world, firefighting authorities are coming under pressure to have aircraft based locally rather than hiring in equipment "which might arrive a week too late", says Beaudoin, who adds: "If you want to fight forest fires, you have to be close to the source."

Bombardier is also pushing its aircraft as intelligence, surveillance and reconnaissance platforms. The UK's Raytheon Sentinel R1 airborne stand-off radar uses a Global Express. The company has also won Q Series business in Australia, Sweden and with the US Department of Homeland Security. "We are building up a lot of experience in this market," he says. "Governments today are rarely willing to develop specific airplanes for these missions. Using modified versions of proven platforms is much more economical."

But Bombardier has no plans to go back to being a defence contractor. "We're not going to be a prime. We've tried the defence business and it's a trade in itself," says Beaudoin. "Selling to governments in the military area - other than VIP aircraft - is not something we do. What we do is make great aircraft."

Whether the CSeries ends up being one of these great aircraft remains to be seen. So far, Bombardier has spent $100 million on the project. To devote another $1.9 billion to an aircraft which will enter the fray with Airbus and Boeing, and potentially a new rival from China, is a decision the company appears in no hurry to take.

Bombardier believes Europe is fertile territory for its proposed CRJ1000 stretch of its CRJ900

The Challenger 300 was Bombardier's last all-new platform

Source: Flight International