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Aviation History
2004
2004-09 - 2652.PDF
BUSINESS ANALYSIS 61- to 90-seat aircraft are projected to increase in 2005, they are fore cast to decline in 2006 as 91- to 120-seaters grow to 15% of deliver ies. This is not good news for Bombardier, UBS concludes. One reason for the pessimism is a belief that Bombardier's 70/86- seat regional jets will not maintain their competitiveness. Derived from the CRJ200, the CRJ700 and the further stretched CRJ900 were designed to appeal to operators of the Bombardier 50-seater. As more airlines buy 70- to 110-seat jets, Embraer's bigger-cabin 170/190 family is expected to dominate. Bombardier was first to market in the 70- and 90-seat segments, delivering the first CRJ700 in January 2001 and first CRJ900 two years later, but Embraer is rapidly making up for lost time. Deliveries of the 170 began in March and the 190 is to enter service in August next year. UBS forecasts Embraer will overtake Bombardier in regional jet deliveries next year as 170/190 production ramps up. Market shift The rapid market shift to larger air craft has cast a critical light on Bombardier's reasons for shelving the BRJ-X in 2000. Unveiled in September 1998, the aircraft was originally conceived as an all-new 90- to 110-seater, but was moved upmarket in 1999 when the com pany begun studying the CRJ900 stretch of the CRJ700. But making the BRJ-X larger moved it out of the regional airline market with which Bombardier was familiar and brought concerns over competing directly with Airbus and Boeing. Bombardier shelved the BRJ-X in late 2000, saying the then-rapid growth of the 50- to 70-seat regional jet market had under mined the requirement for a larger aircraft. Embraer by then had launched its 170/190 family of 70- to 108-seaters. With four-abreast seating, the 170/190 was smaller than the five-abreast BRJ-X, but similarly all-new, with develop ment costing Embraer and its risk- sharing partners $900 million. A second opportunity to enter the 90- to 110-seat market emerged in 2002 when Bombardier was offered the chance to acquire the 728/928 programme from bank rupt Fairchild Dornier. After a tech nical, commercial and financial AIRCRAFT ANNUAL DELIVERIES g 150 I 100 CRJ100/200 ' CRJ700/900 ' ERJ 1 170/190 •f f • -w Source: AvSoft 1,100 i 1,000 900 I 800 o | 700 •S 600 g 500 f 400 - z 300 200- 100 0 .<£> _cP -csN _# -cO t> FLIgjfT FLIGHT H2 Orders CD Deliveries CI Backlog Bombardier as of 31 October. Excludes 10 CRJ200s for Northwest Airlines and 1 CRJ700 for Styrian Spirit Embraer as of 30 September. Excludes American Eagfe cancellation of 18 ERJ-145s, and Air Canada order for 15 Embraer 175s Source: Manufacturers Jem review, the company declined the offer, saying the programme did not meet its investment standards. When Tellier took over as chief executive in January 2003, his focus was on strengthening the bal ance sheet, improving financial transparency and restoring investor confidence. One early action was to restructure the company around its aircraft and rail businesses, and slow the product-development pace that had driven the com pany's rapid growth. "It is time to take a breather and make money. The major investments are behind us," he said at the time (Flight International, 8-14 April 2003). A few months later Tellier said the company could revisit its deci sion to shelve the BRJ-X "in 18-24 months...but at this time we are satisfied with our line of products" (Flight International, 24-30 June). In 2003 Tellier said the company could revisit its BRJ-X decision "but we are A satisfied Wk with our Jk products" IL^BO ^Hr ^—- v> f f r /f .. But, within six months, Bom bardier had launched a study into the 100-seat market. Perhaps recog nising it had missed the boat on the 100-seat market, this evolved into the four-model 110/135-seat family of CSeries airliners unveiled at the 2004 Farnborough air show. The CSeries is intended as a fully fledged mainline airliner, and is being defined by a New Commer cial Aircraft business unit separate from Bombardier's Regional Aircraft division. Concerns about compet ing head-on with Airbus and Boe ing do not seem to be holding the company back - a sign of the criti cal importance of the programme. Bombardier is working with a shortlist of potential risk-sharing suppliers to define the CSeries, with the intention of seeking board authority to offer the air craft in February next year. The company seems convinced there is a 6,000-aircraft market, but the biggest hurdle remains raising the development funding. Bombardier intends to put up only one third of the money, with one third to come from risk-sharing partners and one third from government. To that end, the company is con ducting a competition between potential assembly sites in Canada, the UK and the USA. Repayable loans While government support would take the form of repayable loans, Bombardier's demands come when the long-running subsidies dispute between Brazil and Canada is only recently settled, and Europe and the USA are at odds over Airbus launch aid. "We are not looking for any subsidy on CSeries," says Beau- doin. "What we are asking for is legal [under World Trade Organisation rules]." Signs are the Canadian and Quebec governments will provide funding. "We are having a very good dialogue with governments - plural," says Tellier. Arguing that Canada risks losing its aerospace industry, transport minister Jean Lapierre has warned it is "now or never" for government aid, and last week Quebec underlined its back ing for Bombardier by providing C$750 million in loan guarantees for CRJ sales. This will help to secure additional CRJ orders, but also underscores the seriousness of concerns for the company's future. www.flightinternational.com FLIGHT INTERNATIONAL 14-20 DECEM BER 2004 29
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