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Bombardier risks losing third-largest CSeries customer

Repeated delays and a new financing problem could drive Bombardier’s third-largest customer for the CSeries to cancel the order within a few months.

Moscow-based lessor Ilyushin Finance Corporation (IFC) has decided to “re-evaluate all our options regarding our participation in this programme,” director general Alexander Rubtsov says in an interview.

The review marks a swift change in enthusiasm by the Russian lessor since signing the order for 32 CS300s in February 2014.

IFC is partly-owned by Russian aircraft manufacturing conglomerate United Aircraft Corporation. Its charter calls on the lessor to help launch and buy locally-built aircraft.

The deal signed 15 months ago bolstered the slow-selling CSeries orderbook and offered the Canadian manufacturer a key opportunity to break into the Russian market.

Bombardier says that IFC remains a “solid, valued customer. It’s our understanding that the CSeries aircraft makes up an important component of IFC’s expansion plans and we are therefore confident we can work together to overcome any concerns”.

But Rubtsov says he has grown impatient waiting for the CSeries to be delivered. The cost of the deal also grew after the Canadian government banned Russian companies from having access to export bank financing with lower interest rates, he says. The ban was imposed as part of Canada’s response to the conflict in Ukraine.

IFC now plans to decide whether to cancel, amend or proceed with the CSeries order at the Paris air show, which begins on 15 June, Rubtsov says.

IFC’s decision will not be linked to any concerns about the aircraft’s performance. Rubtsov recently returned from a quarterly meeting with Bombardier in Montreal, and, he says, the performance of the CS100 flight test aircraft is “quite spectacular”. With the exception of a small weight increase, the CS100 is meeting Bombardier’s promises for fuel efficiency and range, he says.

In addition to the financing problem, however, IFC is concerned Bombardier will announce another schedule delay, Rubtsov says. The CS100 was originally expected to enter service in late 2013, with the stretched CS300 following six months later. It is now scheduled to be certificated in the second half of 2015. It was also supposed to enter service by the end of the year, but newly-appointed Bombardier chief executive Alain Bellemare has recently said that entry into service could slip into 2016.

IFC is also weighing the CSeries requirement against new pressure from the Russian government to support the Sukhoi Superjet. The Russian government has recently committed to invest 100 billion rubles ($1.86 billion) to recapitalise the Superjet programme. If consummated, part of the money could be directed to IFC to buy another tranche of Superjets, and that could come at the expense of the CSeries.

Bombardier has 243 firm orders for the CSeries, which is 57 short of its goal to have 300 aircraft on backlog by entry into service. IFC’s order for 32 aircraft is exceeded only by the 40 aircraft each under contract by Republic Airways and Macquarie Finance.

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