Farnborough: Bombardier's new jet has difficult take-off

Bombardier CS100 passenger jet Test flights of Bombardier's C-Series aircraft were halted in May after an engine fault

Another airshow, and another question mark over Bombardier's ambitious new passenger jet.

At last year's Paris show, Bombardier was triumphant about imminent test flights of its long-awaited C-Series aircraft. But the test schedule had to be pushed back a few months.

At Farnborough, the questions have been about what caused a C-Series engine failure during a ground test in May.

Test flights have yet to restart, despite the company saying it hoped to have the aircraft airborne again by the end of June.

The $4bn (£2.3bn) aircraft programme is supposed to be a game-changer for the Canadian company, taking it into a market for longer-range aircraft.

Designed from scratch, the all-new C-Series, with its claimed superior fuel and operating efficiencies, will compete in the market for 100-149 seat aircraft.

The company, known for producing smaller aircraft and corporate jets such as Lear (as well as trains), is now nibbling at the heels of industry giants Airbus and Boeing.

Nigel Cassidy on Bombardier, a challenger to the global might of Boeing and Airbus.

'Back in the air'

But along the row of Bombardier aircraft displayed here at Farnborough, the C-Series is conspicuous by its absence.

Start Quote

It's a new-technology aircraft and it fits into a whole new category in the sector”

End Quote Mark Hughes Falko

"It would have been great to have had the plane here," says Guy Hachey, the company's president and chief operating officer.

"We had a problem with the engine. We've found the root cause and are doing modifications. We are confident we will be back in the air in a few weeks."

There is a mock-up of a C-Series cabin at the show - and very impressive it looks, too. But it is not what potential customers hoped to see at the year's most important aviation trade fair.

Mr Hachey told the BBC that Bombardier remains on course to deliver its first aircraft in the second half of 2015, to Malmo Aviation. However, the C-Series was initially scheduled to enter service last year.

A model of a Bombardier C-Series jet is pictured among promotional balloons following a press conference at the Farnborough Airshow The real C-Series was conspicuous by its absence at Farnborough

The longer the delays continue, the greater the risk that Bombardier's first-mover advantage is eroded as its competitors catch up.

Farnborough orders

The engine problems related to the oil system, says Mr Hachey. And if, as claimed, the changes require a modification rather than an engine overhaul then the resumption of test flights in weeks, not months, seems reasonable, analysts say.

But the C-Series needs to pass another 2,000-plus hours of test flights before it gets air certification. And no air certificate means no customers.

Significantly, though, the engine problems do not seem to have caused a wave of cancellations.

A mock-up of a Bombardier CS100 in Malmo Aviation livery Sweden's Malmo Aviation will get the first CS100 in 2015

Five new customers have been announced at Farnborough, although these have been mainly letters of intent rather than firm orders.

Start Quote

The target is to secure 300 firm orders by the aircraft's entry into service next year”

End Quote Guy Hachey President, Bombardier

Zhejiang Loong Airlines became the second Chinese company to want the jets, and Jordan's Petra Airlines also announced an intent to buy.

Falko Regional Aircraft, a UK-based leasing company, also signed letters of intent for 24 C-Series 100 jets. The company already has Bombardier's regional jets and turboprops in its leasing portfolio.

"It's a new-technology aircraft and it fits into a whole new category in the sector," says Mark Hughes, Falko's executive vice-president of corporate finance.

"We are confident about its future and positioning in our core marketplace. As we begin a period of worldwide growth and expansion with a strong pipeline of acquisitions, the C-Series aircraft will figure prominently in our plans."

CS airliner interior Bombardier is confident it can win a significant share of the market for this type of passenger jet
'Achievable targets'

Mr Hachey refuses to be downcast about the fact that Air Canada, the national carrier in Bombardier's home country, has yet to place an order. The airline recently finalised an order for 61 Boeing 737 Max aircraft, with between 162-180 seats.

Start Quote

Bombardier is in a challenging position”

End Quote John Strickland Aviation consultant

"These aircraft are designed for a different purpose," Mr Hachey says. "It does not mean Air Canada won't buy the C-Series."

Nor is there disappointment about the C-Series order book. It currently stands at 203 firm orders, from 19 customers.

Mr Hachey says: "The target is to secure 300 firm orders by the aircraft's entry into service next year." Achievable? "It will be achieved," he insists.

He sees the market for aircraft in the C-Series segment as being some 7,100 planes over the next 20 years. "We think we can take the lion's share," he says. "We've been studying this area for several years."

However, that demand estimate implies average annual sales of 355 aircraft - far below the average for the past few years.

The logo of Brazil's aircraft manufacturer Embraer Bombardier faces increasing competition from manufacturers like Brazil's Embraer
'Long gestation'

"The market segment is under-served right now," Mr Hachey says. "We decided to optimise an aircraft for this segment." In other words, the C-Series will grab a bigger share of a bigger pie.

Analysts, though, are more cautious. "Bombardier is in a challenging position," says aviation consultant John Strickland.

"The C-Series has been through a long gestation. Other companies are competing now. The field is becoming more crowded, and airlines also want to squeeze manufacturers for a good deal."

Luckily for Bombardier, although Airbus and Boeing reach the lower end of the market segment with their A319 and 737, these planes are not competition for the C-Series. Nor do the two majors look like they will offer anything new.

But it is critical for Bombardier that the C-Series succeeds. Compared with Boeing and Airbus, Bombardier is a minnow. The smaller the firm, the bigger the execution risks.

It doesn't help that other parts of Bombardier are under pressure, such as the CRJ regional jet order book. Also, Brazil's Embraer, Japan's Mitsubishi and planemakers in Russia have a pipeline of competing products.

However, Damien Lasou, aerospace expert at consultants Accenture, says Bombardier is in a stronger position than some competitors.

"They (Bombardier) have a bit more diversity in the product range. And now they've decided to go up the scale. I think that puts them in a better place."

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Business Live

  1.  
    Saudi oil Via Email Roderick Macsween

    "As a former employee of Saudi Aramco of 25 years' standing and still consulting on a worldwide basis on their behalf, I can state without fear of contradiction that the wellhead cost per barrel of oil - irrespective of grade, i.e. heavy, light or extra light , averages out at between $6 to $8 per barrel.

     
  2.  
    10:30: House prices
    houses

    As standard, house prices in London are well ahead of the rest of the country. The Land Registry says average property values increased by 16.3% in December compared with a year earlier to £464,936. The east and south east also both saw steep rises in property values: up 10.3% and 10.8% respectively.

     
  3.  
    10:15: Paper review
    papers

    The Wall St Journal has a story on Standard Chartered chief executive Peter Sands feeling the pressure, telling senior executives at the bank they have "just a few months" to reverse the fortunes of the bank. The Times leads on Bank of England Governor Mark Carney's warning over German austerity plans. The FT says Goldman Sachs and France's SocGen may invest in peer-to-peer lending and The Telegraph reports on trouble for part of the government's foreign aid programme.

     
  4.  
    Shell earnings Via Twitter Victoria Fritz Business reporter, BBC News

    tweets: Expect a BIG backlash from environmental groups.@Shell has just announced that it WILL drill in the Arctic this yr after legal battles

     
  5.  
    Shell earnings Via Twitter Kamal Ahmed BBC Business editor

    tweets: Breaking; Shell announces it will drill in Alaska this year after delays. Needs to get the right permits - but wants to go ahead

     
  6.  
    09:44: House prices

    House prices grew by 0.6% in December, according to the Land Registry, which bases its index on house sale completions. That means house prices year on year grew by 7% nationally to £177,776 - just £3,372 below the last peak in house prices of £181,138 seen in November 2007.

     
  7.  
    09:31: Deutsche earnings

    Deutsche Bank says it expects operating cost cuts to continue in 2015 as fines loom. Its chief financial officer, Stefan Krause said: "We should see a decrease in the underlying cost base coming." Regulatory charges - finance people prefer that term to fines and being sued - are expected to increase in some areas, he said. "We have litigation settlements of the bank as well as other banks (and that) influences the operational risk map and that one is for sure going to increase," he added. "We regretfully can't give you a better outlook."

     
  8.  
    09:16: Market update

    Hong Kong and mainland Chinese stocks closed lower, in line with sharp declines across most Asian share markets. The Nikkei 225 index at the Tokyo Stock Exchange fell 189.51 points, or 1.06% to 17,606.22. The benchmark Hang Seng Index fell 1.07%, or 265.96 points, to 24,595.85. Analysts said the drop was down to declines on Wall Street and concerns that China's market regulator will clamp down on margin trading, which has helped to fuel a recent rally.

     
  9.  
    Saudi oil Via Email

    Benjamin Higgins says "about $15 a barrel". Tristan McCooey, goes with "about 3 dollars per barrel ". Dr Ian McCormick asks: "Isn't it about $4?" All good contributions.

     
  10.  
    08:45: Deutsche earnings
    dbk

    Deutsche Bank has reported a surprise pre-tax profit of €253m in the three months to the end of 2014, helped by an unexpected drop in litigation costs and a rise in trading revenue at its investment bank. Germany's largest lender was able to postpone major legal expenses in the quarter because a number of major cases have yet to be settled, but the threat of future fines still hangs over the lender, frustrating management's efforts to boost profit.

     
  11.  
    Shell earnings Kamal Ahmed BBC Business editor

    As the first of the major oil companies to report its figures for last year, Shell plays the role of the canary in the coal mine - or on the oil rig. After a rather sickly 2013, profits are actually up. But the impact of the low oil price is clearly biting. The company announced that it would be cutting investment over the next three years in new exploration and the development of oil and gas fields, a move that will raise fresh concerns about its business in the North Sea.

     
  12.  
    08:19: House prices
    The sun illuminates property in the historic city centre of Bath

    Nationwide says house price growth got off to a weak start in January with property values up just 0.3% in the month and 3.8% higher than the same month a year earlier. That marks the lowest rates of house price growth for 14 months.

     
  13.  
    Saudi oil Via Email Neil Carter, Business live reader from Devon

    "In the eighties it was one to three dollars a barrel. Today I expect that it is in the region of six to eight dollars. Some newer fields may have higher costs due to higher exploration and extraction costs, so maybe ten to twenty dollars a barrel."

     
  14.  
    07:55: Diageo results Radio 5 live

    "The results today show we are seeing a pick up in momentum," Diageo's John Kennedy tells Radio 5 live breakfast. "If you look at the overall picture... we've seen an emerging market slowdown... but the big developed markets... are performing well despite a muted recovery particularly in Europe." India is performing strongly, as is Mexico, he adds.

     
  15.  
    07:51: Diageo results
    guinness

    Distillers Diageo say profit for the six months to the end of December dropped to £1.36bn from £1.65bn as the pound strengthened and they suffered "lower income from associates and joint ventures".

     
  16.  
    07:41: Shell earnings

    Shell's has also pulled $15bn of investment in oil exploration over the next three years. It says organic capital investment in 2015 is expected to be lower than 2014 levels. "Shell has options to further reduce spending, but we are not over-reacting to current low oil prices and keeping our best opportunities on the table," it adds.

     
  17.  
    07:24: New fund BBC Radio 4

    Nigel Wilson, chief executive of asset manager and insurer Legal & General, says the firm will put £1.5bn for a new infrastructure fund in the UK on Today. "We are very long-term investors - 20, 30, 40, 50, years," he says. Longer-term financing from fund managers like him are the future rather than shorter-term bank lending, he says. Will £1.5bn be enough? He's attracting outside investors and will borrow money to grow the fund to about £25bn.

     
  18.  
    07:15: Royal Mail chairman
    mail

    Donald Brydon will step down as chairman of Royal Mail, the company says. The company is looking for a new one. Mr Brydon will carry on until the firm's annual meeting in the summer.

     
  19.  
    07:10: Shell earnings

    Shell has reported full year earnings (on a current cost of supply basis) of $19bn compared with $16.7bn a year earlier. Fourth quarter earnings were also higher at $4.2bn compared with $2.2bn for the same quarter a year ago.

     
  20.  
    06:58: Eurozone union BBC Radio 4

    Bank of England Governor Mark Carney yesterday said the eurozone needs fiscal union to manage monetary union. James Bevan, an asset manager CCLA, tells Today "a root cause of the problem is absence of growth," low money rates alone won't get growth going.

     
  21.  
    06:48: Shell results
    Car lights are seen streaking past an oil rig extracting petroleum

    Some discussion here on the business livepage as to just how cheap it really is to extract oil in Saudi Arabia. So we thought we'd open it up to the floor. How much do you think it costs Saudi Arabia - per barrel - to extract oil from the ground. Send your answers to bizlivepage@bbc.co.uk or tweet @bbcbbusiness. Usual rules apply: no peeking at the internet.

     
  22.  
    06:38: Shell results Radio 5 live

    How does the lower oil price affect alternative ways of exploring for oil such as shale? Michael Hewson of CMC markets tells Wake Up to Money shale oil exploration is largely dead in the water. Getting shale oil out of the ground is still far more expensive than getting oil out of the ground in Saudi Arabia, he says. What pushed up Saudi Arabia's oil extraction costs was the welfare programme the country introduced when the Arab Spring broke out in 2011. He adds Saudi Arabia can live with a low oil price for a long time.

     
  23.  
    06:23: Shell results Radio 5 live

    "I think there is a good chance that we could see a reduction in [Shell's] dividend and that could affect pension funds here in the UK," Michael Hewson of CMC markets tells Wake Up to Money. He doesn't see that happening just yet, but if the oil price continues to fall, or stays low for a long time, then he thinks it is unavoidable.

     
  24.  
    06:11: Shell results Radio 5 live

    Michael Hewson of CMC markets tells Wake Up to Money he expects Shell's revenues will be slightly lower when it publishes results later this morning. He is, naturally, interested in how Shell is coping with the lower oil price. He doesn't think "we've hit bottom yet" in terms of oil prices. "The Saudi's have still got their foot to the floor in terms of market share," he says. "The low hanging fruit in terms of getting oil of out the ground is gone," he adds.

     
  25.  
    06:01: Apple analysis
    apple

    Apple caught up with Samsung as the world's biggest smartphone seller in the fourth quarter of 2014, thanks to booming sales of its new iPhone 6, market researcher Strategy Analytics said. Strategy Analytics said Apple flogged 74.5 million handsets in the fourth quarter, compared to 51 million a year ago. Samsung shifted the same number, which for them was a reduction from 86 million the previous year.

     
  26.  
    06:01: Matthew West Business Reporter

    Morning. Do get in touch at bizlivepage@bbc.co.uk or tweet us @bbcbusiness.

     
  27.  
    06:00: Howard Mustoe Business reporter

    Good morning everyone. Overnight, McDonald's has said Don Thompson will retire as chief executive of the fast food firm to be replaced by British-born Steve Easterbrook, the company's current chief brand officer. We have house price data from the Land Registry at 09:30 and Shell's results to look forward to. Stay tuned.

     

Features

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.