WICHITA, Kan. — Bombardier’s struggling C Series airliner got a much needed boost Thursday with a firm order from Delta Air Lines for 75 CS100s.
But Delta’s firm order, as well as others, will come at a cost. In announcing the order as part of its first quarter 2016 earnings announcement, Bombardier said it will take a significant charge related to the C Series in its next financial quarter, which ends June 30.
Bombardier said in its earnings release that the company would take a $500 million loss in the second quarter of 2016 on 127 of its more than 300 firm C Series orders, including the Delta order.
Cowen &Co. analyst Cai von Rumohr estimated the loss at about $4 million per C Series airplane.
The loss is more than likely the result of competing against the duopoly of Airbus and Boeing, which for years have been airlines’ only viable choice for single-aisle airliners larger than regional jets.
Still, von Rumohr and other financial analysts said in notes Thursday to investors, the concessions Bombardier has made to win the coveted Delta order — which includes options for 50 more C Series jets — provides stability and likely longer-term benefits to Bombardier’s first, large jetliner program.
“Not only is the order large in terms of size (firm orders to date have averaged only 16), the status of Delta as one of the world’s preeminent airlines will provide a much needed boost to the long-term viability of the CSeries aircraft and will likely help pave the way to follow-on orders from both small and larger airlines alike,” wrote Robert Spracklin, an RBC Dominion Securities analyst, in a note Thursday to investors.
On a conference call Thursday with analysts, Bombardier CEO Alain Bellemare called the Delta order “a game changer.”
“We are entering service with a strong tailwind,” he said.
The order, the value of which is based on list prices, includes an option for 50 additional CS100s, with deliveries slated to begin in spring 2018.
The Delta order is Bombardier’s largest for its struggling C Series program, which has been saddled with significant delays and cost overruns. The firm order is valued at $5.6 billion based on list prices, and deliveries to Delta are expected to begin in spring 2018.
The Delta announcement came in conjunction with the release of the company’s first quarter 2016 earnings on Thursday.
In the quarter, Bombardier said it posted a $34 million loss on $3.9 billion in revenue. That compares with earnings of $170 million on $4.4 billion in revenue in the same quarter a year ago.
In the quarter, Bombardier’s business aircraft division that includes Learjet delivered 31 aircraft compared to 45 in the second quarter of 2015, a 31 percent decline in deliveries. However, Bombardier said it took net orders for 40 aircraft in the period, compared with 19 in the year-ago second quarter. Business aircraft backlog stood at $17.3 billion at the end of the first quarter of 2016. That was slightly higher than $17.2 billion in backlog at the end of the fourth quarter of 2015.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
