Industry

Published on November 14th, 2015 | by Jim Lee

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CSeries reaches critical milestones but future of the programme far from assured as Québec Government forced to invest

Bombardier used the occasion of the 29th Dubai Airshow to make a number of announcements in relation to its CSeries flagship programme. Bombardier displayed C-GWXZ, its firth test CS100 aircraft, in the livery of first operator SWISS, at the show. This was part of an impressive line-up of its commercial and business aircraft on static display. Also on hand at the Dubai World Central Airport, were members of Bombardier’s senior leadership team from commercial aircraft and business aircraft to meet with customers, suppliers and other stakeholders at the Dubai Airshow, which ran from 8th to 12th November. Joining the CS100 in the static display alongside newest regional operator Abu Dhabi Aviation’s Q400 turboprop was a CRJ900 aircraft from long-time customer Petroleum Air Services (PAS); a Learjet 75, Challenger 350 and Global 6000 aircraft

Fred Cromer, President, Bombardier Commercial Aircraft

Fred Cromer, President, Bombardier Commercial Aircraft

The fleet of Bombardier Commercial Aircraft in the Middle East and Africa is steadily growing with more than 200 Q Series turboprops, CRJ regional jets and CSeries airliners now in service with, or on firm order from, approximately 55 customers and operators in the region. Bombardier’s Commercial Aircraft Market Forecast for the period 2015-2034, covering aircraft from 60- to- 150 seats, predicts deliveries of 450 units to the Middle East and 550 to Africa over the forecast period. This is why the Dubai event was so important, as it is recognised worldwide as a premier venue for meeting key industry leaders. “The Dubai Airshow also represents a great venue and opportunity for us to display our line-up of aircraft and provide an update on the exciting developments ongoing with CSeries aircraft’s certification program,” said Fred Cromer, President, Bombardier Commercial Aircraft.

CS100 test programme almost 100% complete

On 8th November Bombardier Commercial Aircraft announced that the CS100 aircraft flight test programme was close to 100% complete. Only a few tests remain to be completed and Bombardier is on track to have the aircraft certified this year with Transport Canada.

Bombardier also announced that function and reliability (F&R) testing on the CSeries aircraft commenced, with a four-leg flight the previous day by the CS100 F&R test aircraft. The first F&R flight, which started and ended in Mirabel, Québec, included stops in Moncton, New Brunswick; Halifax, Nova Scotia and St-John’s, Newfoundland and Labrador.

The F&R test flights, which will be conducted using typical airline flight routings and operational procedures, are scheduled to include approximately 15 city pairs in Canada and 20 in the U.S, before moving on to Europe. The company also confirmed that CSeries flight test vehicles have completed more than 1,000 flights and CS100 aircraft is in final stage of flight testing leading to certification

Bombardier C Series CS100 C-GWXZ (Swiss)

Bombardier C Series CS100 C-GWXZ in Swiss colours

“The success of this historic CSeries aircraft test program is a testament to the hard work and dedication from the teams that designed, developed, built and tested the CSeries aircraft over the last few years,” noted Mr Cromer. He went on “we’re proud to be moving into the entry-in-service and production phase as we look to deliver the aircraft in the first half of 2016 to SWISS – a customer that has been with the program from the beginning. Congratulations to all involved.”

“With our flight test program almost 100% complete and all the high-risk CS100 aircraft’s flight tests behind us, teams are now finalising the last few certification activities,” said Rob Dewar, Vice President, CSeries Aircraft Program, Bombardier Commercial Aircraft. “Following more than 1,000 flights conducted by the CSeries flight test vehicles, the F&R flights will give a really good indication of how the C Series aircraft will perform in a typical airline schedule to and from different airports in Canada and the U.S.” “Airfield performance, landings, airport turnarounds and on-ground operations are just some of the important characteristics that will be observed during the F&R testing,” added Mr. Dewar.

About the Function and Reliability Test Aircraft

The function and reliability (F&R) test aircraft is not a Flight Test Vehicle (FTV), rather it was built to represent an airline-configured aircraft, with various seating options and configurations and joins the five existing FTVs (C-FBCS, C-GWYD, C-GWXJ, C-GWXK and C-GWXZ). It was delivered on 30th October and is registered C-FFCO (c/n 50006). It is expected to undergo worldwide F&R testing and will be showcased in Bombardier’s house livery, as it conducts the tests over the next few weeks.

In addition, all noise performance testing on the CS100 aircraft has been completed and data confirms it is the quietest in-production commercial jet in its class. The aircraft’s noise performance and its outstanding short-field capability make it ideal for varied types of operations. The C Series aircraft’s maximum range has also been confirmed to be up to 3,300 NM (6,112 km), some 350 NM (648 km) more than originally targeted. The aircraft is also delivering more than a 20% fuel burn advantage compared to in-production aircraft, and a greater than 10% advantage compared to re-engined aircraft. The CSeries aircraft will also emit 50% fewer NOX emissions than the CAEP 6 NOX emission standards (Committee on Aviation Environmental Protection).

Bombardier C Series CS300 Air Baltic

Bombardier C Series CS300 in Air Baltic colours

airBaltic confirmed as CS300 aircraft’s first operator

The CS100 and CS300 aircraft have over 95% parts commonality, as well as the same type rating and both use the ground-breaking Pratt & Whitney PurePower® PW1500G engine. Currently there is one CS300 FTV; C-FFDK (c/n 55001) delivered on 27th February 2015. Also on 8th November, Bombardier confirmed that Riga, Latvia-based Air Baltic Corporation AS (airBaltic) will be the first customer to operate the CS300 aircraft when it takes delivery in the second half of 2016. The Latvian flag carrier has 13 CS300 aircraft on firm order and retains options for seven CS300 aircraft.

“Bombardier’s CS300 airliners are integral to the execution of airBaltic’s business development strategy and fleet optimization plan. As the airline increases its network potential, we will do so by replacing older jet aircraft,” said Martin Gauss, Chief Executive Officer, airBaltic. “The CS300 aircraft has exceeded our expectations in terms of its noise and emissions footprint, aligned with airBaltic’s low environmental impact vision. Additionally, it will offer airBaltic passengers a widebody, unparalleled in-flight passenger experience, perfectly complementing our modern fleet of 12 Bombardier Q400 turboprops” he added.

Bombardier Fred Cromer went on. “We are thrilled to confirm that airBaltic will be the first airline in the world to operate the CS300 aircraft. As one of Europe’s leading innovative airlines, airBaltic is successfully reshaping its business plan and expanding network capacities on the backbone of the C Series aircraft – which will provide the perfect fusion of performance, technology and comfort.” “The unrivalled cabin living space offered by the CS300 aircraft will allow airBaltic to optimize its extra capacity seating offerings without comprising passenger comfort, together with world-class flying experience” he added.

Bombardier announce third quarter loss of $4.6 billion

On 29th October, Bombardier reported its financial results for the third quarter, ended 30th September 2015. Earnings (loss) before financing expense, financing income and income taxes (EBIT) totalled a loss of $4.6 billion (around €4.27 billion), compared to earnings of $171 million (around €158.85 million) for the same period last fiscal year. Revenues totalled $4.1 billion (around €3.81 billion) for the quarter, compared to $4.9 billion (around €4.55 billion) for the same period last fiscal year.

Net loss totalled $4.9 billion (around €4.55 billion), or loss per share of $2.20 (around €2.04), due to special items mainly related to impairment charges on C Series and Learjet 85 program tooling, compared to net income of $74 million (around €68.74 million), or earnings per share (EPS) of $0.03 (€0.028), for the same period the previous year. On an adjusted basis, net income amounted to $2 million (around €1.86 million), or EPS of nil, for the third quarter ended 30th September 2015, compared to $222 million, (around €206.22 million) or $0.12 (€0.11), for the same period the previous year.

Bombardier C Series flight test aircraft

Bombardier C Series flight test aircraft

For the three-month period ended 30th September 2015, free cash flow usage (cash flows from operating activities less net additions to property, plant and equipment (PP&E) and intangible assets) amounted to $816 million (around €758 million), compared to a usage of $368 million (around €341.84 million) for the same period last year. As of 30th September 2015, available short-term capital resources of $3.7 billion (around €3.44 billion) included cash and cash equivalents of $2.3 billion (around €2.14 billion), compared to $3.8 billion (around €3.53 billion) and $2.5 billion (around €2.32 billion), respectively as at 31st December 2014. The overall backlog reached $61.8 billion (around €57.41 billion) as at 30th September 2015, compared to $69.1 billion (around €64.19 billion) as at 31st December 2014. A charge of $3.2 billion (around €2.97 billion) was recorded in special items in the third quarter of 2015, mainly related to the impairment of aerospace program tooling.

Needless to say, such performance prompted an in-depth review of the C Series aircraft program. Following the completion of this review Bombardier continues to believe that the C Series aircraft programme meets specific market requirements and that it has long-term market potential.

Bombardier open to foreign investment in the C Series programme

With Bombardier struggling to sell C Series and not having announced a new firm order in more than a year, the company seems open to foreign investment. Asked about the possibility of such investment, Quebec’s Economy Minister Jacques Daoust hinted that a majority stake held by overseas interests would not be unusual. Investissement Quebec, created by the province to provide financing for Quebec companies, has already loaned Bombardier $87.83 million (around €81.59 billion), at market rates in 2009, for CSeries development. Minister Daoust said that the provincial government was ready to help Bombardier but added that the company had not asked for financial help with the CSeries. However, the CSeries has increased Bombardier’s debt, forcing them to consider asset sales or other measures to raise cash. By way of confirmation, as of 30th June, Bombardier had $9 billion (around €8.36 billion), in long-term debt and $3.1 billion (around €2.88 billion), in cash, after going through $808 million (around €750.57 million) in free cash flow in the quarter.

Then on 6th October, Bombardier, following an Airbus Group’s statement, indicating that the Group had held talks with Bombardier, regarding certain business opportunities, confirmed that “such discussions had occurred and are no longer being pursued”. It added, “as previously mentioned, Bombardier will continue to explore initiatives such as a potential participation in industry consolidation. The Corporation will neither comment nor speculate on the potential outcomes of its commercial discussions”. Bombardier had already approached an unnamed Chinese company, but those discussions had ended three to four weeks earlier. Any potential deal involving the sale of aerospace technology to the Chinese would no doubt trigger a federal government review. However, an Airbus deal would have also carried a significant appeal to Airbus as it would keep the CSeries away from China, an obvious long-term competitor and one described as having “deep pockets”.

Government of Québec will invest $1 billion in the C Series aircraft program

Meanwhile Bombardier was having discussions with the Government of Québec, which ultimately resulted in a memorandum of understanding which was announced concurrent with the company’s financial results for the third quarter on 29th October.

The memorandum of understanding which contemplates a $1 billion (around €.928.92 million) investment by the Ministère de l’Économie, de l’Innovation et des Exportations du Québec (through Investissement Québec) (hereinafter referred to as ‘the Government’) for a 49.5% equity stake in a newly-created limited partnership (hereinafter referred to as ‘the Investment’) to which would be transferred the assets, liabilities and obligations of the C Series aircraft program. This newly created limited partnership will be owned 50.5% by Bombardier and, as a subsidiary of Bombardier, will carry on the operations related to the Corporation’s CSeries programme. After the Investment, the newly created limited partnership will continue to be consolidated in Bombardier’s financial results. The Investment has been approved by the Board of Directors of Bombardier and the Cabinet of the Government of Québec, and remains conditional upon “the completion of definitive agreements, the receipt of consents from third parties, the completion of an internal pre-closing reorganization, the receipt of required regulatory approvals and other customary conditions precedent”. The proceeds of the Investment will be used entirely for cash flow purposes of the CSeries program.

The Bombardier statements notes “definitive agreements are expected to be entered into on or before 1st January 2016, or such other date as the Corporation and the Government shall agree, and disbursement of the Investment and issuance of the warrants will occur over two equal instalments, expected to take place on 1st April 2016 and 30th June 2016, respectively, subject to the conditions to closing”.

Alain Bellemare, President & CEO, Bombardier Inc

Alain Bellemare, President & CEO, Bombardier Inc

It adds “the Investment contemplates a continuity undertaking providing that Bombardier shall maintain in the Province of Québec, for a period of 20 years, the newly-created limited partnership’s operational, financial and strategic headquarters, manufacturing and engineering activities, shared services, policies, practices and investment plans for research and development, in each case in respect of the design, manufacture and marketing of CS100 and CS300 aircraft and after-sales services for these aircraft and that Bombardier will operate the facilities located in Mirabel for these purposes”. The Investment was negotiated between Bombardier and the Government at arm’s length and will not materially affect control of Bombardier.

Quebec’s finance minister has said the equity stake is not a subsidy and is “well within permitted standards”.

“Today, we are proud to announce that the government of Québec will invest $1 billion in the C Series aircraft program. This partnership comes at a pivotal time, with the C Series on the verge of certification. The market is there, our leadership is in place, we have the best product and with the support of the government, we are ready to make this aircraft a commercial success,” added Alain Bellemare, President and Chief Executive Officer, Bombardier Inc.

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About the Author

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Jim has had a life-long interest in military matters and aviation. Initially, he fused both of these interests together with a passion for military aviation, initially as a photographer. He has travelled extensively over the years and has been the guest of many European air forces, plus the air forces of the United States, Russia and others throughout the world. His first introduction to journalism coincided with an interest in the civil aviation industry was when he initially wrote for and later edited, ‘Aviation Ireland’, the club magazine of the Aviation Society of Ireland. Jim was a contributor to Flying in Ireland since its inception over 10 years ago and is now a key contributor to this site. He has also contributed items for a number of other aviation magazines and has produced a number of detailed contributions to Government policy documents, most recently the Irish Government’s White Paper on Defence. He is also deeply involved in the local community and voluntary sector and has worked both in local government and central government.



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