Bombardier ramps up Chinese partnership, faces new challenge - Action News
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Bombardier ramps up Chinese partnership, faces new challenge

Bombardier is deepening its relationship with a Chinese aircraft manufacturer amid pressure from a new line of planes being launched by a Brazilian rival.
Mike Arcamone, president of Bombardier Commercial Aircraft, unveils its CSeries flight test vehicle Thursday, March 7, 2013 in Mirabel, Que. Bombardier expect its first flight test by the end of June of this year. (THE CANADIAN PRESS/Paul Chiasson)

Bombardier is ramping up its relationship with Chinese aircraft manufacturer Comac amid intensified pressure from a new line of regional planes to be launched by Brazilian rival Embraer.

The Montreal-based manufacturer said Monday it signed a new agreement with Comac to enhance the commonalities between the CSeries and the C919 widebody aircraft from Commercial Aircraft Corporation of China Ltd.

The latest definitive agreement will require the two companies to collaborate on areas of non-flying flight testing, sales and marketing, and customer services related to training, technical publications and parts distribution.

"The second phase of Comac and Bombardier's co-operation is expected to contribute further to enhancing the competitiveness of not only the C919 and CSeries aircraft programs, but also of both Comac and Bombardier's overall businesses," Bombardier announced on the first day of the Paris Air Show.

It said the agreement will help each partner to maximize cost savings and market share, while allowing customers to gain cost benefits from operating both aircraft.

World's largest potential new aerospace market

The strengthening relationship is expected to facilitate a number of CSeries orders in the world's largest potential new aerospace market. However, Bombardier has yet to receive any orders from China for its new CSeries family of jets.

Bombardier's efforts come as Embraer announced at the Paris Air Show the launch of a second generation of E-Jets.

The first of three E-Jets E2 family of planes is expected to enter into service in the first half of 2018, followed by other planes in the following two years.

"The launch of the E2 builds on our vision to offer leading-edge commercial jets with a capacity right-sized for 70 to 130 seats, seamless mainline comfort, and performance for flexible and efficient utilization by regional, low-cost, and network carriers," stated Embraer CEO Frederico Fleury Curado.

Pressure from Brazil

Walter Spracklin of RBC Capital Markets said the updated Embraer aircraft puts pressure on Bombardier's old CRJ regional jet and CSeries products. He said Embraer will have an advantage winning orders with existing customers because cockpits on the new planes will be similar to the planes in service.

"We believe that it will be a tough sell for competitor airframers to displace Embraer in the future with airlines that have the current E-Jet family in their fleets," he wrote in a report.

With its longer range and better anticipated economics, the all-new CSeries will "provide for enough of a differential such that the two products will largely target two different customer bases," Spracklin said.

But he said the E2 will better compete against Bombardier's CRJs.

Bombardier responded by saying its existing products are able to compete, but Spracklin believes the company will need to either launch a new regional jet or concede market share in the regional jet segment.

Meanwhile, Bombardier identified the buyer for one of its previously announced orders for 10 CSeries passenger jets.

It said an order announced two years ago was placed by Odyssey Airlines, which plans to operate business-class service from London City Airport.

Bombardier said the CS100 jets ordered by Odyssey have a list price of US$628 million.

The company has received commitments for 388 CSeries aircraft, including 177 firm orders.

On the Toronto Stock Exchange, Bombardier's shares fell 10 cents, or two per cent, at $4.68 in Montreal morning trading.