New Development Programs Stretch Bombardier
The demands of four new jet aircraft development programs, coupled with anemic sales of its Learjet business jet brand and regional jets, fueled a cash burn pyre that persuaded analysts to issue a fresh round of stock downgrades for Bombardier in September. In the last quarter, the OEM drew down $1 billion of cash reserves against $211 of net income, double for the same period a year ago. Its market capitalization is $7 billion and the cash burn rate set off caution lights for stock analysts. The news is not cataclysmic; most now rate the company as “market perform,” but from early July through the end of September, Bombardier stock lost 43 percent of its value.
Hopes that the company’s new CSeries single aisle “super-regional” 110- to 149-seat jet would take big market share away from Airbus and Boeing appear to be fading, at least for now, as both of those companies announced re-engine programs and big orders for their legacy narrowbodies. New competition from the Russian Sukhoi Superjet and aircraft under development in Japan and China could also crimp its CSeries ambitions.
There are also hints that the CSeries may not make it to market by 2013 as scheduled, and they are being dropped by Bombardier Aerospace president Guy Hachey. Big chunks of the $3.5 billion development program have been outsourced as part of a complicated global supply chain. This includes fuselage manufacture to China’s Shenyang Aircraft, part of state-owned AVIC.
Over the summer Hachey conceded that “areas” of the CSeries were “off our schedule” but said that the company was not ready to issue a revised program timetable–yet.
While no one envisions problems for the CSeries of the same magnitude that Boeing suffered on its recently certified 787, the CSeries does pose considerable manufacturing and technical risk because of both the degree of outsourcing and the large amount of new technology being incorporated into the aircraft. That includes composite wings, a high-tech metal alloy fuselage with aluminum-lithium skins, the new Pratt & Whitney PW1521G geared turbofan engine and fly-by-wire controls. It is this technology that Hachey believes will deliver a large enough operating efficiency advantage to differentiate the CSeries from competitors.
Learjet 85 Still on Schedule
The all-composite Bombardier Learjet 85 similarly represents above-average technical risk and creates a new niche between midsize and super-midsize business jets. It is scheduled for certification in 2013. That program for the 3,000-nm jet (four passengers) remains on schedule for now, but over the summer Bombardier admitted that certain capital expenditures related to the program have been “moved to the right.”
Like the CSeries, the $17.2 million (2008 $) Learjet 85 relies on a global supply chain, but this one is more within Bombardier-owned companies. Plans to outsource fuselage development and early production to Germany’s Grob Aircraft faded when that company filed for insolvency in 2008.
Throughout Bombardier, approximately 1,250 employees are dedicated to the Learjet 85 program and it is using the company’s engineering and manufacturing assets in Canada, Europe, Mexico and the U.S. The Belfast, Northern Ireland, facility will make wing planks, spars and other parts using resin transfer infusion technology (RTI), the same composite technology tapped for the CSeries airliner. Bombardier’s Queretaro, Mexico plant will assemble the wings and the fuselage before they are trucked to Wichita in the U.S. for final aircraft assembly.
Bombardier has tried to take as much variability as possible out of the Learjet 85’s composite manufacturing process by making it repeatable using a process whereby digital engineering drawings of the composite plies are projected onto the mold. This allows precise placement of each ply and layer of composite material and should aid in weight control. Bombardier is now focusing on getting the process down to where it is repeatable at the correct production volume.
While drawing heavily on company resources for the Learjet 85, Bombardier still is relying on 41 “major” suppliers for the aircraft and is using a collection of 63 test rigs at these companies to ensure that all of the aircraft’s components work properly when installed. Major vendors on the 85 include Pratt & Whitney Canada (engines), Rockwell Collins (avionics), Lufthansa Technik (cabin management system) and C&D Zodiac (interior).
For some time Bombardier has said it has approximately 60 orders for the aircraft. This summer it announced that its fractional shares arm, Flexjet, would be the launch customer with an order for seven aircraft. The 85 could help rejuvenate the languishing Learjet brand that delivered only 28 aircraft in all of 2010, but is slowly recovering with 19 deliveries in the first six months of 2011. Still, the Learjet production backlog currently is just six months.
Globals Bring Good News
There is good news from the Globals. Bombardier’s large-cabin jets, the XRS/6000 and 5000, continue to be popular sellers and have a healthy backlog that extends out 36 months. The Global line was further buoyed by a $2.8 billion order in March from fractional provider NetJets for 30 current production Globals and 20 new-generation Global 7000 and 8000 aircraft expected to come on line beginning in 2016. NetJets also took options for an additional 70 Globals that could boost the deal’s total value to $6.7 billion. Deliveries of the in-production aircraft begin late next year.
Bombardier also has received orders for its 7000/8000 Globals from fleet operators, including VistaJet and AVWest.
The new Globals will use the same fuselage cross section as the current production Global aircraft but it will be longer; the 7000 by 11 feet, three inches and the 8000 by two feet, three inches, and feature larger cabin windows. Not all details for the aircraft have been announced, but Bombardier has said that the aircraft will feature a new thin high-speed wing, fuel-efficient GE TechX engines (16,500 pounds of thrust each) and a Global Vision avionics suite (likely based on the Rockwell Collins Pro Line Fusion system, but that has not yet been confirmed).
Bombardier said that both aircraft, at Mach 0.90, will beat the new Gulfstream G650’s range. At Mach 0.85 the Global 8000 has a range of 7,900 nm and the 7000 has a range of 7,300 nm. Both aircraft are expected to sell in the $65 million (2010 $) range and have a maximum takeoff weight near 105,000 pounds.