A Delta C Series order could ‘ease pressure’ on Learjet, analyst says

Bombardier’s successful completion of a deal to sell a major U.S. airline a fleet of its new C Series airliners likely would have a positive effect across the company’s operations, including at Learjet in Wichita, an analyst said Friday.

“It’s the biggest and best thing to happen to Bombardier now and in the foreseeable future,” aviation forecaster Rolland Vincent said.

Bombardier Inc. is near an agreement to sell up to 75 of its CS300 aircraft – the largest of its two C Series variants – to Delta Air Lines, a person familiar with the talks said. Delta also is seeking options for 50 more of the single-aisle jets to replace some of the oldest and smallest planes in its fleet, said the person, who asked not to be named because the talks are private.

The carrier’s potential commitment for 125 of the narrowbody composite airliner would equal about half the total orders Bombardier already has in hand.

A final decision hasn't been made, Delta said in an e-mailed statement.

Bombardier Commercial Aircraft spokeswoman Marianella de la Barrera declined to comment on the Delta report. She said in an e-mail to The Eagle that the company is “in discussions with a number of operators and we’ll disclose agreements when finalized.”

The Delta order would ease the pressure on Bombardier’s business aircraft unit, including Learjet, Vincent said.

The C Series – Bombardier’s newest and biggest jet program – is two years late and more than $2 billion over budget. Its delays and cost overruns likely led to the cancellation of the Learjet 85 program, which in turn cost the Wichita economy more than 600 jobs at the Bombardier Learjet plant on the west side of Wichita Eisenhower National Airport.

The company also operates the Bombardier Flight Test Center in Wichita, adjacent to the Learet plant, where both the CS100 and CS300 have undergone and are undergoing pre- and post-certification flight testing, de la Barrera said.

“I think a lot of the pressure that’s been around the company … a lot of it is due to the C Series program delays and overruns,” Vincent said.

With the Delta order, Vincent added, “I think some of that pressure can begin to subside.”

But Vincent and George Ferguson, senior analyst for aerospace and airlines at Bloomberg Intelligence, said Bombardier would have to offer Delta a steep discount on its $82 million list price for the CS300. That’s because it is competing against Airbus and Boeing for the order with Delta, which is seeking to replace its fleet of 115 MD-88 narrowbody jets

“Bombardier needs this order,” Ferguson said. “The challenge here for the manufacturers is being very aggressive. Even if Bombardier gets the order, it’s going to be painful price-wise.”

But winning an order from Delta “brings them to the big table” and automatically makes the C Series program successful, Vincent said, even if there’s little to no profit for Bombardier to make winning it.

“They absolutely need one of the big three U.S. carriers to endorse this aircraft,” Vincent said, adding that the Delta deal likely would lead to orders from other major airlines.

“Some carriers wait to see what others do” before placing their own orders on new aircraft, he said.

Vincent said Bombardier winning the Delta order also would soften what he thinks will be an “ugly” first quarter 2016 earnings announcement, scheduled for April 29.

“I think there will be some pretty brutal numbers in the earnings report,” he said. “The best thing that can happen to them right now is a large order for the C Series.”

This story was originally published April 15, 2016 at 5:28 PM with the headline "A Delta C Series order could ‘ease pressure’ on Learjet, analyst says."