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Bombardier delivers first CS300 airliner as speculation mounts about an even bigger plane

Alain Bellemare, chief executive officer of Bombardier Inc., speaks during a news conference in Mirabel, Que. on Nov. 28, 2016.

Valerian Mazataud/Bloomberg

Bombardier Inc. delivered its first CS300 aircraft to Air Baltic Monday as investor attention turns to the question of the Canadian company's next plane project, possibly a bigger version of its marquee C Series airliner.

The delivery of the first CS300 built for commercial service capped a revival of the C Series program that many people had considered dead only 12 months ago as Montreal-based Bombardier struggled under the weight of a cash crunch and order drought for the airplane.

"A year ago, a lot of people were thinking that this program would be shut down, that Bombardier would go down," Bombardier chief executive Alain Bellemare told a crowd of employees and VIPs gathered in Mirabel, Que., to mark the transfer to Air Baltic. "Our financial situation was difficult. But I never had any doubts about the quality of the program or the quality of the plane."

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Bombardier spent about $6-billion (U.S.) to develop two versions of the C Series, its big bet to drive revenue in the commercial aerospace business for a generation to come. The smaller CS100, which seats between 100 and 130 people, is currently flying with Lufthansa subsidiary Swiss International Air Lines. The larger CS300, which can accommodate between 130 and 160 people in its densest seat configuration, is scheduled to fly its first paying passengers on Dec.14 with Latvian carrier Air Baltic. Bombardier has sold enough C Series units to ensure five years of production into 2021.

Investors are now speculating what the company's next aircraft will be. Bets range from an all-new plane to a CS500, which would be bigger than the CS300. After its Global 7000 luxury jet comes to market in 2018, the company won't have any new plane programs in its development pipeline.

Bombardier executives are tight-lipped about the possibility of a CS500, saying it's too soon to talk about that possibility. But Mr. Bellemare has been saying for months that he's already thinking about what comes next and the company's request for a $1-billion investment request from the Canadian government could help fund that effort.

Bombardier's situation continues to improve as Mr. Bellemare executes a five-year plan to rebuild profitability. While the company's initial request to Ottawa was for the government to match a $1-billion investment made by Quebec in the C Series program, as a way for the company to share the risk and reward on the plane, it appears to have morphed into a broader request for research and development dollars to help fund Bombardier's next plane.

That is probably more palatable to taxpayers, many of whom have expressed anger at what they view as a bailout request from a company whose struggles are largely of its own making at a time when there are pressing needs elsewhere in the economy. In Toronto, the company's reputation has been sullied recently by its failure to deliver new streetcars on schedule. "Our needs are changing," Mr. Bellemare told reporters, adding Bombardier's $1.4-billion bond sale, which was concluded last week, was the last piece of the puzzle in terms of lowering risk facing the company. "Refinancing our bonds earlier with certainty that we have all the cash needed for the years to come was a big deal."

Whether Bombardier's board of directors will approve a bigger C Series remains to be seen.

The CS300 aircraft already competes against the smallest single-aisle airliners built by giants Boeing and Airbus and a larger version would push it even more squarely into the crosshairs of the competition. As one source close to Bombardier put it: "A CS500 is really playing with fire. Boeing and Airbus will see it as a direct challenge and Bombardier will suffer the consequences."

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On the other hand, building a CS500 would give Bombardier a complete aircraft family to offer and potentially expand its customer base. Rivals are already bearing down on Bombardier and a new plane won't change that, said AltaCorp Capital analyst Chris Murray.

"Hoping a bully goes away isn't a strategy," Mr. Murray said.

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About the Author
Quebec business correspondent

Nicolas Van Praet is Quebec correspondent for the Report on Business. He joined The Globe and Mail in 2014 after eight years at the National Post, where he covered the North American auto industry crisis and several other major stories. More


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