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Bombardier’s biggest C Series customer casts doubt on order

Bombardier employees look at the one of the new C Series aircraft after its first test flight in Mirabel, Quebec, on Sept. 16, 2013.

CHRISTINNE MUSCHI/REUTERS

The single biggest customer for the new Bombardier Inc. C Series airplane is raising doubts about whether it still wants the aircraft, another potential blow to the company's attempt to carve out a profitable niche in the biggest segment of the large commercial airplane market.

Airline holding company Republic Airways Holdings Inc. has 40 C Series planes on order, but is focusing for the medium term on its feeder airlines that use regional jets to fly between smaller centres and link passengers in those cites with the hubs of larger airlines.

Republic said in a presentation to investors on Tuesday that by the end of 2016, its fleet will consist of smaller Embraer E170 and E175 regional jets and Bombardier Q400 turboprops and no C Series.

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Republic chief executive officer Bryan Bedford said in an e-mail exchange that the company is not considering cancelling the order, but the CS300 planes on order don't fit into its plans.

His comments follow the announcement last week by Air Canada that it intends to hang on to its 25 remaining Embraer E190 regional jets for the foreseeable future. Bombardier was believed to have been a leading contender for a new order from the country's largest carrier for narrow-bodied airplanes.

"We're focused on our core fixed-fee business," Mr. Bedford was quoted as saying by Bloomberg news service. "There is no place to operate the C Series in that model."

It's possible the purchase agreement with Bombardier, which was worth $3.06-billion in revenue to the Montreal-based transportation giant has value and thus becomes an asset that can be sold, he said.

The C Series program, whose original $3.4-billion cost has expanded to well above $4-billion, is Bombardier's bid to grow beyond its regional jet and business jet business and into a niche served by smaller versions of the A320 from Airbus Industrie SA and the Boeing Co. 737.

But that has sparked a ferocious competitive response from the two giants, which operate in a profitable duopoly. Although other challengers besides the C Series are under development, the Bombardier plane is the furthest along. It was, in fact, scheduled to be flying passengers already, but has been delayed several times.

"You have Airbus and Boeing being unbelievably aggressive to do things they normally wouldn't do," said one industry source, who spoke on condition of anonymity. Late last year, for example, Boeing agreed to buy 20 of Air Canada's E190 regional jets in return for a 61-plane order for Boeing 737 Max planes, which have new, more fuel-efficient engines introduced to help blunt the impact of the major selling point of the C Series – better fuel economy.

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Bombardier has a firm contract with Indianapolis-based Republic, Bombardier Commercial Aircraft spokeswoman Marianella Delabarrera said.

"They've agreed to purchase the aircraft, we've agreed to sell them the aircraft and come whatever their delivery dates are, they will pick up their aircraft," Ms. Delabarrera said.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

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