Bloomberg News

Bombardier May Decide by Year-End on Comac Tie-Up, Hachey Says

October 11, 2011

Oct. 12 (Bloomberg) -- Bombardier Inc. hopes to decide by the end of 2011 whether to move ahead on a potential partnership with Commercial Aircraft Corp. of China on narrow-body jets, the head of the Canadian company’s aerospace unit said.

The two companies are working through a memorandum of understanding to see how they might share features between Bombardier’s planned CSeries and the Chinese maker’s C919, Guy Hachey said Oct. 11 in Las Vegas. The planes are being built with similar materials, so there may be opportunities in purchasing components and working with suppliers, he said.

Planemakers such as Montreal-based Bombardier and Comac, as the Chinese company is known, are developing models that compete with Airbus SAS and Boeing Co., the world’s largest commercial- aircraft manufacturers. The C919 will be larger than the CSeries, so those models would be complementary rather than competitive, Hachey said in an interview.

Bombardier, the world’s third-biggest maker of commercial aircraft, has five teams working on the potential tie-up, he said. Sales, marketing and distribution, as well as long-term product development, are also areas of interest for cooperation with Shanghai-based Comac, Hachey said.

The company isn’t considering offering an equity stake to Chinese investors, said Hachey, who spoke at a meeting with analysts and journalists.

‘Against a Wall’

The Bombardier executive said the company is pressing to meet its timetable for the CSeries to enter service in 2013. The top areas of concern are the fly-by-wire cockpit controls, the avionics, the electrical system, the composite wing and the fuselage that’s being built in China, Hachey told the analysts and journalists.

“We’ve used up a lot of our contingency in terms of time, so we are up against a wall in terms of meeting our schedule,” he said. “I don’t see a major miss, if we do have a miss.”

Bombardier is learning from the years of delays to Boeing’s new 787 Dreamliner and Airbus’s A380 superjumbo jet and A350, Hachey said in an interview. Those larger companies have struggled with new materials, technology and manufacturing systems being used with their latest models.

“I don’t feel in any way that we’re in the same basket as those programs, but are we under pressure? Absolutely,” Hachey said in the interview. “What we’re trying to do is create an enormous amount of transparency so that we’re all aware, so that our people are trained in risk management and also not afraid to tell us if there’s an issue, so we can deal with it.”

Keeping to Schedule

The CSeries will be “wildly successful,” he said at the meeting, held during a National Business Aviation Association conference. He reiterated that the CSeries is on track for its maiden flight by the end of 2012 and first delivery, to a yet- undisclosed customer, by the end of 2013.

Bombardier’s aerospace unit accounted for 49 percent of revenue in the year that ended in January.

Bombardier forecast that the industry will need 7,000 planes in the CSeries-sized segment of the market -- 100 to 149 seats -- during the next 20 years. The CSeries will compete against the Airbus A319neo and the Boeing 737-700 MAX, the smallest models offered by those rivals.

“We’ve been able to get the lion’s share of every order in that segment,” he said. “People were saying it’s a paper plane, you’ll never get it done. As we get closer, we’re dispelling that.”

Airbus and Boeing are responding to increased competition from Bombardier, Comac and others by offering new, more fuel- efficient engines with their planned neo and MAX derivatives, being developed now.

Timing Advantage

While some potential customers are waiting to place orders until they know more details about the 737 MAX, which Chicago- based Boeing is still completing, Bombardier still has an advantage in terms of timing, Hachey said.

The CSeries’ planned entry into service will be two years ahead of Toulouse, France-based Airbus’s A320neo, due at the end of 2015, and about four years ahead of the 737 MAX, which Boeing plans to begin delivering in 2017.

The Bombardier plane’s CS100 model has a list price of $58.3 million, while the larger CS300 sells for $66.6 million. Airlines typically negotiate discounts.

Hachey said he’s spending most of his time now on the CSeries, after Gary Scott, president of Bombardier’s commercial- aircraft business, retired Oct. 1 to help an ill family member. Hachey said he hopes to name a replacement by Christmas.

He said he’s not too worried about the areas of concern that Bombardier has identified for the CSeries “because we know about them, so we’re making contingency plans.”

“It’s the ones we don’t know that will bite us that I’m most worried about,” he said. “As we get closer to first flight those will start popping up, but hopefully they won’t be too major.”

--Editors: John Lear, Stephen West

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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