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Bombardier Inc. (BBD/B) is transferring most of its commercial-aircraft sales staff outside Canada in a bid to capture growing demand for jets and turboprops in China, the Middle East and Africa.
About three-quarters of the sales team will be placed outside the country by the end of 2012, said Mike Arcamone, who runs the commercial aircraft unit at Montreal-based Bombardier. That’s up from less than 20 percent at the end of last year, said Arcamone, who joined the company on Feb. 1.
“We are going global,” Arcamone said yesterday in an interview in Montreal. “We are moving our sales offices out of Montreal and Toronto. We are changing the footprint in sales. It’s a major transformation.”
That approach will expand Bombardier’s reach in higher- growth markets such as China, which Bombardier predicts will receive 2,200 commercial planes seating 20 to 149 people in the next 20 years. That would be 17 percent of 12,800 global deliveries in that span, according to a Bombardier forecast.
Arcamone’s remarks fleshed out previous comments by the world’s third-largest planemaker about dispersing the commercial-aircraft sales staff. Bombardier said last month it needs more orders this year for models such as Q400 turboprops and CRJ regional jets to avert production cuts in 2013.
After opening sales offices in Dubai, Shanghai, Singapore and Sydney in the past few months, Bombardier is poised to add staff in Russia and other select countries, said Arcamone, who declined to give the size of his sales force or details on Bombardier’s expansion.
After opening an office in Munich to cover western Europe, “we still have a few more to go this year,” Arcamone said. “We just announced a service center in Russia and we will have a sales office in Russia as well. It’s a very active market.”
Bombardier’s Class B shares fell 0.5 percent to C$4.03 at 4 p.m. in Toronto, leaving the stock down less than 1 percent for 2012. That compares with a 1.5 percent drop this year for Boeing Co. (BA), the world’s largest aerospace company, and gains of 10 percent for Airbus SAS parent European Aeronautic Defence & Space Co. and 15 percent for Brazil’s Embraer SA. (EMBR3)
Arcamone is new to aerospace after a 30-year auto-industry career, most recently as chief executive officer for General Motors Co. Korea. (GM) He faces competitors such as Commercial Aircraft Corp. of China and Embraer, and a market for which yesterday’s forecast of 12,800 airliner deliveries over 20 years is 300 fewer than previously projected.
Commercial-aircraft sales accounted for 4.8 percent of Bombardier’s $3.51 billion in first-quarter revenue. Counting sales of business jets, parts and maintenance, aerospace revenue was $1.5 billion. Commercial buyers in 2012 include Ethiopian Airlines and China Express Airlines, while Warren Buffett’s plane-leasing unit at Berkshire Hathaway Inc. (A) ordered business jets last week with a list value of as much as $7.3 billion.
Arcamone said “significant” hiring will occur throughout Bombardier’s international sales network, while declining to give specifics.
“With every sales director comes the marketing team that supports that, the legal team that supports that,” said Philippe Poutissou, vice president of marketing at the commercial-aircraft unit.
Arcamone’s business is presiding over development of the CSeries, Bombardier’s entry in the smaller end of the narrow- body jet segment. Designed to carry 100 to 149 passengers, the CSeries is still set for its first flight this year and a commercial debut by the end of 2013, Arcamone said yesterday during a presentation to analysts and reporters in Montreal.
“Management could have taken the opportunity at the briefing to really start to manage expectations regarding foreseen delays,” Walter Spracklin, an RBC Capital Markets analyst in Toronto who rates the stock outperform, wrote in a note today. “Instead we heard strong conviction that they are tracking to plan.”
Republic Airways Holdings Inc. (RJET), the jet’s biggest customer, remains “very supportive” of the CSeries even while weighing the future of its Frontier Airlines, Arcamone said yesterday. Indianapolis-based Republic has 40 CSeries jets on order.
North America will remain pivotal to Bombardier, because the region will absorb 4,730 new planes in the next two decades, according to the planemaker’s forecast.
AMR Corp.’s American Airlines, Delta Air Lines Inc. (DAL) and SkyWest Inc. probably will announce “major” orders in the next several quarters, according to analysts such as Tim James at TD Securities in Toronto. Their purchases may total more than 300 regional jets and turboprops, James wrote in a June 12 note.
“The U.S. will be the big part of the game this year for regional jets,” Chris Murray, a PI Financial Corp. analyst in Toronto, said this week in a telephone interview. “Everybody is trying to figure out how to bump the older, smaller regional jets and either move to larger jets or turboprops on some routes.”
Arcamone said bigger models such as Bombardier’s 100- passenger CJR1000 may reap additional U.S. orders as airlines win more-flexible union work rules to allow pilots at less- costly regional units to fly those planes, a step up from older 50- and 70-seaters.
“Definitely there is still a market for that product within North America as the restructuring occurs,” Arcamone said. “We don’t want to miss the opportunity that this will provide us.”
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