Soft Market for Regional Aircraft Will Prompt Bombardier To Revisit Rate Cuts This Fall

 - September 1, 2011, 11:25 AM
CRJ production will remain stable for the time being while Bombardier attempts to restore a healthy backlog. (Photo: Bombardier)

Bombardier Aerospace continues to suffer from what executives characterized as a soft market for regional aircraft. However, the company stopped short of announcing further cuts to production rates as widely expected. It plans to revisit the possibility of rate cuts to both the Q400 turboprops and CRJ regional jets this fall, Bombardier Aerospace president and COO Guy Hachey said during the company’s second-quarter earnings call on Wednesday.

Anticipating building some 90 CRJ regional jets and Q400 turboprops during the 11-month period ending December 31, Bombardier earlier this year signaled a “slight reduction” of turboprop rates to take effect this fall to help its Q Series backlog stabilize at nine months. Analysts expect a similar announcement related to CRJs, the backlog for which now stands at 15 months.

Bombardier’s target for both aircraft types remains 18 to 21 months.

While acknowledging that orders did not materialize as quickly as expected over the past few months, Hachey revealed the existence of “six or seven” campaigns for the Q400, most notably in emerging markets such as India. He also talked of “three or four” CRJ campaigns that have moved into advanced stages. 

“We anticipated the regional market to pick up faster,” said Hachey. “It has not happened; there’s still a lot of uncertainty in the marketplace…However, if I look at the two different product segments, the Q400 as an example, we are still seeing a lot of activity and a very solid pipeline.

“So even though we’ve not reflected substantive orders in the last two quarters, there is a need, there is a desire from the customers to replenish their fleets, but there’s anxiety, and they’re sort of waiting on the sidelines.”

Hachey reported that the Q400 rate reduction should prove sufficient from now until the end of this year. “On the CRJ, we’re OK for this year in terms of the skyline and the backlog,” he said. “However, next year we still have quite a few positions open on our skyline.” 

The company also reported “no abatement of interest” in the C Series narrowbody, following a flurry of sales activity culminating in a firm order from Korean Air and the launch by Boeing of its re-engined 737. “In that time frame we progressed with many other customers,” said Hachey. “Now that I think that there’s more visibility of what the competitors are doing, I think it is good for the C Series.”