American Airlines Boosts Bombardier’s CRJ Position

 - October 1, 2009, 8:48 AM

The fortunes of Bombardier Aerospace’s regional jet business received a considerable boost last month when American Airlines announced the signing of a letter of intent covering the conversion of an option for 22 CRJ700s. During a September 17 conference call, American Airlines executive v-p and CFO Thomas Horton said he expects Bombardier to start delivering the new airplanes–equipped with dual-class cabins–to its American Eagle regional subsidiary some time near the middle of next year. He also said he expects the airline to secure full financing for the transaction, implying no effect on American’s cash position and heightening the prospect of a straightforward and relatively expeditious conversion to a firm order. American Airlines also said it plans to convert all 25 of its existing CRJ700s to a two-class configuration.

The announcement comes as Bombardier weathers an airliner sales drought exacerbated by the recent cancellation of an order for 15 CRJ1000s by Italy’s MyAir, which recently lost its operating certificate due to financial troubles. Bombardier also awaits a decision by the Supreme Court of Canada on a $1 billion claim by Kuwait Airways against Iraq. The case has delayed delivery of nine of 10 CRJ900s to Iraqi Airways, which Kuwait wants to hold liable for damages it suffered during the first Gulf War. Before the American Airlines announcement, Bombardier Aerospace president and COO Guy Hachey said the company was considering cutting CRJ production at its plant in Mirabel, Quebec, in response to weakening demand for its RJs. However, he said, much would depend on the success of several sales campaigns.

The announcements accompanied news that American had secured $2.9 billion in new liquidity and aircraft financing, and that the airline would institute a series of network changes designed to strengthen its Chicago, New York, Los Angeles, Dallas and Miami hubs.