C Series could hold key to Bombardier’s future

 - October 1, 2009, 8:46 AM

The future of Bombardier Aerospace’s airline business might well hinge on what becomes of the final product that emerges from last month’s official ground breaking of a new complex in Mirabel, Canada, dedicated to the C Series airliner. The ceremony, held on September 15 and attended by some 200 company employees, government dignitaries, labor representatives and media, formally launched work on the first of five phases of construction known as the complete integrated aircraft systems test area (Ciasta)–a testing and proving facility that will house a “virtual” C Series test aircraft designed to assess systems for reliability and functionality a full year before the first prototype flies.

Once complete, Mirabel’s Ciasta will house the C Series integrated systems test and certification rig (ISTCR), or so-called “iron bird.” Meant to facilitate early product maturity, the iron bird will test flight-control systems, avionics, electrical and environmental controls. Other test articles planned for the building include an interiors rig, a systems integration test stand and engineering simulator and flight controls integration lab.

Hosting the ceremony last month in Mirabel, Bombardier Aerospace president and COO Guy Hachey called it a “red letter” day for the C Series program and, in understated fashion, an “important” day for Bombardier Aerospace. “Some of you might be surprised to see us investing so much in the area of commercial aviation,” said Hachey, referring to the roughly $3 billion the company has committed to the project. “But we must not be misled by the fits and starts of the economy. In the aerospace industry, we must work with timelines that cover the next 15 to 20 years. And for the long term, the prospects for commercial aviation are extremely positive.”

Hachey even projected a somewhat positive outlook for the C Series’ sales prospects for the short term, predicting that the 110- to 145-seat pair of airliners would garner another sale this year after generating firm orders for 50 airplanes from two customers since Bombardier announced the development of the project to replace the stillborn BRJ-X in 2005. “We believe we are now at the bottom, and basically we’re bouncing off the bottom; it’s not going down either in the business aircraft or the commercial aircraft segment,” said Hachey. “But we expect in the next three or four quarters, maybe the next two or three quarters, things to start picking up.”

Launched on the strength of a letter of interest from Deutsche Lufthansa during the 2008 Farnborough Air Show, the program has since seen Lufthansa convert its LOI to a firm order for 30 SC100s and Dublin-based Lease Corporation International place another firm order for 17 CS300s and three CS100s.

Scheduled for certification in 2013, the program moved into its joint definition phase in March, at which point Bombardier began colocating suppliers at its C Series product development center in the Montreal borough of St. Laurent.

Bombardier has signed contracts and confirmed 98 percent of the suppliers for the C Series; some 1,000 Bombardier employees and another 350 supplier personnel now work together in the Montreal facility, according to Bombardier Aerospace vice president of commercial aircraft programs Ben Boehm.

In the same borough of St. Laurent, Bombardier’s Plant 1 will serve as the site of cockpit and aft fuselage production, while the company’s plant in Belfast, Northern Ireland, takes responsibility for the wings and composite structures. China’s Shenyang Aircraft Company (SAC) has agreed to supply the center fuselage.

In fact, SAC in August delivered an aluminum-lithium C Series test barrel to Bombardier’s St. Laurent plant, where last month workers loaded the fuselage section onto a rig to begin pressure and torsion testing this December. Over the next two months workers plan to install more than 300 sensors on the barrel, then begin some two years of testing designed to simulate 180,000 operational cycles.
Plans call for Bombardier to test all flight commands, avionic circuits, electrical circuits and climate controls at the new Mirabel facility–an important advantage, according to Boehm, “because we will be able to identify potential problems related to the use of new state-of-the-art technology and the implementation of new advanced processes and thus be able to provide solutions.” Bombardier also plans to conduct most of the 1,800 hours of its program’s planned flight testing at the Mirabel site.

Eventually, Bombardier plans to erect a complex of buildings, standing adjacent to the company’s existing CRJ assembly hall in Mirabel, that will total 860,000 sq ft. Bombardier has hired Weiland-Dafco Quebec and Ghafari Associates to build the Ciasta as a Leadership in Energy and Environmental Design (LEED) building, the first such structure for the company. LEED is a third-party certification program and an internationally accepted benchmark for the design, construction and operation of so-called “green” buildings. Making use of existing resources where possible, the
contractors will reconstruct an existing fuel-flow building to build the Ciasta.

Notwithstanding the rather lukewarm sales response the C Series has generated so far, Boehm noted that the program, if it does draw the anticipated additional order this year as the company expects, will have collected as many sales as the Boeing 787 did at around the same period in its development. “When we first started into this segment, a lot of people said, ‘Well, you’re getting into the Bermuda triangle of airplanes,’” said Boehm. “But we keep reminding people that there are over 5,000 hundred- to 149-seaters out there flying today that most airlines love. At Northwest Airlines there are [DC-9] fuselages in there that are over 30 years old.”

However, new technology will allow the C Series to meet today’s environmental needs, as well as provide transcontinental range not available with DC-9s, for example. Meanwhile, Bombardier expects the 110-seat CS100 to effect a 16- to 17-percent cash operating cost advantage over the Embraer E195, Airbus A318 or Boeing 737-600 with winglets, while an SC300 would do the same over an A319 or 737-700 with winglets, said Boehm. Bombardier advertises a 20-percent fuel burn improvement over those airplanes, and “fuel-burn-wise, we are over 70 percent lower than a DC-9,” said Boehm.

The Bombardier v-p said the program’s sales team is talking with roughly 150 potential customers, “some in more advanced stages than others; each of them looking at it in a different way,” for example, from the perspective of low-fare carriers, major airlines and even some regionals studying new business plans.
Still, “the airlines aren’t necessarily in a rush to be putting all these orders in,” said Boehm. “They’ve got another four years to wait as well.”

It now appears potential customers for the next-generation single-aisle airplanes from Boeing and Airbus will have to wait more than a decade for similar cost-basis improvements Bombardier has promised for the C Series, possibly giving the Canadian company a six or seven-year head start in any direct competition between its product and the presumed A320/737 replacements.

“The question really is ‘Where is their design point going to be?’” said Boehm. “All the indications [suggest that] the next-generation replacement [for their narrowbodies] needs to actually get bigger; otherwise they’ll have a [product] gap…Their design point is already somewhere between 150 and 160 seats today. So, as a bare minimum, I highly doubt they will ever make their design points smaller.”

Boehm acknowledged, however, that Bombardier might face a disadvantage in the industry perception that paints it as a small-aircraft manufacturer. “It is a bit of a hurdle that we have to [face] to move into the mainline market to compete a little bit more closely with Boeing and Airbus,” he admitted. “But we’ve dealt with Lufthansa, we’ve dealt with the Northwests in the past. But having said that, yes, moving into the mainline market, there are a few adjustments we need to make, but it’s not something utterly brand new to Bombardier.”

However, he wouldn’t accept the idea that Bombardier needs to overly concern itself with the pricing power Boeing and Airbus might bring to bear on shrunken variants of their replacement narrowbodies. “This is market-based pricing; it’s not one where there’s some magic formula, where you step into this other world with different pricing,” said Boehm. “I would agree that Boeing and Airbus can sometimes leverage deals–[for example], a 747 deal with a narrowbody deal. But more and more nowadays you’ll find that the interactions with the airlines in these economic situations are about the right airplane and not about, ‘Let’s fire-sale buy this airplane.’ Airlines that have tried doing that in the past are the ones that have gotten caught.”

Now employing some 1,200 people dedicated to the C Series project in Quebec and Northern Ireland, Bombardier plans to hire roughly another 300 engineers by next summer for the program, according to Hachey. The company expects that by 2017 the C Series will employ some 3,500 workers worldwide.

In two separate rounds of cuts, Bombardier this year laid off some 4,360 employees due to the slump in business jet orders. Depending on how well its CRJ line weathers the commercial airliner sales drought, Hachey said during the company’s September 2 earnings call that it might need to resort to more layoffs at its regional jet production line in Mirabel, where the CRJ700, CRJ900 and CRJ1000 undergo final assembly.