Bombardier reacts to surging backlog
“A strong market for strong products” is driving growth at Bombardier Aerospace, according to president and chief executive officer Pierre Beaudoin. The Canadian group is increasing its 27,000-strong workforce even as it faces the challenge of achieving earnings growth targets subject to currency exchange fluctuations that have led it to outsource more work to lower-cost partners.
The company’s latest move is to set up a major aerostructures assembly and electrical-harness fabrication plant in Queretaro, Mexico. In less than two years, Bombardier established 1,000 new jobs there, a number it expects to triple before 2010. “Queretaro is bringing down our manufacturing costs,” said Beaudoin.
Nevertheless, Beaudoin warned that the company could face a possible economic downturn that from his perspective is “not yet evident in aerospace.” Bolstering Bombardier against this prospect is a $22 billion backlog (compared with $13 billion 12 months earlier and $10 billion in each of the preceding two years).
Strategy and business development vice president Mairead Lavery unveiled Bombardier’s latest market forecast two months ago, saying yield pressure and high fuel costs will drive orders for larger aircraft with lower operating costs. Increased demand for 20- to 149-seat aircraft since 2004 and predictions that the market will double by 2027 has led the company to increase its 20-year forecast for deliveries.
Lavery said 12,900 aircraft will be needed, 15 percent more than the company suggested 12 months ago and with a major shift toward larger regional jets. While 20-year requirements for aircraft with fewer than 60 seats have fallen from 1,000 to 500, the forecast anticipates a 42-percent increase (from 4,300 to 6,100)
in demand for 60- to 99-seat aircraft. There will be a more modest 6.8-percent growth in deliveries of 100- to 149-seaters (up from 5,900 to 6,300).
Overall, shipments of new aircraft worth an estimated $528 billion will see the 20- to 149-seat fleet grow to 17,300 aircraft (with 6,600 aircraft being retired). Of these, 8,600 aircraft will have more than 100 seats, 7,200 will accommodate 60 to 99 passengers and 1,500 will seat 20 to 59.
C-Series’ Time Has Come
Regional operators are generally increasing the size of their aircraft, according to Bombardier commercial aircraft president Gary Scott. He said they are replacing 50-seaters with 70-passenger units that, in turn, are giving way to 90-seat models. The development supports Bombardier’s view that its proposed C Series variants providing 110 and 130 seats are required in place of 100-passenger models.
Acknowledging that major manufacturers Airbus and Boeing have achieved commonality by downsizing the A320 and 737 families to offer 100-plus seat variants, Scott argued that the major airframers’ “sweet spot” is 150 seats and above.
The fly-by-wire C Series, which is aimed at the lower end of the 100- to 149-seat market, has been revitalized after a pause in development by adoption of the new Pratt & Whitney geared turbofan (GTF). Bombardier said the new engine concept will account for six tenths of the new single-aisle transport’s claimed 20-percent fuel burn advantage over any in-production aircraft in its class. The airframe and wing will be almost 50 percent composites. Scott said the cabin is “half a seat wider than a DC-9, half a seat narrower than a 737. There likely will be six C Series variants, with basic and extended- and long-range versions of 110- and 130-seat models.
The company is developing the new jet with Chinese requirements in mind. “We are working with AVIC to address the market,” said Scott, who wants “one or two quality [launch] customers for 50 to 100 aircraft.”
Speaking of the location for final assembly, Scott said the initial preference is Montreal, where the availability of government investment is a consideration, but Kansas City, Missouri, is also a possibility. Bombardier’s factory in Belfast, Northern Ireland, is a candidate for the wing, again linked to availability of government aid. The manufacturer hopes partners and governments can share the $2.5 billion risk equally, and said it is on schedule to make a decision this year.
Dash 8 Stretch Studied; CRJ 1000 to Fly
Studies of a Dash 8-400X 90-seat stretched variant continue, incorporating more powerful turboprop engines, beefed-up wings, landing gear and brakes, larger tires, more baggage capacity and longer range. But Bombardier is in no hurry, Scott said. “Right now we can sell as many [Series 400s] as we can build,” he declared.
The CRJ Series1000 regional jet, with higher-thrust engines, larger wing, more baggage space, and improved avionics, is scheduled to fly this month and enter service late in 2009.
Last year’s record business aircraft orders, deliveries, revenues and backlog value occurred as manufacturers prepared to introduce 20 new models or variants in the next five years, according to Lavery. She said more than 50 percent of orders now come from outside North America and predicted that markets in the Asia Pacific region, Latin America and the Middle East will lead growth.
In the next 10 years, deliveries will be much higher than Bombardier was predicting just 12 months ago. Stimulated by recent orders, they will be well over double those of 1998-2007, said Lavery, who forecast 1,320 deliveries each year through 2017, compared with last year’s predicted 995 average annual shipments. Those figures exclude very light jets (VLJs), broadly defined by Bombardier as comprising the Eclipse 500, Cessna Citation CJ 1+ and 2+, and Hawker Beechcraft Premier I, and accounting for less than 5 percent of market revenue.
A predicted 13,500 orders and 13,200 deliveries during the period 2008 to 2017 contrasts with about 8,200 orders and 6,200 deliveries in the past 10 years. The manufacturer noted a 30-month industry backlog covering almost 2,600 business aircraft worth more than $60 billion. This represents a “significant buffer” against recession, Lavery said, but she warned that lots of new aircraft entering the global fleet by 2017–which by Bombardier’s count would be 24,800, excluding VLJs–could reduce residual values.
Never has Bombardier Business Aircraft had such a backlog following orders for record numbers of aircraft–more than 450 this financial year–with business aircraft president Steven Ridolfi citing the Middle East as a coming market that has not been penetrated. Based on recent production rates, there is up to almost four years’ work: Learjet backlogs cover 16 months’ production, Challengers some 27 months and the Global series a full 45 months. During 2004 to 2007, Ridolfi said the company took a 29-percent share of market revenues, excluding VLJs.
Bombardier’s model line includes three Learjets (40XR, 45XR and 60XR), three Challengers (300, 605 and 850) and the two Global models (Express XRS and 5000). Scheduled developments include the Global Vision flight deck, a 400-nm increase in Global 5000 range, enhanced-vision systems, approval for London City Airport operations, optional heads-up guidance for the Challenger 605 and an enhanced Challenger 300 cabin.
The two-pilot, eight-passenger Learjet 85 currently under development–the first all-composite jet certified for U.S. FAR Part 25 operations–offers more cabin volume, speed and range than anything in its class, including Mach 0.82 cruise and four-passenger range of up to 3,000 nm.
Improved Bombardier manufacturing plans include increased Challenger capacity in Montreal, overhauled production in Toronto, lean initiatives, moving the completions line for Global aircraft and a “U-line” Challenger 605 assembly. Ridolfi expects customer satisfaction to improve following planned introduction of more-timely parts deliveries, fewer open service items, better AOG support, promotion of safe operations and a carbon offset program.