Delta Air Lines agreed to buy at least 75 of the state-of-the-art C Series narrow-body airplanes, which have struggled to make inroads against single-aisle aircraft made by rivals Airbus and Boeing.
A breakthrough order from Delta Air Lines has finally established Bombardier as a real challenger to the Boeing and Airbus duopoly at the smaller end of the commercial-jet market.
Delta on Thursday finalized a firm order for 75 of Bombardier’s state-of-the-art CSeries narrowbody jetliners, providing the market validation from a high-profile U.S. airline the Canadian jet maker has long sought.
The plane features new, fuel-efficient Pratt & Whitney geared turbofan engines and carbon-composite plastic wings. Its light, all-new design is aerodynamically superior to the latest Boeing 737 MAX and Airbus A320neo models, which feature similar new engines on older airframes.
Bombardier claims the CSeries will be 15 percent cheaper to operate than the current Boeing 737 and Airbus A320 models, and 10 percent cheaper than the new MAX and neo models. It will also be significantly quieter.
Most Read Business Stories
- Boeing will hire hundreds of temporary employees at Moses Lake as it prepares for 737 MAX's return to service
- Where a recession might hurt the Puget Sound region worst | Jon Talton
- A 'pivotal year' for Nordstrom: New NYC flagship store part of a huge bet on the company's future
- T-Mobile's promise of widespread 5G comes a step closer with new Bellevue lab VIEW
- FAA cautions airlines on maintenance of sensors that were key to 737 MAX crashes
The order is valued at $5.6 billion based on list prices, and deliveries of the 110-seat CS100 jets will begin in 2018, Montreal-based Bombardier said Thursday. Carriers typically negotiate very large discounts, especially for early launch orders like this.
Delta, which will become the aircraft’s largest operator, has options for 50 more planes and the ability to convert the firm orders to the larger 130-seat CS300 model. That jet competes against Boeing’s 737 MAX 7 and Airbus’ A319neo, neither of which has sold well as they are much less economical than the larger single-aisle models.
Delta will use the planes to replace older single-aisle and regional jets.
A Bombardier filing posted Thursday said the company also expects Air Canada this quarter to ink a firm order for at least 45 CS300 aircraft, based on a letter of intent signed in February.
The Delta deal snaps a 19-month slump without firm orders for the CSeries, which has struggled to make inroads against the 737 and the A320.
Boeing Commercial Airplanes boss Ray Conner told employees in a recent internal webcast that during a crucial sales campaign in January, Boeing lowered its price dramatically to win an order from United Airlines for 40 current-generation 737s against what he called “aggressive” competition from the CSeries.
Conner said Boeing did so specifically to block Bombardier’s new plane.
He recalled how Boeing had lost similar sales battles in the 1990s to the Airbus A320, allowing that jet to gain traction against the 737.
If Bombardier had won the United order, Conner said, “that would’ve been a validation of this CSeries in the marketplace, I think. So very important for us to win that.”
Just a few months later, Bombardier has the validation Conner sought to stop.
The combination of big sales to Delta and Air Canada is a watershed moment for the CSeries.
“It’s a turning point for the program,” Bombardier CEO Alain Bellemare said in a telephone interview. “It gives us very strong momentum and will fill up the skyline for the next few years.”
The company also said Thursday it will write off $500 million to cover the 127 firm orders from Delta and Air Canada, or about $4 million per airplane.
Unlike Boeing, which uses an accounting approach that defers early-production costs on new jet programs into the future, Bombardier books its losses upfront.
For comparison, Boeing said Wednesday in its quarterly financial results that it had deferred an average $5 million in costs for each of the 787 Dreamliners delivered in the first three months of this year — and that’s after it has built nearly 400 Dreamliners.
The CSeries is more than two years late and more than $2 billion over budget.
Last year, as Bombardier ran out of cash, Quebec’s provincial government agreed to provide a $1 billion bailout. The company is discussing a further cash infusion from the Canadian federal government.
That’s bound to raise protests that Bombardier may be breaking World Trade Organization rules prohibiting state subsidies.
The CSeries, initially announced by Bombardier in 2004, then shelved, was relaunched at the Farnborough Air Show in 2008, but after that endured numerous delays and cost overruns.
The smaller CS100 model flew in fall 2013 and the CS300 had its first flight in February 2015.
Last year, Bombardier completely replaced its top management, and both CSeries models were showcased at the Paris Air Show with a promise of a final push to win orders and save the airplane program.
The new orders will be greeted with relief at aircraft plants in Belfast, Northern Ireland, where the CSeries composite wings are made using equipment designed by Electroimpact of Mukilteo; in Shenyang, China, where the center fuselage is made; and in Mirabel, Quebec, the final-assembly site.
The Delta order means Bellemare exceeds Bombardier’s target of 300 firm orders for the CSeries before the jet enters service.
The order is a “major boost for this program and provides runway to allow the CSeries to gain some traction in the marketplace,” Peter Arment, an analyst at Sterne Agee in New York, said in a note to clients.
Before the agreement with Delta, Bombardier had racked up 243 firm orders for the CSeries, though many of them — Republic Airways, Iraqi Airways and Ilyushin Finance Corporation, for example — were considered uncertain.
Lufthansa’s Swiss International subsidiary will become the first carrier to operate the jet when it deploys CS100s on European routes. First delivery is expected in June and to enter commercial service July 15.