Plenty of Sunshine in Montreal: Bombardier’s CSeries 100 Takes Off

The CSeries is in the air, and it’s carrying the hopes of an entire company with it.

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The sun has come out for Bombardier’s (TSX: BBD.B) CSeries 100.  Finally.  After waiting for the right weather and conditions for the launch of the CSeries, today offered plenty of sunshine in Montreal, and the CSeries launch was on.  And Bombardier has a lot riding on the success of this plane.  In recent years, Bombardier has struggled with declining revenues and declining margins, and ongoing delays in its CSeries program that has left its stock price in limbo.

Its first CSeries aircraft is expected to be delivered in 2015.

Competitive Advantage

The CSeries is manufactured using a patented “resin transfer infusion” process, which is used to make lighter-weight composite wings.  Also, according to the company, the plane will need fewer inspections due to better corrosion resistance and fatigue strength.  Finally, there is also room for customization on the CSeries planes according to the customer’s needs.

The company says that the plane will have a 15% operating cost advantage, a 20% fuel burn advantage and will be significantly quieter.

Challenges

Bombardier’s business is very capital intense, and the CSeries program has been no exception.  The total cost of the program is $3.5 billion and may be adjusted upward at final count.  This however is the price of entering into a brand new market: the market of commercial passenger single-aisle aircraft between 100 and 160 passengers.

As always, Bombardier will face stiff competition from its closest competitor, Embraer.  Embraer’s new E2 family of jets, particularly the E195 will be the biggest competition for Bombardier’s CSeries.  In addition, Airbus and Boeing are both very active in this market.  Airbus’ A319 Neo, a direct competitor to Bombardier’s CSeries, is scheduled to arrive in the market as early as 2016.  While Boeing and Airbus have been discounting their planes in order to get ahead of Bombardier, the company has no plans to participate in discounting.  Their plane will stand on its competitive advantages.

Bottom Line

At this time, Bombardier only has 177 firm orders for the CSeries, but expects to have 300 by the time the plane enters service.  Bombardier is predicting that sales of the CSeries will add an additional $5 billion to $8 billion in revenue within five years.  The company predicts that airliners will buy 6,900 planes with a 100 to 150 seating capacity over the next 20 years, and it plans to capture half of that market.  If this occurs, the C-Series could be a game changer for Bombardier.  Time will tell however.  To get a better sense for the plane’s prospects, keep an eye on the data that comes in over the next few months.

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Fool contributor Karen Thomas does not own shares in any companies mentioned at this time.  The Motley Fool does not own shares of any company mentioned at this time. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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