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Bombardier Nearing Deal for 125 CSeries to Delta, WSJ Reports

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Bombardier Nearing Deal for 125 CSeries to Delta, WSJ Reports

Bombardier Nearing Deal for 125 CSeries to Delta, WSJ Reports
April 14
16:54 2016

MIAMI — According to a report by Jon Ostrower of the Wall Street Journal, Bombardier is about to close a deal with Atlanta-based carrier Delta Air Lines for the acquisition of up to 125 CSeries aircraft.

During the Q1 2016 Earnings Call held today, Delta President Ed Bastian, commented that the airline is currently focused on the domestic fleet renewal over the next five years, including the replacement of its McDonnell Douglas MD-88 fleet, which average 25.7 years, almost nine years over its current average fleet age.

“We also need to continue to up gauge our regional flying to the main line which we’ve had a lot of success in and there is much more to go. And I think we can do it cost effectively” Bastian admitted.

According to Airways senior analyst Vinay Bhaskara, the CSeries offers mainline levels of comfort in a 100-seat package, as well as excellent operating economics and the range to operate longer and thinner routes. “With the flexibility to operate high frequency service from Atlanta to Newark or a long and thin route from Detroit to Spokane, the CSeries is an excellent fit for Delta’s network.”

The order, reported by Ostrower to be for 75 aircraft in firm plus 50 options, would be the largest order placed to date for the CSeries program, a major victory for the program which has struggled to find customers. This order could be considered a contrarian move by Delta, which has avoided bleeding edge and clean sheet aircraft such as the 787, A320neo, and 737 Max in favor of more proven aircraft with a lower capital expenditure. Given Airbus and Boeing proclivity to defensively heavily discount their narrow body competitors such as the 737-700 and A319, Delta’s pricing is likely incredibly favorable. Delta has made exceptions to its fleeting policy with orders for the A330neo and Airbus A350 however.

In early January,  John Leahy, Airbus’ chief salesman and commercial officer, called the CSeries “a nice little plane” that was probably doomed to be a poor seller forever. The aircraft hadn’t received a single order in almost a year and a half, which together with spiraling development costs triggered a funding crisis, to be eventually solved by government backings.

Last February, days after Air Canada announced a Memorandum of Understanding for up to 75 CS300, the CSeries lost a head-to-head competition at United Airlines, which ultimately placed an order for 40 Boeing 737-700s. Last November, Bombardier had been courting United and presented the aircraft to the airline’s senior management team and employees as part of a demonstration tour to prospective customers in North America.

A few days after this loss, Republic Airways, a major CSeries customer, filed for bankruptcy in order to eliminate the turboprops and 50-seat regional jets from its fleet, besides adjusting its capacity purchase agreement contract with U.S legacy carriers, implying that the order placed in 2010 could be cancelled.

Despite these setbacks, Bombardier kept on track its program and completed its route-proving campaign in Europe in March, one of the last steps prior to the delivery of the first aircraft to SWISS, expected to take place next June. Bombardier confirmed that the results of the campaign were aligned with previous observations, thus confirming that the CSeries met or exceeded the original proposed targets.

To date, Bombardier has booked orders and commitments for 678 CSeries, which include firm orders for 250. The aircraft originally rolled out in March 2013.

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A Global Review of Commercial Flight since 1994: the leading Commercial Aviation publication in North America and 35 nations worldwide. Based in Miami, Florida.

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