Analysts say Bombardier still facing risks despite CSeries momentum
by Ross Marowits, The Canadian Press
Aerospace firm will need to make progress on CSeries program to address share volatility
MONTREAL—Bombardier Inc. finished the Farnborough Airshow in Britain with some momentum in CSeries orders, but industry analysts say the company still faces several key risks to develop and sell the commercial jetliner.
Despite an engine mishap that has kept test flights grounded since late May, Bombardier racked up 66 new order commitments for the CSeries at the airshow.
Analyst Walter Spracklin of RBC Capital Markets says the new aircraft is in better shape coming out of the airshow, but expects Bombardier’s shares will remain volatile until it addresses “valid investor concerns” by making further progress on the aircraft program.
Flights of the CSeries were stopped nearly two months ago after “an engine-related incident” that damaged an aircraft during maintenance testing on the ground.
A fix for the problem believed to be related to a failure in the turbine’s oil system is being tested and test flights are expected to resume in “the coming weeks.”
Bombardier insists it has enough time in its testing schedule to have the aircraft enter service in the second half of 2015, despite the test flight pause.
However, it still faces several hurdles before it can deliver the CSeries to its first customer, including logging the necessary flight test hours for Transport Canada certification, confirming the aircraft’s promise for fuel savings and noise levels and demonstrating that the fly-by-wire system used to operate the plane is working as planned.
Questions also remain about the company’s ability to pick up the pace of firm orders for the new plane.
Analyst Kevin Chiang of CIBC World Markets was less optimistic, saying he expects “another shoe to drop” that would push out the first deliveries to the first half of 2016.
While that is sure to intensify investor anxieties, the analyst said there remains significant upside for long-term investors if the company can achieve its goals.
Chiang says he can’t imagine that CSeries sales won’t build given the aircraft’s better fuel and operating cost efficiency than its competitors.
Analysts also say Bombardier’s prospects are higher because of signs of improvement at Bombardier Transportation, its rail division.
Improved efficiencies at its plant in Derby, U.K., should generate higher profits as production doubles with the start of the US$2.1 billion Crossrail project around the second half of 2015.
