Bombardier expected to maintain Q400 production rate with SpiceJet order

MONTREAL — Bombardier Aerospace should be able to avoid a production rate decrease and layoffs in Toronto after it finalized a US$446-million order for 15 Q400 NextGen turboprops from India’s SpiceJet, industry analysts said Thursday.

MONTREAL — Bombardier Aerospace should be able to avoid a production rate decrease and layoffs in Toronto after it finalized a US$446-million order for 15 Q400 NextGen turboprops from India’s SpiceJet, industry analysts said Thursday.

The value of the deal could increase to US$915 million if options for an additional 15 planes are exercised.

The discount airline signalled its intention to place India’s first Q400 order last month and said deliveries would begin in the second quarter of 2011.

SpiceJet chairman Kalanithi Maran said the airline plans to add service to the cities and industrial towns that are the backbone of the country’s substantial growth.

“As India’s most preferred low-fare airline, we are focused on catering to these markets which require an aircraft that could increase the reach to over 60 airports that could not be served by the larger jets and establishing our footprint in these markets,” he said.

Maran said SpiceJet chose the Q400 because it wanted a 60- to 80-seat plane that combines reliability, economics and passenger comfort.

Analysts said the order was positive, even though it was fully anticipated.

“We view this contract positively given it reduces the likelihood of seeing further Q400 production cuts,” wrote Benoit Poirier of Desjardins Securities.

The order fills up a significant portion of the open slots that Bombardier said remains in the second half of next year.

As of Oct. 31, the Q400 backlog was 67 aircraft or 16 months of production. Bombardier’s target is 18 to 21 months of production.

Michael Willemse of CIBC Capital Markets said investors would likely react favourably to the order because it will keep production steady in fiscal 2012.

“We were somewhat concerned that there could be a small production cut at Bombardier Aerospace’s commercial operations as a result of weak order activity for the Q400 and CRJ platforms,” he wrote.

Bombardier spokeswoman Marianella delaBarrera said an undisclosed number of open spots remain available.

“We factored this transaction into our business plans for the year,” she said in an interview.

Gary Scott, president of Bombardier Commercial Aircraft, said it expects the world’s largest democracy will take delivery of 600 commercial planes over the next 20 years in the 20- to 149-seat category.

“At this time, when new airports are being commissioned by the Indian government, Bombardier is uniquely positioned to support the development of India’s airline network,” Scott said.

Bombardier has now received 404 firm orders for the Q400 and has delivered 322 planes as of Oct. 31. More than 30 operators fly the fuel-efficient plane.

SpiceJet currently serves 22 destinations in India, Nepal and Sri Lanka using Boeing 737s. It plans to more than double its fleet in about three years and placed a US$2.3-billion order in July for 30 Boeing planes that will begin to be delivered in 2014.

Bombardier, the world’s third-largest aircraft manufacturer, is boosting its presence in India to service the Asia-Pacific market that is expected to account for much of the airline demand in the coming decades.

It opened an office in Mumbai earlier this year to support business and commercial aircraft customers and complement representatives located throughout India and surrounding regions.

Founded five years ago, SpiceJet is India’s fifth-largest carrier and second-largest low-fare airline with about 12.8 per cent market share. It launched service to Nepal and Sri Lanka in October.

Bombardier shares were down six cents at C$4.56 in afternoon trading Thursday on the Toronto Stock Exchange.

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