Bombardier says CSeries on track

MONTREAL — Bombardier said its CSeries aircraft remains on track despite market concerns that a lack of new orders signals that customer interest may have waned.

MONTREAL — Bombardier said its CSeries aircraft remains on track despite market concerns that a lack of new orders signals that customer interest may have waned.

The Montreal-based company said it is involved in intense negotiations with four to five potential customers in Europe, the Middle East and Asia that could generate orders in the coming months.

Orders are ahead of other airplane programs with customers typically waiting 24 to 30 months before a new plane’s delivery to make their purchases, it said.

“Obviously the market has high expectations and that’s understandable but we are feeling we are in good position with the program at this point in time,” Guy Hachey, president of Bombardier Aerospace, said Wednesday during a conference call.

The airplane and railway manufacturing giant’s second-quarter profits dropped nearly 30 per cent to US$148 million on lower sales as it continued to suffer from the impact of a sluggish global economy.

The company, which reports in U.S. dollars, said that earnings amounted to eight cents per share.

The results compared with a profit of US$202 million, or 11 cents a share, in same quarter ended July 31 last year.

Excluding $34-million in unusual gains, it earned six cents per share, two cents less than the consensus forecast of analysts compiled by Thomson Reuters.

Bombardier (TSX:BBD.B), which manufactures commercial and business aircraft as well as rail transportation equipment and systems, said revenues fell to $4.1 billion from $4.9 billion for the same period last fiscal year.

“The aerospace financial results continued to reflect the uncertain economic conditions, however, we have started to see signs of a recovery as illustrated by the significant reduction in business aircraft cancellations,” president and CEO Pierre Beaudoin told analysts.

Bombardier Aerospace revenues totalled US$2 billion in the quarter, compared with $2.4 billion last year.

Bombardier delivered 46 aircraft overall during the quarter, compared with 81 last year. That included orders for 26 business jets, along with 12 cancellations, for a net of 14. Fewer cancellations helped increase net orders for these aircraft from the negative 53 it recorded last year.

Hachey said that although the order intake was smaller than before the recession, Bombardier had its largest net orders in seven quarters.

“We see a slow progressive trend in terms of order intake,” he said, adding that the company expected to increased deliveries of business aircraft in the second half of the year.

“We thought things would be a little better. They (orders) are improving but they’re probably not to where we thought they would have been at this point for business aircraft,” he said.

On the commercial aircraft side, demand is matching low expectations for 2010 with a pickup not expected until next year. However, the new CRJ1000 is slated to begin deliveries in the second half of the fiscal year.

Hachey said the company doesn’t expect to require further production rate decreases at its commercial and business aircraft facilities.

The smaller CSeries aircraft remains on schedule for entry into service by the end of 2013. The larger aircraft version would follow a year later.

Bombardier now expects that two-thirds of the demand will be for the larger version of the plane, a reversal from original forecasts.

Hachey said the company is working hard to ensure that several key components of the aircraft, including the Chinese-built fuselage, composite wings and fly-by-wire technology, proceed as schedule.

He dismissed suggestions that the plane won’t deliver the promised savings, including a 20 per cent lower fuel burn and 15 per cent decrease in operating costs.

Putting new engines on existing Airbus or Boeing aircraft would only generate one-third the savings.

“We feel very strongly about the value proposition we have in the marketplace and our customers are confirming that,” he said.

Bombardier Transportation revenues totalled $2.1 billion, compared with $2.5 billion for the same period last fiscal year.

The division was hit by the start-up of new programs that are in the engineering phase. Revenues will increase as the projects mature and options on large contracts are completed over the next two years, Bombardier said.

It expects revenues, excluding currency adjustments, will decrease by single digits this fiscal year.

Transportation president Andre Navarri said he doesn’t yet know what impact a new US$267-million order for 100 multi-level commuter rail cars from New Jersey Transit Corporation will have on employment at the company’s facility in La Pocatiere, Que.

Bombardier had warned about potential layoffs in La Pocatiere if it didn’t win the contract to build subway cars for Montreal’s Metro system.

The railway division also said it would reopen its facility in Sao Paulo if it wins the contract to build a monorail system in the Brazilian city.

Michael Willemse of CIBC World Markets said the conference call “had a positive tone despite weaker-than-expected results.”

“Business jet demand has been lower than anticipated, however, momentum remains positive,” he said in a report.

On the Toronto Stock Exchange, Bombardier shares gained 16 cents, or 3.6 per cent, to C$4.60 Wednesday.