Did Bombardier Really Under Sell the CSeries?
Did Bombardier Really Under Sell the CSeries?
In a previous article “Is Bombardier Fully Sold on the Merit of the CSeries”, we questioned the soundness of the failed attempt by the Montreal-based aircraft manufacturer to sell a major stake of the CSeries to their European and most hostile rival, Airbus. In this edition, we are back with yet another critical and necessary question: Did Bombardier really undersell the CSeries?
If you are a regular reader of Airline Profits, you know that we have given much space to the CSeries. Especially when most publications were negatively reporting about the program delays and cost overrun. And for full disclosure, this is not because we were sponsored by any entity or organization to write about this aircraft. In fact, at the time of this writing, we do not have any advertising or sponsorship ties with Bombardier. The reasons why we have taken such a firm stand for the CSeries are many folds.
Firstly, like it or not, the Bombardier CSeries is the best aircraft in its category. This is not some sort of bias, but a plain and simple fact. And one of our core value as a publication is to report on facts, not fables nor fictions.
Secondly, the bitterness expressed against Bombardier and the CSeries by its competitors through caustic comments is a clear indication that they were caught off guard by the value proposition of the CSeries.
Thirdly, we understand through the stories of past inventions that the road to significant innovation is often bumpy, challenging and difficult to navigate, especially in the aviation and aerospace industry.
Finally, through Bombardier’s past history and founding vision, one can read a story of resilience, a capacity to bounce back from difficulties and make things happen.
And as you probably know, Bombardier did catch up and succeeded in turning things around. Consequently, both the CS100 and CS300 have been type-certified by Transport Canada, and validated by the FAA and EASA. By the end of 2016, a fleet of CSeries airplanes has been delivered to the European launch customers, namely Swiss International for the CS100 and airBaltic for the CS300. Both aircraft variants have successfully entered revenue service. The launch customers have each reported that their respective all-new aircraft are exceeding their performance expectations in-service.
All that should be fully credited to the Bombardier teams who have worked relentlessly to bring about some positive outcome from the state of chaos, of doom and gloom, which many media reports have suggested over the past few years.
With that said, the highlight of this article is about the continuous allegations of deep discounts that Bombardier was reported to have offered not only to Air Canada but more importantly to Delta Air Lines on their CSeries orders.
You may recall that before these two deals, Bombardier had not been able to land any deals for their all-new aircraft for nearly two years (between 2013 and 2015). Then following the appointment of CEO Alain Bellemare and the forming of a new sales leadership team, a perceivable turnaround was initiated.
The accusations were made by Airbus and Embraer shortly after Bombardier announced the conclusion of the Delta deal. On one hand, Airbus’s chief salesman, John Leahy told reporters that “Bombardier had sold the CSeries to Delta for a song.” On the other hand, Embraer’s top executives have stated that “Bombardier was distorting the commercial aircraft market by offering deep discounts thanks to government subsidies.” And since then have threatened to file a case with the World Trade Organization (WTO) against Bombardier for unfair competition.
Now, a first reaction may have been to dismiss those allegations or at least downplay their impacts on future deals, considering that airline executives know better than to make aircraft buying decisions based on hearsay evidence. Especially, now that the CSeries is in service and has reportedly been performing beyond expectations.
However, from a more critical and strategic viewpoint, if these allegations were true, then Bombardier may have checkmated itself into a bargaining corner, where it would be very difficult to get out of. The reason is simple. The Delta order, which came as a powerful endorsement for the CSeries could or should have been a robust leverage to unlock more sales. However, it appears that more than eight months after that momentous and historic deal, Bombardier has yet to announce any other significant CSeries orders, apart from firming up the deal with Air Canada and reporting a much smaller order from Air Tanzania.
For if in fact, Delta Air Lines did order their CSeries fleet at a deep discount (below cost), every other airline, regardless of their size and market position, would expect to get a similar deal from Bombardier.
For if in fact, “the CSeries was really offered to Delta for a song” as Airbus’s Mr. Leahy suggested, while Embraer is preparing a WTO case to denounce that deal, one might ask the following questions. Firstly, has Bombardier really undersold the CSeries? Secondly, given the perceived value and quality of the CSeries aircraft, was the Delta deal worth it after all? According to prominent industry analysts, the market was expecting some marquee customer-endorsement of the CSeries. Yet, was that meant to have come at all costs?
And finally, if in fact, the CSeries was undersold to Air Canada and Delta, then our previous question would remain valid: Is Bombardier fully sold on the merit and value of the CSeries?
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