Bombardier Inc. has grabbed a piece of a key emerging market, signing a letter of intent to sell 10 of its new C Series planes to a Russian leasing company in a deal worth about $600-million.
Ilyushin Finance Co., making its first purchase of planes from a Western aircraft maker, will buy seven large CS300 planes and three smaller CS100 planes, while signing options for another 10 aircraft and purchase rights on 10 more.
The order, if made firm, is the second one from a leasing company and represents another step in Bombardier’s strategy of signing up multiple customers for the plane in relatively small orders.
It follows on the momentum established at the Paris Air Show in June, when Bombardier signed up Korean Airlines and two other unidentified carriers as customers for the plane, which is the Canadian aerospace giant’s $3.4-billion bid to split up the Airbus SAS-Boeing Co. duopoly that controls the narrow-bodied airplane market.
The Paris deals came after a one-year drought in new orders for the plane.
Russia is an emerging market that is expected to generate sales of 400 to 500 planes in the 100-seat to 150-seat segment during the next 20 years, said Chet Fuller, senior vice-president of sales and marketing for Bombardier Commercial Aircraft.
The key opportunity exists in displacing older Russian aircraft and Airbus A319 and Boeing 737-700 planes that were sold in the country 10 to 15 years ago, Mr. Fuller said.
“The classic 319s went into there 10 to 15 years ago, so five years from now they will need to be replaced with a new generation of airplanes,” he said in a telephone interview Wednesday from the Moscow Air Show, where IFC announced the letter of intent.
It’s the first order from a Russian customer, which will make the plane available to airlines along with smaller Russian aircraft and the larger MS21, a new Russian-made plane that will challenge Airbus and Boeing in the market for narrow-bodied planes with more than 150 seats.
“Making a sale in Russia is important because you would think the priority would be towards the local [manufacturers]” said industry analyst Addison Schonland, president of consulting firm Innovation Analysis Group of La Jolla, Calif. “So selecting CS says a lot about the program. Buying CS must have been very compelling for IFC to swim upstream.”
The IFC deal pushes the C Series order book to 143 firm orders and another 149 options and purchase rights. First flight of the plane is scheduled for next year and it will begin flying for airlines in 2013.
“The prospective C Series order represents an important breakthrough in what is expected to be a fast-growing market for new aircraft,” Cameron Doerksen, who follows the company for National Bank Financial, said in a note to clients Wednesday.
The successes at the Paris and Moscow shows bode well for the C Series at air shows in China in September and Dubai in November, Desjardins Capital Markets analyst Benoit Poirier said in a note to clients.