Bombardier CRJ Facility, Mirabel, Que.
Bombardier Inc. has won a significant order for its aging regional jet aircraft, a welcome win ahead of what will be heightened competition from key rivals over the next decade.
The Montreal-based plane and train maker said Tuesday that it signed a firm order for 24 CRJ900 NextGen planes to an undisclosed customer. Based on list prices, the order is worth about $1.14-billion (U.S.).
Bombardier shares rose 1.5 per cent to $4.10 (Canadian) on the Toronto Stock Exchange at midday Tuesday.
Bombardier says its line of CRJ regional jets has revolutionized aviation. The company has tallied firm orders for 1,858 planes in the series since the first model was introduced in 1992. They are designed primarily for medium-haul routes and are in service with more than 60 airlines.
But sales these days are a pale shadow of what they once were. Airlines have been moving to larger planes in a bid to add more seats to counter the effects of higher oil prices in recent years. That in turn, has meant lower sales for the smallest regional aircraft like the CRJ100 and 200 and a recent uptick in sales for the larger CRJ900, which can carry about 76 to 90 passengers.
"There has been a bit of a renaissance [of these planes] as the airlines have been re-fleeting to a larger size," said David Tyerman, an analyst with Canaccord Genuity in Toronto. "[Still], it's definitely a smaller market now."
Mitsubishi Aircraft Corp. is leading a race to break the virtual stranglehold Bombardier and Embraer SA hold on the market for small passenger jets. The Japanese manufacturer in October unveiled an all-new regional jet powered by Pratt & Whitney turbofan engines. It plans to build two versions of the plane with flight tests starting next year.
Brazil-based Embraer is also expected to unveil its next generation of regional jets over the next few years. That will put further pressure on Bombardier.
Executives with the Canadian company have limited options to try to counter the new competitive threats, analysts say. They can continue to make incremental improvements to the existing regional jet design to try to squeeze out better operational metrics. Or they can reposition the aircraft as a cheaper alternative to those of other manufacturers.
"There's a bit of a move in the airline world right now to buy older, cheaper equipment which might not have quite the same economics from an operating standpoint but are much cheaper to buy," Mr. Tyerman said. "So there's some thought of positioning [the CRJ series] as a value play – sort of the Chevette versus an Audi."
Bombardier says the CRJ900 NextGen regional jet is the most cost-efficient jet aircraft in its class and that it will continue to seek improvements to make it cheaper to operate. The latest version of the aircraft is up to 5.5 per cent better on fuel burn than the earlier generation, the company says.
"With the most recent enhancements to the aircraft, we are constantly moving that benchmark forward," Bombardier Commercial Aircraft executive Ray Jones said in a statement.
Bombardier has sold 384 CRJ900 and CRJ900 NextGen aircraft. Recent orders include a December, 2013, deal with American Airlines for 30 firm jets and a December, 2012, agreement with Delta Air Lines for 40 planes.
Bombardier's big commercial aerospace bet is the CSeries, an all-new plane that will be the largest it has ever built. The narrow-bodied aircraft, which is expected to add a minimum of $5-billion (U.S.) in annual revenue to Bombardier's balance sheet, is slated to enter into service in the second-half of 2015.
Separately Tuesday, Bombardier said it received a firm order for six Learjet 75 business jets with options for three more planes. The total value of the purchase is about $124-million (U.S.) at current list prices if all options are exercised.
Nicolas Van Praet