Bombardier Inc. says a previously undisclosed conditional customer for 15 C Series jets is a Chinese aircraft lessor, providing the aerospace manufacturer with a key first step into China for its new passenger jet.
The agreement, announced Friday, includes options on another 15 C Series planes.
The conditional sale to CBD Leasing Co. Ltd. – valued at up to $2.07-billion (U.S.) if all options are exercised – is “huge for the C Series,” said Michel Arcamone, president of Bombardier Commercial Aircraft. CBD Leasing is a subsidiary of China Development Bank.
Mr. Arcomone signed the agreement Friday evening, as Chinese president Xi Jinping and Canadian Governor-General David Johnston – together for a state visit at the Great Hall of the People in Beijing – looked on.
The agreement was initially announced July 8, 2012 as a conditional order from an undisclosed customer for 15 planes.
“It’s our entry into China, and we’re very very pleased of having this lessor CDB having the C Series,” Mr. Arcamone said in an interview. “It opens the doors to lease these airplanes into China and outside of China.”
Bombardier sees the C Series as well-suited to China’s fast-growing smaller regional airlines, which provide domestic service in a country where air travel is surging.
The jet, which Bombardier is hoping will compete against fierce competition from larger players like Boeing and Airbus, is well-matched to the geography and elevation of China’s broad landmass, Mr. Arcamone said.
“Given ongoing high fuel prices and increased environmental concerns, older and less efficient aircraft represent one of the greatest challenges to airlines,” Wang Chong, chairman of CBD, said in a news release.
“Following an in-depth analysis of existing and re-engined aircraft, the CSeries family of airliners, with its unmatched economics, advanced technology, excellent operational flexibility, as well as its outstanding performance seemed like the obvious choice and shows great potential for operators in China and abroad.”
CBD’s order is for five of the smaller CS-100 110-seat jets and 10 of the larger CS-300 aircraft. The options are for five additional CS-100s and 10 additional CS-300s.
“The C Series is the right type of aircraft that new and upcoming airline companies in China are looking at,” said Mr. Arcamone.
Noting the presence of Chinese president XI Jinping and Canada’s Governor-General, RBC Dominion Securities analyst Walter Spracklin said in a note Friday that the agreement augurs well for more C Series sales in China.
“Given the high profile nature of the event, we see a high probability that the current conditional order will be converted to a firm order -- bringing the total order book for the CSeries to 192 firm (target 300 by entry-into-service).
Mr. Spracklin added that he anticipates that the CBD order “will be the first of several orders that will ultimately see Chinese carriers operating CSeries aircraft.
“While the order was previously announced and remains conditional, we view positively the fact that it: 1) increases the customer base in Asia; and 2) came from a leasing company. With a clean first flight and what we expect to be further orders announced as flight test data is compiled over the next several months, Bombardier continues to move in the right direction with the CSeries program,” he said.
“We believe this will translate directly to investor sentiment and a positive multiple re-rating on the [Bombardier] shares.”
It’s not Bombardier’s first sale to CBD, which ordered five Global 6000 business jets, with a list value of $293-million, in late 2012.
Rapidly developing China is a critical market for Bombardier, at both its aerospace and rail divisions.
The Montreal-based company has been deepening commercial relationships and partnerships for years in both sectors.
Last June, Bombardier and Commercial Aircraft Corp. of China Ltd. (Comac) signed an agreement as part of the second phase of a long-term pact to strengthen the commonalities between the C Series and Comac’s C919 jet.
The two companies said they hope to offer customers of the C Series and C919 cost savings from the operation of both aircraft families thanks to commonalities.
China’s SAC Commercial Aircraft Co. (SACC) also supplies the rear fuselage section for the C Series.
Bombardier so far has 177 firm orders for the C Series, but its target is 300 units – valued at about $19-billion – ordered by the time the plane is scheduled to enter service in mid-2014.
The C Series’ maiden flight took place last month and company officials have said they are encouraged by the performance results so far as the plane is put through a battery of tests.