Bombardier’s conditional deal with Malaysian start-up Flymojo could be worth as much as $2.94-billion (U.S.)CHRISTINNE MUSCHI/Reuters
Bombardier Inc. has landed the first conditional customer in Southeast Asia for its new C Series airliner, winning a potential toehold in one of the world's fastest-growing regions amid lingering questions about the certainty of its commercial aerospace order book.
The Canadian plane maker said it has signed a letter of intent that will see Malaysian start-up Flymojo buy 20 CS100 jets, the smaller of the two C Series models. The airline has also taken options on another 20 CS100 planes. The total value of the deal if the options are exercised is $2.94-billion (U.S.) before any discounts.
Bombardier didn't say when a firm purchase agreement could be struck. It also wasn't clear what Flymojo's chances are of getting and remaining airborne. A ceremony Tuesday to announce the new carrier was attended by Malaysia's prime minister and transport minister, suggesting the company has government backing. Its main investors are believed to be private, but remain unknown.
"I would say [Flymojo's] chances are particularly low," said Timothy Ross, head of Asia transport research at Credit Suisse in Signapore. "It's an unproven player in a very, very tough competitive environment. Maybe this is just low oil prices giving people a rush of blood to the head."
Malaysia's government is trying to set the country's flagship carrier, Malaysia Airlines, back on course through a restructuring. The effort comes after one of the carrier's planes vanished after takeoff from Kuala Lampur to Beijing in March of last year. Another Malaysia Airlines jet was shot down over eastern Ukraine barely four months later, killing 298 people.
Flymojo will be based at Senair International Airport in Johor and begin flying in the first quarter of 2016, focusing on regional routes, its managing director told Reuters.
Bombardier believes the Asia-Pacific region will be a key growth market for 20- to 149-seat commercial aircraft in the years to come. The company estimates that of the 13,100 planes of that size expected to be sold between 2014 and 2033, roughly one third will go to clients in China and other Asia-Pacific countries.
Counting the Flymojo letter of intent, Bombardier now has 603 firm orders, expressions of interest and other commitments for the C Series, its largest-ever aircraft. Bombardier had been insisting it could obtain certification for the smaller of the two C Series planes by the end of 2015, but on Tuesday, chief executive Alain Bellemare seemed to hint that it could be pushed back.
"We might have a little bit of a schedule impact in terms of certification that I'm trying to assess right now," Mr. Bellemare told trade publication Flightglobal on the sidelines of the U.S. Chamber of Commerce Aviation Summit in Washington. A delay anywhere in the supply chain could affect the overall schedule, the CEO said.
Any significant delay would likely further erode investor and customer confidence. The C Series development program is already two years behind schedule and $2-billion over budget. A Bombardier spokeswoman said "nothing has changed" from the current certification plan.
Existing customers for the C Series have expressed confidence the aircraft will meet or exceed performance promises. Having that performance data in hand as tests are completed will prove a key tool in winning new sales in the months ahead, analysts said.
"While it is true that a large number of orders and commitments are of the questionable variety, we believe that C Series delivery slots for the first 24 months are largely committed," said Cameron Doerksen, an analyst with National Bank Financial. "[That] gives the company time to firm up [conditional orders] and generate new orders."
Nicolas Van Praet