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Next hurdle for Bombardier's C Series: cutthroat prices Add to ...

Bombardier's $3.4-billion bet on the market for narrow-bodied aircraft faces a potential threat: a price war instigated by Boeing Co. and Airbus SAS.

The world's two biggest aircraft makers are the dominant players in the single-aisle airplane market, and have been following the development of Bombardier new C Series plane, which is scheduled for first flight next year and delivery the following year, closely.

Discounting their planes is one possible tactic for trying to hang onto customers, says a report on the C series released Monday by consulting firm AirInsight. "The biggest threat to Bombardier as it tries to sell the C Series is the pricing power possessed by Airbus and Boeing that it cannot remotely begin to match," it states.

The report comes just days after Airbus SAS unveiled a key competitive response to the C Series, which takes aim at the narrow-bodied segment of the airplane industry now dominated by Airbus and Boeing's A320 and 737 respectively.

Airbus will undertake a $1-billion (U.S.) program to offer two, new fuel-efficient engines on the A320 and its A319 and A321 derivatives by 2016, including the same Pratt & Whitney engine Bombardier will offer on the C Series, which is regarded as one of the most significant improvements in jet engines in decades.

Boeing is biding its time, with no response so far to new competition from Bombardier and airplane makers from Russia and China or to the Airbus move of last week, which had been expected even though Airbus delayed the decision several months.

Both the Chicago-based Boeing and Europe-based Airbus have other weapons in what is likely to become a dogfight as the newcomers battle the two established players for orders, said AirInsight, a consulting firm set up by three airline and airplane industry experts.

"The full family of airplanes offered by Airbus and Boeing give them the ability to price the A319 and 737-700 as loss leaders (should they choose to) or to wrap discounts into larger models and … twin-aisle airplanes," AirInsight noted.

The C Series is aimed at a segment of the narrow-bodied market that it believes doesn't hold much interest for Airbus and Boeing - airplanes with 100 to 149 seats. Although that segment has been shrinking, AirInsight believes airlines will buy more than 6,000 planes of that size over the next 20 years.

"The key question is whether Bombardier has targeted a shrinking market or whether through superior economics it can revitalize that market," the report notes.

The C Series has superior economics even when stacked against an Airbus with equally fuel-efficient engines, AirInsight adds.

The cash operating costs for the larger CS300 version of the C Series will be 11 per cent lower than those of an A319 with new engines measured on a seat-mile basis, or the costs of flying one seat one mile. On an aircraft-mile basis, or the cost of flying the aircraft one mile, the CS300 will cost 12 per cent less to operate.







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  • Bombardier Inc
    $3.73
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    (+1.91%)
  • Updated February 16 4:00 PM EST. Delayed by at least 15 minutes.

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