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Bombardier playing catch-up to broader recovery

Bombardier's CRJ 700 regional jet

The Globe and Mail

Orders for regional jets are expected to trail the broader economy's recovery by up to two years, leaving Bombardier Inc. to suffer from the aerospace sector's version of jet lag.

Consumers tend to take six months to a year to resume previous flying patterns after a recession, and airlines another six to 12 months after that to feel confident enough to place new orders.

By the time orders for Bombardier's regional jets finally turn around, it will likely be anywhere from mid-2010 to mid-2011, industry experts say.

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"The recession is over, but passenger traffic is coming back very slowly because corporations aren't going to loosen the shackles on business travel until they see a recovery in earnings," said David Newman, an analyst at National Bank Financial Inc.

Bombardier said Thursday it will reduce production of regional jets after failing to win new orders, prompting 715 job losses on top of those previously announced.

In the cyclical aviation industry, airlines place many of their plane orders when the economy is bustling, only to have them delivered during a downturn.

The airline sector has a long way to go before financial health is restored, and high fuel prices have forced carriers to be conservative in their capital spending, Mr. Newman said in an interview Thursday.

"Some airlines are still removing seat capacity," he said. "Bombardier has to be prudent and adjust its production rates."

Leading U.S. customers for Bombardier's CRJ aircraft have included Northwest Airlines Corp., Delta Air Lines Inc., Comair Inc. and SkyWest Airlines Inc., while Germany's Deutsche Lufthansa AG has been among the top buyers.

Air Canada Jazz has been an important CRJ customer in the past, but the regional carrier is looking closely at another Bombardier product - the Q400 turboprop, Mr. Newman said.

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Jazz could order between 10 and 20 Bombardier Q400s, while three-year-old Porter Airlines Inc. is nicely positioned to add to its Q400 fleet, he added.

Jazz spokeswoman Debra Williams said Halifax-based Jazz has ongoing discussions over potential aircraft, but declined to confirm if Q400s are on tap.

Porter spokesman Brad Cicero said the Toronto-based carrier is mulling over its next move.

"The Q400 is one of the strong Bombardier products. We've been extremely happy with them," Mr. Cicero said, noting Porter has already taken delivery of 17 Q400s. "As we take the 20th aircraft from our original order by April, it's not impossible that we would consider a follow-on order."

Bombardier said it had 116 CRJs in its backlog of orders on July 31, compared with 105 Q400 turboprops.

The availability of used CRJs on the market is impeding new sales of the jets, said Desjardins Securities analyst BenoƮt Poirier. He estimates Bombardier will deliver 52 regional jets for the fiscal year ended Jan. 31, 2010, and another 45 CRJs in the next fiscal year.

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The market for CRJs has proved to be challenging in 2009. In August, Bombardier cancelled an agreement with Italian carrier MyAir for 15 CRJ-1000s.

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