Bombardier Inc. has launched its biggest ever plane into the skies, hoping the momentum of the jet's first test flight will generate crucial sales in the months ahead.
Aiming to rebuild investor confidence after failing to deliver on financial and operational targets over the past two years, Bombardier on Friday executed the first airborne test on its larger C Series plane, the CS300. The single-aisle airliner took off at Mirabel, Que., under a clear sky and frigid -21 C temperature to a driblet of applause from a small group of assembled customers, employees and media assembled near the runway.
Bombardier chief executive Alain Bellemare stood front and centre at Friday's event. Handed the job barely two weeks ago in a shakeup that saw former CEO Pierre Beaudoin become executive chairman and cede daily management of the company, Mr. Bellemare faces the task of getting the plane and train maker back on course.
"I feel good about what we've done and where we are," Mr. Bellemare said in an interview. "We have the financial ability to manage our way successfully, complete the certification of [current aircraft] programs, bring them to market and regain our financial strength in the long run."
Critics argue that Bombardier is still trying to do too much, stretching its resources over six different aircraft families and the world's biggest train manufacturing unit, in addition to a new aerostructures business. Some say it should consider selling the least profitable parts of the company or striking major commercial partnerships to lower costs.
Bombardier has hinted it will do just that, saying this month it will "explore other initiatives" such as taking part in industry consolidation. The company also launched a recapitalization plan that saw it suspend its dividend and issue $1.1-billion of new equity. Bombardier is also raising $2.25-billion (U.S.) in debt, including $1.5-billion of notes due in 2025. The bonds were priced to yield 7.5 per cent, more than 600 basis points above 10-year government of Canada bonds, showing the substantial risk premium demanded by Bombardier investors.
Mr. Bellemare declined to comment specifically on his strategic plans, saying he's currently doing reviews with business units and trying to understand how best to use the company's resources. "Clearly, the name of the game will be about focus, perfect execution and doing it in a very disciplined manner."
Bombardier is developing the C Series, a new family of single-aisle airliners, to fill what it sees as a hole in the market for aircraft seating 100 to 150 people. It is counting on the planes to fuel aerospace revenue as its CRJ regional jets fade, projecting it will tally up to $8-billion (U.S.) in sales annually from the program when it ramps up production.
The CS300 is the larger of Bombardier's two C Series aircraft, seating up to 160 people in a maximum-seat configuration. The plane vaults the company squarely into the crosshairs of giants Boeing and Airbus, which are also launching revamped versions of their bestselling 737 and A320 jets, respectively.
Bombardier customers say privately that the two larger and better-capitalized rivals are engaging in a whisper campaign against the Canadian company, telling prospective clients that it won't survive its current financial challenges. One customer said the Canadian executives are too nice in the way they've countered that reputational smearing so far.
"It's a cutthroat industry," one customer said. "We're trying to convince them to be tougher."
Mike Arcamone, who leads Bombardier's commercial aircraft unit, said Bombardier will let the product speak for itself.
"We are going to be around. And they're running scared," he said of his competitors. "They're running scared because they know it's a great aircraft."
Executives overseeing the C Series program said the jet is meeting all performance targets and remains scheduled to be certified by the end of the year. Among the plane's advantages, Bombardier says it is four times quieter than competitors' offerings and 20 per cent better on carbon dioxide emissions.
Bombardier has tallied 243 orders so far for the C Series jets. Executives said Friday they're very comfortable with that number, saying interest from around the world proves there will be future global demand.
Among Bombardier's challenges will be trying to counter the discounts being offered by Boeing and Airbus. The two rivals can spread out such price cuts over hundreds of planes and an order backlog that stretches several years. Airbus on Friday announced continued strong orders for its A320 program, saying it will ramp up production of the airplane to 50 units a month by the first quarter of 2017. By contrast, Bombardier projects it will be cranking out 10 C Series jets a month by the end of 2016.