Last updated: 11:07 AM ET, Thu May 05 2016

Will Delta’s Big Bombardier Order Buoy the CSeries?

Airlines & Airports | Paul Thompson | May 05, 2016

Will Delta’s Big Bombardier Order Buoy the CSeries?

Photo courtesy of Delta Air Lines

Last week, Delta Air Lines placed a firm order for 75 Bombardier CS100 jet aircraft, with options to add another 50 later on. Delta will be the first airline to fly the CS100 in the United States. The firm order is valued at roughly $5.6 Billion U.S. dollars, and the order is intended to replace older, fuel-guzzling planes, which were designed decades ago.

At a press conference from Mirabel, Quebec, incoming Delta CEO Ed Bastian said, “As we reshape our fleet for the future, the innovative onboard experience of the CSeries is a perfect complement for the top-notch service provided every day by Delta people.” He added, “These new aircraft are a solid investment, allowing us to take advantage of superior operating economics, network flexibility and best-in-class fuel performance.”

READ MORE: Bombardier Announces Game-Changing Order from Delta

Delta’s Senior VP Supply Chain Maintenance and Fleet Strategy told Reuters that the decision to order the CS100 was based in part on the expected implementation of emissions standards by the United Nations over the next decade. There is no word on exactly what those standards will be, but Delta’s average fleet age is older than its biggest competitors in the U.S. — American, Southwest, and United.

Many of Delta’s aircraft are based on designs from the 1980s, such as the Boeing 757, 767, and McDonnell Douglas MD-88 or MD-90. It’s an industry joke that “There’s not an old plane that Delta doesn’t like,” because they’re known for picking up planes second-hand, because they’re cheap even if they’re less efficient.

Bombardier has found their 100-seat CS100 a tough sell — so much that the company has asked the Canadian government for a bailout, due to those poor sales and massive cost overruns. Only 128 CS100s have been ordered, according to Bombardier’s own website updated March 31st, plus the Delta order. Delta’s order more than doubled the previous CS100 tally, and marked the largest in Bombardier history. It is without a doubt that Bombardier secured the purchase with very aggressively discounted pricing for Delta. Delta is expecting to take delivery of the planes beginning in early 2018.

A larger version of the plane, the 130-seat CS300 has sold a bit better, with 190 ordered as of the end of March. However, 40 of those orders were from Indianapolis-based Republic Airways, who filed for bankruptcy protection earlier this year, so it remains to be seen if those planes will ever be delivered.

Fuel expenditures are one of the top three costs for airlines, along with labor costs and the aircraft themselves. Over the years, technologies have advanced to allow the creation of jet engines that are much more efficient and cleaner burning than those of previous generations. Modern engine builders General Electric, Pratt & Whitney, and Rolls-Royce are players throughout the field of commercial aviation, no matter what size of jet is being bought. They have figured out ways to make the engines more powerful and lighter, while consuming far less fuel.

On the CSeries, the Pratt & Whitney Pure Power PW1500G has not been problem free, and has led to program delays, including an uncontained engine failure (read: it exploded). The whole CSeries Program is more than $2 billion over budget, according to The Globe and Mail.

Bombardier is no stranger to building planes, but the planes they have previously built were regional jets. The CSeries is much larger. Both the CS100 and CS300 are smaller than their competitors — the Airbus A320 series and the Boeing 737 series. And although Bombardier was first to offer these new and efficient planes, Airbus and Boeing responded with updates to their venerable workhorses, including new engines from GE and Pratt & Whitney. Since then, many airlines have chosen to stick with what they know and order hundreds of re-engined A320s and 737s.

According to Flight Global, Bombardier courted Delta for over six years to secure the order. But will the high-profile order from one of the world’s top carriers buoy the CSeries, in particular the expected U.N. mandate for emissions standards be enough to save the program? Hundreds more planes need to be ordered just for the program to break even through the research and development costs.

READ MORE: Who's In Third? Bombardier's Struggles Leave Door Open For Embraer.

Perhaps more of the world’s airlines will play “copy cat” by mimicking Delta and ordering the small but efficient Canadian aircraft. Though if I had to place a bet, I would not expect a windfall of orders just because Delta ordered them. After all, the plane has been offered for sale for several years now, and only a small handful of airlines have taken the bait. 


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