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Bombardier says Russian leasing company firms up conditional CSeries order

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(Globalpost/GlobalPost)

MONTREAL - Bombardier said Tuesday a large Russian leasing company has firmed up its conditional order for up to 42 CSeries jets.

The company said that Ilyushin Finance Co. shareholders have now approved the firm order for 32 CS300 aircraft and options for 10 additional jets.

The order includes aircraft with up to 160 seats for export to international airlines.

Based on the list price, the Russian order is valued at about US$2.56 billion, but could rise to US$3.42 billion if all the options are exercised, however customers typically receive a discount off the list price.

Ilyushin signed a letter of intent in 2011 and a conditional purchase agreement in February.

Its director general said airlines, particularly in the Commonwealth of Independent States (CIS) have expressed an interest in replacing older aircraft with the fuel-efficient CSeries.

"With its clean-sheet, advanced technology design, the CS300 jetliners will help to alleviate these concerns, while offering excellent range, superior field and runway performance, and a superb cabin that will bring airline transport into the 21st century," stated Alexander Rubtsov.

Bombardier (TSX:BBD.B) has received commitments for 388 110- to 160-seat CSeries jets, including 177 firm orders.

The smaller version of the plane is expected to make its maiden test flight by the end of the month and enter into service a year later. Deliveries of the larger CS300 are expected to begin by December 2014.

Bombardier commercial aircraft president Mike Arcamone called the IFC deal a "landmark" order for the CSeries and the Russian leasing company.

"IFC's order confirms that the CSeries aircraft is ideal for a step-change in air travel throughout the CIS and elsewhere in the world," he stated.

Analyst Walter Spracklin of RBC Capital Markets said "a focused sales effort" is required for Bombardier to meet its goal of having 300 firm orders when the plane enters into service in about a year.

But he said Ilyushin's firm order "signals that a leasing company is willing to make a substantial bet on the CSeries aircraft."

"As such, we believe that the CSeries has reached enough depth and breadth in their customer order book that we should see additional leasing companies come in and place additional orders of size," he wrote in a report.

Also Tuesday, Bombardier identified Bahrain's Gulf Air as one of the customers for the CSeries, which will compete with some of the smaller planes offered by Airbus and Boeing.

The Middle Eastern carrier ordered 10 CSeries CS100 aircraft in June 2011, but declined to be identified until Tuesday. It also has options for six additional planes.

Gulf Air currently has a fleet of 26 Airbus planes, but said it's working with Bombardier Aerospace to ensure the CSeries meets the goals of the airline's ongoing restructuring.

The money-losing national airline is focusing on high-yield routes that connect Bahrain businesses with regional markets. It has laid off more than 1,000 employees, or 15 per cent of its staff and cut four routes since January.

Analyst Cameron Doerksen of National Bank Financial said he doesn't expect the first CSeries flight will coincide with the Paris airshow, which starts June 17.

"But a first flight that corresponds to the show would clearly be a headline-grabber," he wrote in a report.

Doerksen said small CSeries orders will likely be announced at the air show even if it doesn't complete the first test flight.

Among the airlines considering the aircraft is Europe's EasyJet.

Benoit Poirier of Desjardins Capital Markets said IATA's stronger airline industry profit forecast for 2013 is positive for manufacturers like Bombardier.

The International Air Transport Association expects the global airline industry will earn US$12.7 billion of profits this year, up from its March forecast of US$10.6 billion.

The number of passengers is expected to reach 3.13 billion, the first time it will have passed the three billion mark.

"The increase in IATA's 2013 outlook is a positive indication, in our view, since profitability is typically linked to aircraft orders," he wrote in a report.

http://www.globalpost.com/dispatch/news/the-canadian-press/130605/bombardier-says-russian-leasing-company-firms-conditional-cs