MONTREAL - Bombardier's all-new commercial jet is days away from its planned inaugural flight, but the lack of CSeries orders at the Paris Air Show has highlighted concerns about its ability to secure enough interest to make the program a success.
"This is a white hot market for selling aircraft and the only odd man out is Bombardier," Richard Aboulafia of the Teal Group said of the manufacturer's weak performance at the premier aerospace event.
The Quebec-based company was overshadowed by rivals Boeing, Airbus and Embraer, which secured more than 1,200 firm and potential orders.
Analysts said Brazil's Embraer "stole the show" by unveiling details of its refreshed E-Jet family of regional aircraft powered by a Pratt
RBC Capital Markets said Embraer's largest plane will compete with the CSeries, but orders will be mission dependent. The CSeries offers a longer range and larger cabin, while the E-195 E2 promises lower costs per trip on shorter flights.
"Overall, we believe competition will be healthy in the 110- to 130-seat market but no clear winning on either side," analysts Walter Spracklin and Derek Spronck wrote in a report.
The pair labelled Paris a disappointment for Bombardier (TSX:BBD.B), having hoped for an order from a Chinese airline, a global leasing company or a recognized international carrier.
Instead, it announced just a few commercial aircraft orders valued at nearly US$400 million at list prices. It also received US$1.8 billion worth of business jet orders.
Aboulafia said he likes the CSeries but believes Bombardier hasn't been commercially aggressive enough to take advantage of the several-year jump-start its plane will have on the competition.
He also worries that Bombardier doesn't have the financial resources to sell the planes at a significant enough discount price to attract airlines.
Bombardier officials have insisted they will have at least 300 firm orders when the aircraft enters into service next year, without resorting to huge discounts. Of the 388 commitments received so far, only 177 are firm orders.
Porter Airlines president Robert Deluce said he expects a successful first flight will be a catalyst for additional orders.
"Once the aircraft flies I suspect there will be a whole bunch of potential users of that aircraft that will surface and will want to have their foot in the door and secure their place in the delivery queue as well," he said in a speech Friday in Toronto.
Porter has placed a conditional order for 12 CS100 aircraft, with 18 options worth a total of about US$2.08 billion at list prices. The controversial order is contingent on Porter receiving permission to fly the plane out of Toronto City Centre airport.
Industry observers are hoping the first flight prompts orders by removing the risk that the plane won't fly or deliver the promised fuel and cost savings of its clean-sheet design.
"Historically, what we have seen is that first flight and the entry into the test programs appear to be kind of one of those key inflection points where you start building a bit of an order book," said Chris Murray of PI Financial.
The CS100 is slated to enter into service in a year, followed by CS300 by the end of 2014. Murray said it's not inconceivable for these dates to be delayed by several months.
A track record of lengthy delays by aircraft manufacturers has prompted buyers to be skeptical about any timing promises. Bombardier was forced to delay delivery of its CRJ1000 by 10 months. Boeing's 787 Dreamliner was delayed by several years over a string of incidents, including a fire during a 2010 test flight.
Bombardier has tried to learn the lessons of these delays through intense pre-flight testing and harnessing its supply chain experience from the many business and commercial aircraft programs it has developed.
"(They) want to make sure that the test is done safely, that it proves out the aircraft but . . . avoid is anything that significantly delays the entry into service," Murray said.
Aboulafia said Bombardier could overcome even a lengthy delay if it can fill its order book.
"I think 18 months late is still OK. Heck, Boeing was four years late and they didn't lose any real orders out of the order book," he said from Paris.
The U.S.-based analyst described any challenges in achieving certification or ramping up production as tactical.
"The big overwhelming strategic question is can they afford to break into this market."
Karl Moore of McGill University's Desautels Faculty of Management said Bombardier needs to get CSeries orders but anticipates the program being a success.
"It will take off and be a considerable success. It's just a matter of time," he said.
Moore described the CSeries as a "central pillar" of Bombardier's aerospace strategy. Initially introduced in 2004, the CSeries program was halted for several years before being officially launched in 2008 with a new engine and key components made from composite materials.
The aircraft's design with five-seat rows optimizes its ability to use short downtown runways in cities like London and Toronto or in mountainous conditions like Switzerland.
Bombardier expects the CSeries will help the company to double its revenues within five years and generate enough cash to boost its dividend and restore its credit rating.
"If it doesn't meet up to expectations and it's something which is not deemed a considerable success, that would be something that would cause problems for Bombardier Aerospace," Moore said.