Bombardier pushes for Chinese orders with breakthrough deal
The Luxair Q400 NextGen aircraft is shown in this image released by Bombardier on Thursday Sept. 29, 2011. THE CANADIAN PRESS/HO
Published Wednesday, March 21, 2012 12:17PM EDT
SHANGHAI, China - Bombardier's push to sell CSeries in the large Chinese market received a boost after the Canadian manufacturer signed an agreement to develop commonalities with China's larger C919.
COMAC and Montreal-based Bombardier (TSX:BBD.B) will work on four projects during the first phase of a long-term collaboration.
The initiatives to be completed over the next 12 months involve the cockpit, electrical system, aluminum-lithium specifications, publications and co-location of customer service teams.
"We are confident these four initial projects will build on the complementary nature of our respective products and expertise while helping to maximize both parties' cost savings and market shares," stated Bombardier CEO Pierre Beaudoin.
He signed the definitive agreement in Shanghai Wednesday with his
Chinese counterpart, which follows a framework deal inked last March.
The synergies being developed "will certainly contribute to enhancing the competitiveness of not only the C919 and CSeries aircraft programs, but also of COMAC and Bombardier's overall businesses," added Jin Zhuanglong, chairman of Commercial Aircraft Corporation of China Ltd.
The companies said the strategic long-term relationship demonstrates the "complementary nature" of the 110- to 149-seat CSeries and the 168- to 190-seat narrow-body C919.
The Chinese will model its cockpit, under development over the next 12 months, after the CSeries to ensure that an operator could use the same pilot training for both aircraft.
"The look and feel will be very similar," spokeswoman Haley Dunne said in an interview.
Although the COMAC plane is larger, the cockpits "will be common enough so that training will be reduced between the two aircraft types so it will be easier to get a type certification."
Both companies have contracted with Hamilton Sundstrand for the electrical systems.
Having common features would make it more attractive for airlines to buy both planes for their fleets and compete with wide offerings of Boeing and Airbus.
Dunne said the deal doesn't involve any transfer of financing or ownership in Bombardier. It also would have no job impact. Bombardier Aerospace has more than 100 employees working in China.
Bombardier and COMAC said they will continue to explore other opportunities for procurement along with synergies in development and customer services.
Benoit Poirier of Desjardins Securities said the agreement pushes CSeries orders from China a step closer to fruition.
"We see the agreement as a positive development given that it will in all likelihood open the vast Chinese market for the CSeries and could potentially tap China's ample financial resources to backstop the development cost of the CSeries," he wrote in a report.
The CSeries is slated for entry into service in late 2013 while the C919 is set for 2016.
The Bombardier plane has 138 firm orders while the Chinese aircraft has 175 firm orders.
"We expect the tie-up between Bombardier and COMAC to provide Bombardier with greater firepower in its battle against Boeing and Airbus."
Bombardier's quest to sell into China means that it has little choice but to transfer some of its technology to China, added Karl Moore, a professor at McGill University's Desautels Faculty of Management.
"Are we helping to build our future competitors, absolutely. But if we're not involved in that game the Americans and the Europeans will continue to do it," he said.
Bombardier is the world's third-largest commercial aircraft manufacturer and largest maker of trains. Founded in 2008, COMAC is China's main commercial aircraft company.
On the Toronto Stock Exchange, Bombardier shares gained 10 cents, or 2.47 per cent, at C$4.15 in morning trading.