Bombardier stock takes off on first CSeries order in 18 months
Under-pressure airplane maker Bombardier scaled back CSeries jet deliveries by around a third because of engine delays, but has received its first order for the narrow bodies in 18 months, helping send shares up 4pc.
Wings for the C Series are built in Belfast. Last week Bombardier said it was cutting 280 jobs from its Belfast plant as part of a bid to cut costs.
Bombardier has about 4,000 staff in the city and is Northern Ireland's biggest private sector employer.
Engine delays, which reduced CSeries deliveries from 30 to an expected 20 to 22 this year, are a "short-term issue" that supplier Pratt & Whitney is "actively addressing", Bombardier CEO Alain Bellemare said.
Pratt & Whitney, a division of United Technologies, said in October that it was resolving issues with the geared turbofan (GTF) engines that power the CSeries and Airbus A320neo to make them more durable.
Bombardier said the delays would raise its free cash flow usage for 2017 to about $1bn, at the higher end of its forecast range.
Shares were up 4.7pc in morning trading to C$2.92. The Canadian plane-and-train-maker also said it received a letter of intent from an unnamed European customer for 31 firm CSeries orders.
European planemaker Airbus recently agreed to take a majority stake in the CSeries programme for $1, in a deal expected to improve CSeries sales and reduce costs. Bellemare told analysts that the Airbus venture, while boosting "sales momentum" for the CSeries, isn't directly "linked" to the order which the company was already working on and would be valued at about $2.4bn based on list prices, with an additional 30 options.
Some analysts were anticipating orders because of increased confidence in the CSeries from the Airbus deal, which closes in 2018. A European customer won't face potential duties stemming from a trade dispute with Boeing.
"We'll have to see who the new airline is, but it certainly sounds promising, particularly since it isn't subject to the US duty," said Teal Group analyst Richard Aboulafia.
Bellemare said the company was weighing strategies like forming partnerships to boost volumes of its smaller aerostructures division, which makes components for planes like the CSeries.
Bombardier reported third-quarter earnings before interest, taxes and special items (ebit) that surged 90pc to $165m and a loss in line with analysts' expectations.
It expects full-year ebit of at least $630m, which is at the high end of its forecast of $580m to $630m.
Bombardier, which is in the middle of a five-year turnaround plan after facing a cash crunch in 2015, delivered 31 business jets in the third quarter ended September 30, compared with 36 in the same period last year. The company was dealt a huge blow after a complaint from rival airplane maker Boeing resulted in the US administration imposing a provisional 300pc tariff on each of the aircraft sold there, potentially scuppering a multi-billion dollar deal with Delta Air Lines for up to 125 jets.
Boeing had objected to financial aid provided to Bombardier from Canadian government sources. (Reuters)