By Richard Pettibone, Aerospace & Defense Companies Analyst, Forecast International.
The turmoil that has roiled Bombardier over the past few years came to a head in 2015 when top management was dramatically reshuffled.
In February, Alain Bellemare was named to replace CEO Pierre Beaudoin. In April, Fred Cromer was selected to lead Bombardier Commercial Aircraft. In June, David M. Coleal was named president of Bombardier Business Aircraft. Finally, in August, a new chief financial officer, John Di Bert, was named to replace the retiring Pierre Alary.
The new management team has its work cut out for it as it seeks to deal with a litany of woes in the CSeries, Global 7000/8000, and Learjet 85 programs.
Entry into service of the long-delayed CSeries was delayed until 2016. While the certification effort gained momentum following an engine failure in 2014, it was not enough to get the needed approvals in time for a 2015 delivery. As a result, delivery has been delayed yet again to the first half of 2016.
The product has been a risky venture for the company as it straddles the high end of the regional jet market and the low end of the narrowbody market – the hyper-competitive Airbus and Boeing territory. The aircraft was expected to be a fierce competitor in 2013 (its original service entry date) due to improvements in efficiency thanks to its Pratt & Whitney PW1000 geared turbofan (GTF) engine and use of lightweight materials. But as the delays mounted, other manufacturers caught up by launching re-engining programs for their existing models. Airbus’ A320neo is likely to enter service before the end of 2015, and Boeing’s 737 MAX family, in 2017. Embraer’s upgraded and re-engined E-Jets family will enter service around 2018. As a result, Bombardier is not entering the market with the huge advantage in operating costs it expected to enjoy at launch. This setback is further exacerbated by the low cost of oil, which is reviving the market for used (and less fuel-efficient) aircraft.
The next program to get hit with a delay was the long-range Global 7000 business jet. The program was delayed in mid-2015, with Bombardier citing unspecified development “challenges.” Designed to counter competing offerings such as the Dassault 5X/8X and the Gulfstream G650, the new aircraft features a new, high-speed transonic wing and will be powered by GE’s new Passport engine. Under the new schedule, launch of the Global 7000 has been pushed back to 2018 from its original 2016 debut date.
The Global 7000 delay is likely in response to the need to focus all efforts on the CSeries program. Unfortunately for Bombardier, this will likely give the competitors a leg up on the market in the near term. That said, Bombardier will capture a share of it long term; it is just going to be a bit more difficult thanks to the delay.
Meanwhile, at the company’s Learjet operation, Bombardier announced a “pause” for an indefinite period of time in its Learjet 85 program. As the reason for this decision, the company cited weak demand for the Model 85 in particular and for lighter business jets in general.
Bombardier insists that the suspension of the Learjet 85 program is temporary, and that it will resume work on the program when market conditions are right. However, it seems more probable that the program’s suspension will ultimately become permanent and that, if and when the firm returns to the medium jet class, it will do so with a different design. The all-composite Model 85 may simply be too innovative for much of the normally conservative business jet customer base.
The turmoil across its major programs is speculated as one of the drivers of the restructuring of Bombardier Aerospace from one unit into three independent segments in 2015. The move eliminates a layer of management, as all three segments – Commercial Aircraft, Business Aircraft, and a new Aerostructures and Engineering Service – now report directly to Bombardier’s president and CEO.
The reorganization has ignited speculation that the firm might spin off parts of its aviation business. While the compartmentalization of the operations in this structure might make such a deal possible, it is considered unlikely at present. For example, a sale of the Aerostructures unit would be difficult, as the unit produces major components across Bombardier’s aircraft product lines. Rather, the new structure appears aimed at focusing the firm on its particular markets while at the same time fixing operating issues.
Bombardier’s new management team is moving quickly to correct the company’s course. The company has implemented a transformation plan to drive performance across the entire organization. As a first step, the corporation launched a systematic process to identify and quantify opportunities within each business segment. English to Galician The main areas of opportunity identified are product cost reduction, better control of working capital, and effective use of cash. While this plan has resulted in some difficult decisions program-wise, the effort appears to be focusing the organization and its resources where they are needed.
A military history enthusiast, Richard began at Forecast International as editor of the World Weapons Weekly newsletter. As the Internet grew in importance as a research tool, he helped design the company's Forecast Intelligence Center and currently coordinates the EMarket Alert newsletters for clients. Richard also manages social media efforts, including two new blogs: Defense & Security Monitor, covering defense systems and international issues, and Flight Plan, which focuses on commercial aviation and space systems. For over 30 years, Richard has authored the Defense & Aerospace Companies, Volume I (North America) and Volume II (International) services. The two books provide detailed data on major aerospace and defense contractors. He also edits the International Contractors service, a database that tracks all the contractors involved in the programs covered in the FI library. More recently he was appointed Manager, Information Services Group (ISG), a new unit that encompasses developing outbound content for both Forecast International and Military Periscope.
