Air Canada's Bombardier order to be cut: analyst
Airline will order 30 Bombardier planes through 2007 instead of 45
BOMBARDIER Inc, the world's third-biggest aircraft maker, may have an order from Air Canada that is one-third smaller than initially agreed upon, Credit Suisse First Boston analyst Cameron Jeffreys said in a report.
Air Canada will order 30 Bombardier planes through 2007 rather than 45, the amount in a December memorandum of understanding, Mr Jeffreys said, citing the airline's fleet schedule.
The schedule was disclosed in Air Canada's business plan filed last Wednesday to emerge from bankruptcy. It lowers the order's value to about US$755 million from US$1.16 billion based on list prices, which don't include discounts buyers often get.
The cut would make Bombardier chief executive officer Paul Tellier's recovery plan more difficult as the company's backlog of plane orders shrinks, Mr Jeffreys said.
Mr Tellier, 65, surprised investors on May 27 with a US$23 million loss in Bombardier's aircraft business even as sales rose 9.4 per cent to US$1.76 billion for the quarter ended April 30.
'The backlog simply does not support the current production rate, even if a sizeable order, which we do not envision, develops,' Mr Jeffreys wrote in his report. 'More significant restructuring is likely.'
Mr Tellier, who in January of last year replaced Robert Brown as CEO, is working on a three-year plan that began in April 2003 to keep the company's credit rating from falling to junk status and return it to profitability after two years of net losses.
In 2003, Mr Tellier led the sale of 370 million shares to raise C$1.2 billion ($906.7 million) and sold the company's snowmobile business for C$960 million.
He also decided last year to eliminate 3,000 of 33,000 jobs in the aircraft business.
In March he announced plans to lay off 6,600 of 35,600 workers and close seven plants in the train business over two years.
Bombardier didn't return a call for comment.
Under the original memorandum, Air Canada was to buy 15 CRJ200 aircraft and 30 CRJ700 models, Mr Jeffreys said.
It now plans to buy 15 CRJ700s, he said.
'The order is currently in the process of being finalised and the final number will depend on a number of factors,' said Air Canada spokeswoman Angela Mah, who declined to be more specific.
Air Canada filed for protection from creditors on April 1, 2003, weighed down by more than C$12 billion in leases and long- term debt.
A similar agreement with the airline for 45 planes from Bombardier's Brazilian competitor Empresa Brasileira de Aeronautica SA, or Embraer, was only cut by one, Mr Jeffreys said.
The company's aircraft backlog as of April 30 fell to US$11 billion, including 264 commercial jets, from C$17.1 billion, including 334 commercial jets, a year earlier. The backlog's value includes unfilled orders for business jets and propeller planes. Bombardier started reporting financial results in US dollars in May.
Bombardier said in May that it would reduce planned production of its commercial jets by 20 this year because of lower demand and lay off 500 workers. It delivered 223 commercial jets last year, which range from 50 seats for the CRJ200 model to 90 seats for the CRJ900.
The company's future deliveries also may be in jeopardy because 40 per cent of its backlog for commercial aircraft consists of orders from Delta Air Lines Inc and US Airways Group Inc, which are trying to reduce labour costs because of three straight quarters of losses.
Another 34 unfilled orders are for Atlantic Coast Airlines Holdings Inc, which severed its contract as a commuter airline with UAL Corp's United Airlines in April. Atlantic Coast last month started its low-fare carrier, Independence Air, and has ordered larger planes from Airbus SAS, the biggest maker of commercial aircraft. Boeing Co is the second-biggest. - Bloomberg
Give feedback on this article
• Shenzhen container traffic soars 32% in H1
• Students fight it out at global maritime arbitration contest
• Higher shipping costs delay Peru coffee exports
• Reduced ship supplies may drive up Asia tanker rates
• Iraq oil exports still reeling from pipeline sabotage
Air & Land Transport News
• Air NZ, Qantas take alliance bid to court
• Peru declares emergency in air sector
• Kuwait firm leases Boeing jet to MAS
• Qantas flight attendants may strike
• Consortium signs deal on Bangalore airport
• Rise in air travel hurting global environment: study
• Shanghai Air, others to add South Korea flights
• Communication glitches hit emergency response
• Burnishing shipping image
• Newbuild resales on the rise as owners cash in
• Liability remains separate even when shipowner is also master
• Ship Sales
• With ISPS achieved, it's now time to count the costs
Back to "The Shipping Times" index
Go directly to "The Shipping Times" sub-sections:
• Shipping News
• Air & Land Transport News
• Liner Scene
• Strait Talk
• Admiralty Casebook
• Daily Freight
• Bulletin Board
• The Shipping Guide
News Top Stories Latest News Companies & Markets Regional News World News Shipping Times BT Markets/Finance Views & Opinions Mailbag Weekly Sections Weekend BT BizIT Executive Suite Executive Money Executive Lifestyle Knowledge Economy Motoring Supplements BT Statistics BT Tables Corp Transparency BT/LEK Scorecard BT Extras Archive Search BT Mobile Site Map 7-Day Archive Place an Ad Subscriptions Currency Converter About Us
This site is best viewed at a screen resolution of 1024x768 and on IE 4 or Netscape 4 and above