Boeing and Airbus Face Challenge From Bombardier in 100-150 Seat Category
Boeing (BA) - Get Report announced narrowbody deals with two Chinese airlines, Airbus said it has a deal to sell 12 A350s to Virgin Atlantic, and Bombardier looked to the first commercial flight of the CS100 as the Farnborough Air Show opened Monday.
Boeing said Xiamen has signed a memorandum of understanding for the purchase of up to 30 737 MAX 200 jets, while Donghai Airlines signed a memorandum of understanding to buy 25 MAX 8 jets as well as five 787-9s.
Bombardier didn't have any deals to announce on Monday morning, but the Canadian airplane maker is looking to what may be the week's most important landmark on Friday, July 15, when the CS100 will fly commercially for the first time, with launch customer Swiss, a Lufthansa subsidiary, operating a Zurich to Paris flight.
"I think Bombardier gets to prove its case here this week," said aviation consultant Addison Schonland, who is attending the airshow and whose firm AirInsight recently completed a reported titled: "Bombardier's CSeries at EIS {Entry into Service}; Regaining Momentum."
"The CSeries will likely attract a lot of attention now," Schonland said. "It's obviously the real deal now. It is the quietest airplane in the sky which is huge for Europe. Its low fuel burn and emissions make it the green star of the industry."
In February, Bombardier signed a deal with Air Canada for 45 CS300 jets seating 135 passengers. In April, it signed a groundbreaking deal with Delta (DAL) - Get Report for 75 CS100 jets seating 110 passengers.
Schonland's report said Bombardier and Embraer are in a position to "squeeze out Airbus and Boeing from the 100- to 150-seat market." United's purchase of 65 Boeing 737-700s early this year showed that "the only way the big guys win is to cut prices," he said.
The Farnborough Air Show, which takes place about 30 miles outside London, occurs every other year, alternating with the Paris Air Show, and is the aircraft industry's principal showcase, just as the Detroit Auto Show is for the auto industry.
At the 2014 Farnborough Air Show, Airbus announced 496 orders and commitments while Boeing announced 201 orders and commitments. This year, the two giants have a combined record backlog of about 13,500 aircraft, at a time when demand may be slowing. They are not expected to announce any major deals.
In his report on Bombardier, Schonland noted, "A smooth entry into service with Swiss will be critical for the success of the program.
"To date, the CSeries program has faced an uphill climb," Schonland wrote. "The two-and-a-half-year program delays cost Bombardier first-mover advantages. With A320neo in service and Boeing MAX and Embraer E2 just around the corner, {CSeries} is no longer the first player to introduce advanced technologies."
A deal with Delta was probably possible at the right price in 2012, Schonland wrote, but the campaign fell through and Delta moved on to acquire used Boeing 717s.
Still, he wrote, the CSeries "is modern, efficient, comfortable and has performance and range that will enable it to be a category leader in the market between 100 and 150 seats."
Meanwhile, Boeing's focus also could be on the company's 100th anniversary celebration on Friday, which will also be the big day for Bombardier.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.