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Bombardier’s New C-Series Regional Jet- Can a Disruptor Compete with Aerospace Giants?

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It is again time to update Supply Chain Matters readers on regional jet maker Bombardier, its C-Series aircraft program and associated supply chain challenges.

We first introduced our readership to the C-Series program in October of 2010 under the headline of C-Series Joins in the Global Supply Chain Outsourcing Perils of Aerospace. We noted that Bombardier was taking a huge strategic gamble on the

Bombardier C-Series

Source: Bombardier web site

supply chain deployment and market launch of the new C-Series aircraft which was originally scheduled for 2013.  The C-Series supply chain is global in scope. Major components such as fuselage wings and tail are sourced in China, Ireland, Italy, and other countries.  All of the major components are to be shipped to Bombardier’s final assembly facility outside Montreal’s Mirabel airport for final integration. Thus the program has huge dependencies on synchronized global logistics and execution.

The aircraft is a 100-150 single-aisle passenger aircraft that is the cornerstone of the company’s plan to compete head-on with the likes of Boeing’s 737 Max and the Airbus A320 Neo for advanced commercial aircraft that can deliver compelling fuel efficiencies for airlines. Besides it lightweight carbon fiber design, the other major innovative aspect of the C-Series is the designation of United Technologies, Pratt and Whitney unit’s new PurePower Geared Turbofan™ engine as its power plant, which utilizes a complex gearing system that spins the front and rear turbo fans at different speeds. This innovative engine has a promise to deliver considerable fuel savings. Product marketing claims 15 percent cash operating cost advantage and 20 percent fuel burn advantage over the competing Boeing and Airbus models. Bombardier executives are also quick to note that the C-Series utilizes conventional batteries rather than the lithium ion batteries that have caused troubles for Boeing’s Dreamliner plane.

As The Wall Street Journal describes in its reporting: “The unveiling of the single-aisle CSeries marks the first time since 1987 that any company has rolled out an all-new plane in the smallest category of mainline passenger jets.” It has been reported that development costs for this new regional jet are near $3.4 billion, thus the stakes for market acceptance and program profitability are very high.

In our last Supply Chain Matters update on this program in November 2011, it was noted that Bombardier’s target was to have 200 to 300 orders between first maiden flight and first delivery in 2013. The main market for the C-series was identified as China where anywhere between 20 to 30 percent of the global fleet could eventually be located. Since that time, China responded with an aircraft program of its own. In a November 2010 Supply Chain Matters commentary, we observed that China based, state-owned aerospace manufacturer COMAC has embarked on a program of innovation and cost competitiveness for narrow aisle aircraft Which features a C Series program. (Coincidental, of-course)  In order to insure strategic options were covered, major component aerospace suppliers such as General Electric and United Technologies jumped-in with strategic development and relationship programs with COMAC and its other China based supplier partners to insure options were covered in China’s aerospace market segment for regional jets. COMAC garnered orders from several of China’s state-owned airlines because of its unique role for contributing to China’s strategic plan for competiveness in aerospace, and continues its declaration that it will provide a compelling alternative offering for the global market.

Last week, Bombardier conducted an unveiling event for media and analysts and announced that theprogram is making excellent progress. However, the program itself has now slipped about six months from its original milestones. First flight of this new aircraft will be conducted by the end of June 2013 with first aircraft delivery expected to be in the first half of 2014. Pratt recently received certification from Transport Canada for its first engine design, and Bombardier project teams are concentrating on achieving a safety-of-flight permit for initializing the test flight phase of the program. Also announced was an extra capacity model developed for airBaltic that will increase CS300 seating to accommodate up to 160 passengers.

In last week’s unveiling, Mike Arcamone, president of Bombardier Commercial Aircraft stated for reporters that Bombardier is aiming to capture 50 percent of the 100-to-149 seat aircraft sub-category over the next 20 years – an estimated $430 billion market. According to a published report by Reuters, at list prices, the 110-seat CS100 is expected to cost $62 million and the 130-seat CS300 $71 million. In contrast, the Boeing 737 MAX costs $82 million and Airbus’ A319 Neo costs $88.8 million. Thus far, the current tally of firm booked orders currently stands at 148, not including an order of an additional 32 CS300 from a Russian customer.  One of the airlines that placed a firm order is reported to be Germany’s Lufthansa. Bombardier remains adamant that it will meet its target of 300 firm orders and at least 20 customers by mid-2014, when the jet enters service. It will need to do so in order to meet profitability goals for this program.

In its reporting last week, The Wall Street Journal noted that both Boeing and Airbus teams were working hard to ensure that the C-Series would not gain any market traction. Boeing’s vice president of marketing is quoted as indicating that the market is moving away from the C-Series. While the firm orders for both rival makers certainly would confirm that perception, the one uncertainty is the past and current track records of both Airbus and Boeing in delivering innovative aircraft programs to original milestones.

Thus, in our view, the C-Series may still have a trump card if it can deliver to current first ship milestones without any further delays.  As noted in our commentary nearly a year ago, a highly uncertain global financial climate, aerospace industry supply chains that have taxed overall supplier capacity and the dynamics within both China and Russia may well either alter or enhance the widow of opportunity for the C-Series program.  Bombardier’s supply chain must therefore execute flawlessly with little margin for error.

The aerospace segment will be the one to watch over the coming months as these market and global supply chain dynamics continue to unfold. We continue to wish Bombardier and C-Series program teams well in their endeavors.

Bob Ferrari

 

©2013 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog.

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