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Deep Dive on 2017 Prediction Nine: Business Self-Interest Will Fuel Continued Efforts in Supply Chain Sustainability Actions and Initiatives

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The following Supply Chain Matters blog is part of our ongoing series of deep dives into each of our previously unveiled ten 2017 Predictions for Industry and Global Supply Chains.

At the start of the New Year, our parent, the Ferrari Consulting and Research Group along with our Supply Chain Matters blog as a broadcast medium, provide a series of predictions for the coming year. These predictions are shared in the spirit of assisting industry specific and global supply chain cross-functional teams in helping to set management objectives for the year ahead. Our further goal is helping our readers and clients to prepare supply chain management and line-of-business teams in establishing impactful programs, initiatives, and educational agendas.

The context for these predictions includes a broad cross-functional umbrella of supply chain strategy, planning, execution, product lifecycle management, procurement, manufacturing, transportation, logistics and customer service management.

In an earlier Supply Chain Matters blog postings, we provided deep dives related to:

 Prediction One- Subdued World Economic Outlook and Heighted Uncertainty to Test Industry Supply Chain Agility.

Prediction Two- A Challenging Year in Procurement

Prediction Three- A Supply Chain Talent Perfect Storm

Prediction Four- Increased Anti-Trade Geo-Political Forces Provide Added Global Sourcing Challenges

Prediction Five- Continued Global Transportation Industry-wide Turbulence

Prediction Six- A Renaissance in Supply Chain Focused Business Services and Technology Investments

Prediction Seven: Enhanced Supply Chain Intelligence Capabilities Among B2B Network Platform and Managed Services Providers Will Pay Dividends for Industry Supply Chains

Prediction Eight-Amazon and Alibaba Continue to Position for Global Online Platform Dominance

 In this deep-dive series posting, we drill down on our next prediction.    Paris_COP21

2017 Prediction Nine: Business Self-Interest Will Fuel Continued Efforts in Supply Chain Sustainability Actions and Focused Initiatives

Despite the declarations by U.S. President Trump that climate change has not been proven to be an issue, we predict that individual business and supply chain self-interest needs, along with the track record of benefits to-date, will continue multi-industry green and supply chain sustainability initiatives and momentum.  There is literally too much positive momentum on a global basis to motivate senior executives to derail such efforts in 2017.  The need remains compelling.

Where Emissions Emanate

Scientists point to three sectors that are most critical toward reduction of GHG emissions:

Energy– the engine and most influential cost aspect of global business and of industry supply chains represents upwards of 30 percent of global CO2 emissions. Throughout modern history, the cost of energy and fuel has been the principal driver of a majority of industry, manufacturing, distribution, and global supply chain strategies. Reduction opportunities reside in the consumption of alternative and low carbon renewable energy sources, smarter and far more efficient energy, and logistics utilization practices.

Agricultural, Land Use and Forestry Practices account for an additional 30 percent of global-wide emissions. With world population growth expected to reach 9 billion people by 2050, our planet cannot tolerate an unsustainable food production system. Farming practices, fertilizer, water use, animal husbandry all add to considerable emissions.

City Infrastructure, Buildings and Transportation can be responsible for upwards of 40 percent of global emissions. More of the world’s population is expected to be concentrated in larger cities, (mega-cities) and thus will be the hubs for economic growth, commerce, delivery, and fulfillment logistics. The potential of smarter, more connected cities coupled with advances in more sustainable, renewable energy sources provides the opportunity for a complete re-thinking of urban logistics and transportation. Global trade must now stem from advances and efficiencies in global, regional, and local transportation networks.

To address these three imperatives, more and more organizations have discovered that the firm’s supply chain can be responsible for up to four times GHG emissions beyond that firm’s direct in-house operations.  Industry supply chains are therefore one of the most critical areas of opportunity to enable GHG reductions and climate chain resilience.

Sustainability is further not limited to emissions and natural resource protections, it further umbrellas global-wide social responsibility as a business and corporate citizen, and in the treatment and respect of labor provided by individuals. Here, the latter is especially pertinent to industry and global supply chains who elect to source production, component supply or business services in low-wage, limited protection geographies.

Current Status

As we begin 2017, scientists indicate that the Earth reached its highest temperature on record during 2016, breaking an earlier record set in 2014. This development represents the first time in the modern era of global warming data that average temperatures have exceeded prior levels for three years in a row.

The 12th Edition of The Global Risks Report 2017, sponsored by the World Economic Forum, observes that extreme weather events, climate change and water related crisis have each consistently been noted as among the top ranked global risks for the past seven editions of this report. However, according to this latest report, the pace of change is not yet fast enough to curb current warming trends.

The Artic sea ice had a record melt in 2016 and the Great Barrier Reef suffered an unprecedented coral bleaching event last year. Estimates are that GHG emissions are growing by 52 billion tons of CO2 equivalent per year even as the share from industrial and energy sources may be peaking because of investments in green and sustainability initiatives among multiple industries and countries.

Much has been accomplished these past few years, but more difficult work remains.

The Paris COP21 Agreement on climate change entered force during November 2016. This agreement has now been formally ratified by 110 countries with another 196 countries including China, now indicating strong support. The Global Risks Report 2017 cites data indicating: “The reality remains that to keep global warming to within two degrees Celsius and limit the risk of dangerous climate change, the world will need to reduce emissions by 40% to 70% by 2050 and eliminate them altogether by 2100.

Moving Forward

This new era of the Paris COP21 Agreement provides both a profound call to action as well as a significant opportunity- an opportunity for bolder collaboration and joint goal-setting to not only address greenhouse gas reduction imperatives and to saving our planet, but the imperative of sustainable business itself. It literally should change our perspectives and goal-setting for sustainability strategies surrounding industry supply chains, moving such initiatives beyond supply chain functional to line-of-business level efforts.

Across many industry supply chains, a lot has already been accomplished in identifying opportunities related to reducing industry supply chain related GHG emissions, preserving natural resources including water, and insuring sustainable supply of Earth dependent commodities. Multi-year objectives have been established that include annual tracking of performance to each objective. The benefits of these initiatives are meaningful in relation to savings on supply chain related costs, reductions in responsible emissions, insuring adequate supply of key strategic supply needs and a more positive perception to one’s corporate and product branding.

Opportunities to Further Leverage Technology

With the era of COP21, industry supply chains are presented opportunities to seize upon the tenets outlined in Jeremy Rifkin’s book, the Third Industrial Revolution as well as other Industry 4.0 thought leaders that point to the compelling convergence of technologies that are before us. One that leverages the convergence of green and renewable technologies, new more renewable energy sources, IoT enabled predictive-focused analytics and the digitization of manufacturing and supply chains. All are converging over the not too distant future, and collectively can foster insured business continuity through strategies that are directed at long-term sustainability of commodity, raw material, and natural resource supply.

Our Takeaway

In 2017, despite any U.S. political notions that climate change may or may not be a significant factor for business risk, industry supply chains and the respective businesses and customers they support and serve, will be at a disadvantage in de-railing or slowing down sustainability efforts.

Benefits have already been recognized along with added opportunities. From our lens, the ongoing convergence of digital and physical business processes manifested by IoT, more predictive analytics, autonomous decision-making and additive manufacturing will provide added opportunities towards sustainability needs and objectives.

The challenge remains insuring a sustainable business within domestic and global dimensions, and that momentum is likely to continue in the coming year.

 

This concludes our Prediction Nine drill-down. In our final posting of this series, we will explore Prediction Ten which addresses certain industry-specific supply chain focused challenges in the current year.

Stay tuned.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Update on Pratt and Whitney- When All Eyes Remain Focused on Your Supply Chain

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In October of last year, Supply Chain Matters published a blog commentary: Good and Not So Good News When All Eyes Are Focused on Your Supply Chain. Our commentary focused on ongoing developments involving certain commercial aircraft and aerospace industry supply chains, and specifically aircraft engine manufacturer Pratt & Whitney. We committed to our readers to follow through on this stream of ongoing developments to provide added insights and learning. This week, Pratt parent United Technologies briefed analysts and shareholders on Q4 and 2016 performance and there were even more nuggets of information and learning. pratt-pw1100g-production-line_2_450

Once again, we alert readers to the overall length of this particular commentary, but we want to make sure that full context is presented.

The commercial aircraft industry remains challenged by conflicting goals. They include the ability to more rapidly scale-up overall aircraft production levels. However, that sometimes conflicts with the industry dynamics of OEM dominants Airbus and Boeing in their respective desires to deliver higher margins, profitability, and more timely shareholder returns.

Smack in the middle of these dynamics are relationships among suppliers, who need to continue to invest in higher capacity, process innovation and capability, but of-late have had to respond to key customer requirements for larger cost and productivity savings. We will have more to state on this dynamic when we get to our 2017 Prediction deep-dive on unique industry-specific challenges for the coming year.

In response for airline industry needs for more fuel-efficient and more reliable aircraft, Pratt has designed and introduced a revolutionary new geared-turbofan (GTF) aircraft engine.  However, a series of supply chain glitches and volume production ramp-up challenges directly impacted the aircraft delivery production plans of both Airbus and Bombardier in 2016, causing both final manufacturers to now incur some financial and airline customer consequences of delayed deliveries and unfinished aircraft waiting for the inevitable broken-link in the supply chain. The most visible broken link was Pratt. There are others as well, such as interior seats for new wide-body aircraft, but in this new world of ubiquitous visibility, any one supplier can bear the brunt.

In September, UTC, the parent to Pratt, and specifically CEO Gregory Hayes, warned the conglomerate’s investment community that Pratt will likely miss its 2016 customer engine delivery goals by 25 percent, amounting to a shortfall of 50 engines for aircraft manufacturers.  Haynes acknowledged the obvious in that Pratt’s airline customers were not happy with the news.  Neither were UTC stockholders who initiated an immediate 2 percent sell-off in the company’s stock. During that time, Haynes briefed analysts and investors on many of the operational details of Pratt’s supply chain challenges which was an obvious indication of high levels of visibility and detailed briefings that the CEO was obtaining.

Also at that time, Hayes indicated that of the approximately 800 parts for the high-level bill of material for the new GTF Pratt engine, five parts were causing the most pain due to supplier challenges in meeting Pratt’s volume production and quality needs. One critical problem was the heart of this new engine, its newly designed aluminum titanium composite fan blade, noted as a breakthrough in material design and expected performance. Initial production yield problems of the fans had averaged an unacceptable 20 percent.

To help our readers follow developments, we reviewed the entire transcript of UTC’s senior management briefing to equity analysts and shareholders regarding Q3-2016 financial and operational performance delivered in October. It seemed obvious to this author, that the bulk of the attention of senior management, and the questions of equity analysts, were centered squarely on Pratt and its supply chain, hence the title of this commentary stream. Regarding Pratt’s delivery challenges, Mr. Hayes emphatically stated: “It’s going to get fixed and it’s going to be fixed this quarter.” He later stated that UTC senior management follows Pratt developments daily, and that four separate initiatives are simultaneously underway related to process and yield improvements, lead-time reductions and additional added capacity. The Pratt operational and supply chain details continued through most of the management briefing, and even more as individual equity analyst’s questions honed-in specifically on more of Pratt and its supply chain challenges.

We can now update this Supply Chain Matters commentary stream with some highlights of this week’s Q4 2016 and year-end investor briefing.

CEO Hayes declared a solid year for UTC in terms of business and financial results. He praised the Pratt division on GTF accomplishments and reiterated that this engine is now powering 46 in-service Airbus A320 neo’s with more than 82,000 operational hours.

For the year, Pratt delivered a total of 138 GTF engines, 62 of which were in the final Q4 quarter. Moving to the question and answer period with equity analysts, we noted seven specific questions related to Pratt, the GTF engine, and the Pratt supply chain. Among the more detailed information that was shared in executive responses:

  • On the positive news side, executives stressed that Pratt’s supply chain challenges are in a far better state than that of June last year. Production yields on the critical fan blade are now up to 80 percent production yield, a new partner manufacturing facility begins production this quarter and excellent progress is being made in opening a second facility in Michigan scheduled to begin production at mid-year. Reiterated was that Hayes monitors such numbers from his Pratt division on a weekly basis.
  • There have been some issues with GTF in-service reliability, specifically the engine’s combustor liner and an oil seal. Regarding the combustor, issues are related to what was described as harsh operating environments of which India was specifically cited. Hayes indicated a component re-design is underway and will be retrofitted in operating engines later this year. Premature failure of an oil seal was noted as supplier related, with a fix identified with a modified seal available by May. Hayes characterized these issues as “typical of a new product introduction.” Hayes emphasized that the engine’s fuel burn performance metrics are being met right out of the box, its revolutionary designed geared-turbo fan is performing as designed, and again stated his confidence in the Pratt leadership team to resolve any supply chain or component related issues.
  • In addressing this year’s production plan for the GTF, Pratt plans to build 350-400 engines, 50 of which, (roughly 7 percent of production) will be designated as spares to support customer uptime while the above described component performance issues are addressed.
  • One analyst from Bank of America Merrill Lynch specifically questioned whether this was the fifth iteration of the combustor design. Hayes emphasized that not all airline operators are experiencing combustor performance issues, only those in harsh operating environments. The overall timeline for the combustor seal was described as three design iterations. The first 17 engines had the first design which Pratt was aware had to be upgraded because of durability issues. The ‘B” version was described as not having met expected life in harsh environments and thus the third design is expected to be in-place by the end of this year. Again, spares will be made available to airline customers as these component design changes are completed.
  • This same equity analyst asked a follow-up question. If the GTF engine has 30 percent fewer parts, does that translate to a goal that these engines can be sold a breakeven profitability at introduction? Hayes reply was that Pratt is currently losing money on each GTF engine that is shipped, but that is the reality of commercial aircraft engine development. Returns come in later years, and in the case of GTF, that is planned for the 2018 time-period. Another analyst continued to probe on breakeven expectations.

 

We have highlighted the above year-end UTC briefing summary statements to provide our readers reinforcement as to how visible supply chain challenges can become in today’s world of ubiquitous information and especially on how investors and equity analysts can now hone-in on supply chain vulnerabilities. The supply chain indeed matters, and investors are becoming more well informed to this tenet.

We expect many Supply Chain Matters readers to have added impressions or feelings regarding UTC’s latest supply chain related disclosures. Questions such as whether Pratt teams were aware of combustor or oil seal issues earlier in the program or whether pressures to meet first and subsequent customer ship milestones were overriding.  There may be other questions related to multi-tiered supply chain visibility or early-warning from suppliers. That is not for this specific commentary to address. Certainly not without speaking to those with knowledge.

As noted in October, operations and supply chain executives reviewing this information may identify very discernable symptoms of the interrelationships of product design and management, supply chain sourcing and volume ramp-up planning. This is where the learning comes in.

The looking glass of visibility is very high, and the expectations for enhanced supply chain performance is similarly very high. That is indeed the good and not so good news contrast of today’s industry supply chains.

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 


Ocean Container Industry Consolidation Forces Moving at a Faster Pace

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Developments concerning the ocean container shipping industry are now moving at a faster and more discernable pace. Last week featured the news of the consolidation of Japan’s three largest shipping lines. This week adds even more perspective to an industry that is now facing even more structural and other changes. Shippers, transportation procurement teams and indeed maritime regulators need to be prepared to respond to the ongoing implications and not be lulled into predominant one dimensional cost savings strategies.

Yesterday, industry leader A.P. Moller-Maersk announced financial performance for the September ending quarter and the news was not good, not even for the industry leader.  The headline was a 43 percent plunge in overall profits. Maersk Line, the ocean container business unit incurred a loss of $122 million from a $243 million profit in the year ago quarter, despite container shipping volumes rising 11 percent in the quarter. That double-digit volume rise is noticeably above actual industry shipping demand, implying that market-share volume shifts are perhaps underway.

Maersk CEO Soren Skou indicated that shipping rates bottomed at the end of the first quarter and are slowly rising due to the departure of Hanjin Line shipping vessels from global routes. He further indicated that Maersk has observed a general rise in rates averaging 5.5 percent since the second quarter, but keep in-mind that the spot rate base remains below break-even profitability. Of more interest, the CEO validated that industry consolidation is set to continue and that nobody could have expected how fast it is now occurring.

Of far more interest to this author was what was further indicated to The Wall Street Journal. The CEO declared: “In 1996 the top three carriers had 17 percent combined market share. By next year the top three carriers will have 43 percent market share, and it’s not going to stop there.”

That statement, by our lens should be of concern to shippers and regulators alike.  While most shippers may be inclined to appreciate the cost saving benefits of historically low transport rates, it seems rather obvious that the battle for market share and industry dominance is underway among top-tier carriers. The winners will obviously be those with the largest financial pockets and backers and the prize is global scale and industry dominance. The WSJ reported this week that cumulative financial losses for this year could be as high as $10 billion, which is double the recent forecast from industry advisory group Drewry.

We would add that the formation and approval of existing multi-line shipping alliances could possibly be a further enabler to market-share dominance. Competing or non-aligned shipping lines are therefore under even more pressure to further consolidate or risk intolerable financial losses. Meanwhile industry leader Maersk has already indicated that it will seek further opportunities to acquire other attractive lines if the opportunity presents itself.

In a separate interview with the WSJ, the vice-chairmen of CGA CGM, the third ranked global shipping line indicated that none of the 20 top shipping companies are likely report operating profitability this year. He further indicated that his firm is not looking to further acquisitions after recently acquiring Singapore based Neptune Orient Lines.

This week, the Boston Consulting Group added its industry research perspectives in a report: The New Normal in Global Trade and Container Shipping. (Sign-in account required) The report forecasts that shipping capacity will continue to outpace shipping demand by a range of 8.2 percent and 13.8 percent compared with a 7 percent imbalance today. BCG expects annual growth in global container traffic to range between a bear scenario of 2.2 percent and a bull scenario of 3.8 percent, with a base scenario of 3.2 percent through 2020. Further estimated: “that by the end of 2020, oversupply of vessel capacity will stand at 2 million to 3.3 million TEUs.”

These are yet further indications that industry supply and demand imbalance will extend for an additional four years without changes on either end. That again reinforces the building tide of industry consolidation or the opportunity for further market share penetration by the largest and more financially strong carrier groups. Dominant operation of today’s newer mega-ships has another implication, that being the current limited amount of ports that have the infrastructure and modernization to be able to load and unload such vessels on a timely basis. The timing and availability of leased container truck chassis remains a shipper and industry concern.

For shippers and services procurement team, the financially motivated strategy is to try and lock-in today’s historically low rates in longer-term contracts, before further consolidation changes the negotiating picture. That goal is sometimes complicated when transportation services are outsourced to a third-party logistics provider or global services provider, and whether savings are being passed along. However, with such a shipping industry supply and shipping demand imbalance compounded by added consolidation threats, it may be wise to allow for opportunistic spot-rate contracting for shipping, especially concerning carriers or global shipping routes that continue to be highly competitive.

The most prominent criteria for multi-industry internal transportation and logistics teams is, as always, to ensure that any ocean transportation services provider or third party logistics provider consistently delivers reliable on-time services and is responsive to unplanned events. The memories of the 2015 U.S. West Coast port disruptions and consequent implications for lost business remain top-of-mind. The need for planning and collaboration among internal finance, procurement, internal and contracted supply chain operations teams is therefore paramount.

Finally, we advise that shippers, brokers and logistics operators provide added pressures in 2017 for shipping lines and respective shipping consortiums to move beyond pooling of vessels and one-sided optimization of global routes and more into insuring consistent on-time and predictable delivery performance, augmented multi-modal container tracking, routing visibility and other customer focused improvements. The time is long overdue for industry-wide data and information exchange standards.

The takeaway is that ocean container transportation planning cannot be taken for granted in such turbulent times.

 

Bob Ferrari

© Copyright 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.


Bombardier Announces Additional Headcount Reductions

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Last week, transportation equipment provider Bombardier announced plans to shed an additional 7,500 jobs, or just over 10 percent of its global workforce, as it focuses on turnaround efforts amid a soft business-jet market and hiccups with its CSeries commercial aircraft program.  This announcement came in the wake of a prior February announcement to reduce 7000 jobs.

The Canadian-based commercial aircraft and train manufacturer indicated that the headcount reductions will be global in-nature, affecting administrative and non production positions across the company, and are expected to save it about $300 million by the end of 2018.  Swiss Maiden CS100

According to business media reports, about two-thirds of the latest headcount reductions will stem from Bombardier Transportation, the company’s rail manufacturing business. About 2000 of these job cuts are expected to impact employees within Canada.

The cuts are further expected to include a realignment of design, engineering and manufacturing structures and the creation of new “Centers of Excellence” overseeing both rail and commercial aircraft manufacturing.

As Supply Chain Matters and business media continually points out, Bombardier has made a big strategic bet with the development and production in the CSeries single aisle commercial aircraft being a global airline alternative to aircraft producers Airbus and Boeing. This new aircraft finally entered commercial service with Swiss International after a multi-year program delay and flew its first paying passengers in July.

While the new aircraft is garnering positive reviews from airline customers, the financial toll on the broader operations of Bombardier continue and have had a noteworthy financial impact on the company. A year ago, to overcome continued financial funding needs, Bombardier struck an agreement with the government of Quebec to give-up nearly half its stake in the CSeries program in exchange for a $1 billion additional investment. The company further sold an equity stake in its train manufacturing division to a Quebec pension fund for $1.5 billion. That division continues to respond to stiff global competition coming from China’s lower-cost, state-owned rail equipment producers who are in the process of merging.

The latest and perhaps most untimely setback to CSeries program came late this summer with an announcement by aerospace aircraft producer Pratt and Whitney that it would not be able to meet its 2016 production and delivery commitments to certain aircraft manufacturers that included both Bombardier and Airbus.

We previously highlighted that Airbus’s first-half shipping performance related to its new A320 neo aircraft were noticeably impacted by delayed delivery of Pratt’s new geared turbo fan engine. Airbus had delivered just 5 A320neos in Q1 and 3 in Q2 while nearly a dozen of completed aircraft was reported at the time to be lined-up on factory adjacent runways and parking areas awaiting Pratt to deliver completed engines. The July delay was associated with fixing the engine’s cooling design through a combination of software and component modifications.

In early September, Bombardier publicly disclosed a delivery schedule adjustment due to the shortfall in expected completed engines from Pratt. While re-adjusting to a lower revenue expectation, the manufacturer reaffirmed its prior earnings commitment, most likely setting the stage for the current headcount reductions.

Moving forward, the new CSeries is more than ever highly dependent on the consistent and more-timely performance of its sole aircraft engine supplier, Pratt. Industry watchers and academics may well look back and question whether specification and reliance on a single aircraft engine design was a wise one. Then again, Bombardier, from the get-go, may not have had the financial deep pockets to be able to certify and source more than one engine supplier.

 


Some Sign of Light for Bombardier C-Series Aircraft Program Amid Ongoing Financial Challenges

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In the light of our previous posting related to Airbus and Boeing continuing to experience supply chain production scale-up challenges, we turn some attention to new news related to Bombardier’s C-Series program.

Bombardier C-Series

Source: Bombardier web site

For the past several years Supply Chain Matters has highlighted Bombardier’s C-Series aircraft program, particularly challenges related to gaining market attraction as a viable alternative to more technology advanced single-aisle commercial aircraft needs. This effort placed Bombardier in direct competition with the Airbus A320 and Boeing 737 for new commercial airline orders. In 2013 Supply Chain Matters declared that the C-Series could indeed be a competitor.

A series of multi-year program setbacks and lack of substantial customer orders have resulted in building financial loses and questioning whether the aircraft would indeed make any mark. The aircraft is powered by the new geared turbofan technology provided by Pratt & Whitney which has experienced its own start-up design and production challenges. Upwards of $3.2 billion have already been written off from the program. Now, there are some signs of life amid some important new orders.

Last week, Delta Airlines agreed to acquire 75 of the CS100 model aircraft with options for an additional 50 aircraft, along with agreeing to serve as the U.S. launch customer. Delta additionally has the option to convert some of the latter orders to the large CS300 model. The firm order was valued at $5.6 billion in U.S. dollars and was characterized as possibly providing some measure of street credibility for the C-Series program. In announcing the order, Delta’s CEO indicate that the airline’s decision brings the C-Series as a third option in the mainline aircraft marketplace.

Deliveries are expected to begin in the spring of 2018 and Delta now represents Bombardier’s largest commercial aircraft customer. Delta announced a new order for Airbus A321 jets as well. Industry watchers and executives indicate that Delta was able to negotiate a very attractive financial deal for the C-Series jets. According to Delta, the CS100 will provide better fuel efficiency and a 30 percent improvement in maintenance costs over Delta’s existing Boeing 717 aircraft fleet.

Last week Bombardier reported year-over-year revenue and profitability declines. According to business media reports, the C-Series is not expected to reach a break-even cash flow basis until 2020. The company remains saddled with a large debt load as-well.

With the new Delta order, the diversified transportation equipment manufacturer has secured 325 firm orders for both the CS100 and CS300 aircraft, including airline customer Lufthansa and its Swiss International unit. According to business media reports, the company is still awaiting a commitment from government owned Air Canada for 45 jets, amid some threats of violation of World Trade organization prohibiting direct subsidies of aerospace by domestic governments.  The company is seeking financial aid from Canada’s federal government but those talks remain uncertain. Bombardier has raised $2.5 billion since October after agreeing to sell almost half of its take in the C-Series program to the Quebec government as well as selling a stake in its train-making operations to a Quebec pension fund.

 


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