Will Bombardier make more cutbacks? - Suppliers Share Wrap

Bombardier is hoping that it will be able to avoid further job cuts, as the company looks to avoid a decision on regional jet production at its Montreal plant as the economic recovery gains momentum.

4,700 workers have been cut at the company’s commercial aircraft division since the beginning of 2009. The company slashed production rates in late 2008 and again in 2009. There were 302 aircraft deliveries in FY2009, compared to 349 in FY2008.

Sales of regional and business jets, which account for the majority of Bombardier’s aircraft sales, were among the aircraft categories most affected during the downturn.

Bombardier had just 11 net orders last year. The company actually booked 213 gross orders, but suffered 186 business aircraft cancellations and 16 commercial aircraft cancellations.

A decision on the production rate of the company’s CRJ regional jet is potentially several months away. However, 12 months in delays on the CRJ 1000's flight test programme has not helped matters. Type certification and the first aircraft deliveries are expected to occur in 2H2010.

If Bombardier it is to reduce output again, more job losses will follow. Bombardier hopes that better air traffic demand will lead to stronger ordering for the aircraft, allowing the company to avoid cutting more positions. Activity at the Farnborough Air Show will be critical.

Weak ordering and aircraft cancellations saw Bombardier Commercial Aircraft revenue drop by CAD600 million to CAD9.4 billion for the year to 31-Jan-2010. Bombardier’s order backlog plummeted from CAD23.5 billion to CAD16.7 billion over the same period.

The company is making progress on other programmes, even as it vacillates over CRJ output. Much rides on the new CSeries, which pushes Bombardier into direct competition with Airbus and Boeing for the first time.

While there are now 90 firm orders for the type, including Republic Airways’ order for 40 earlier this year, the aircraft has not been an unqualified success. There have been 76 B737 orders and 18 A320 family orders this year, while Airbus and Boeing mull competitive responses to Bombardier's new challenge.

In trading on Friday, Bombardier shares gained 3.3%, ahead of Boeing (+2.5%) and Embraer (+2.3%). European manufacturer, EADS, dropped 1.2%.

Selected Aviation suppliers’ daily share price movements (% change): 21-May-2010