Analyst predicts Bombardier’s aerospace order drought about to end

MONTREAL – Bombardier’s order drought for regional planes and the larger CSeries is about to end, with several airlines likely to place orders in the coming weeks, says an industry analyst.

Cameron Doerksen of National Bank Financial said the Montreal-based manufacturer potentially has positive news on the horizon as several sales campaigns are likely to bear fruit.

“We believe that orders for Bombardier regional aircraft, particularly the Q400 turboprop, are about to pick up materially in the coming months,” he wrote in a report.

The first orders could be announced next week at the Dubai Air Show.

Indonesia’s Garuda Airlines is expected to announce an 18-plane regional jet order and Doerksen said Bombardier’s CRJ1000 has “an even chance of winning.”

There is also the possibility the event will yield a new order for the 110- to 149-seat CSeries, which is slated to enter into service at the end of 2013.

Bahrain Gulf Air is reportedly one of the unidentified CSeries purchasers and is the most likely candidate to place additional orders, Doerksen said.

Qatar Airways is expected to announce a huge plane order at the Dubai Air show, but it’s not expected to include any CSeries.

Elsewhere, Q400 turboprop demand could also take off, with SkyWest’s fleet replacement presenting a major opportunity.

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SkyWest operates more than 500, 50-seat regional jets, many of which are expected to be replaced by larger regional jets and turboprops.

Although its has Brazilian-made Embraer ERJ-145s in its fleet, SkyWest operates 140 CRJ700s and 35 CRJ-900s, giving Bombardier the edge because of significant commonality advantages for pilot training and maintenance costs.

Timing of a new order could be dependent, however, on pilot scope clause negotiations at partner United-Continental. Scope clauses protect union jobs by limiting the number and size of aircraft that a major airline can contract out to a regional airline.

Doerksen said a string of new orders for regional aircraft should boost investor confidence in Bombardier’s (TSX:BBD.B) aerospace segment.

The company’s shares have plummeted more than 40 per cent since hitting a 52-week high of $7.29 in March. The stock was down 13 cents or three per cent at $4.18 in morning trading Wednesday on the Toronto Stock Exchange.

A shortage of regional aircraft orders has forced Bombardier to cut back production rates for both the CRJ and Q400 planes.

As of July 31, the backlog for CRJs was 62 planes, including 30 for Air Nostrum. The Q400 backlog was down to only 40 planes, or eight months of production at the previous rate.

While Bombardier has announced a couple of small orders, it wasn’t enough to excite the market, Doerksen added.

“We believe that orders for Bombardier regional aircraft, particularly the Q400, are about to pick up materially. The announcement of a succession of new orders should be a positive catalyst for the stock.”

Rival turboprop manufacturer ATR has received a record 145 firm orders so far this year and has a backlog for 275 planes, compared with just 40 for the Q400.

ATR has had success, especially in emerging markets, because its plane is cheaper and offers better fuel burn. The Q400 is faster, which makes it more attractive as a replacement for regional jets.

Among the other opportunities are Aeroflot, Poland’s EuroLOT, Caribbean-based LIAT and India’s SpiceJet.

Porter Airlines will take delivery this month of the last two Q400s on its firm order. It may be looking for more planes, however, after having won additional slots at the Toronto City Centre Airport.

Chorus Aviation (TSX:CHR.B) is taking delivery of 15 Q400s by mid-2012 to replace 50-seat CRJs in operation for Air Canada (TSX:AC.B). Chorus has options for 15 more Q400s and Air Canada may want to replace more of the older planes for financial and operating cost reasons, Doerksen added.

On the CRJ front, Estonian Air is expected to order more planes after the remaining CRJ900s from a previous order are added next year. Uruguay’s Pluna has also stated its intention of making a small follow-on order.

Bombardier is the world’s third-largest civil aircraft manufacturer, focused on business and regional aircraft. It is also the world’s largest railway manufacturer.