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UPDATE: Bombardier (TSE:BBD.B) stock closes at $0.89 today after breaking the $1.00 barrier yesterday, now institutional investors, mutual funds, ETF’s will start selling the stock as they do not hold “penny” stocks and there is a risk of the shares being delisted from Canada’s TSX stock index in the next 3-6 months if things do not change. Look the company is in BIG trouble, the CSeries will be it’s Achilles heel and predatory pricing by Airbus and Boeing is the arrow that will ultimately kill it. The CSeries is just not selling, it is positioned for a poor market segment, it faces the might of Airbus and Boeing pricing supremacy, it’s small order book of 243 “firm orders” of which +/- 90 are actually “limp/doughy/non-existing” orders that go back to 2009-2011 that surely will NOT happen, entry into service (EIS) is still 5 months away, production ramp up is just starting and Chairman of the Board, and ex-CEO Pierre Beaudoin is still there. New aircraft orders in 2015 were off by 65% while current backlog may have as little as 324 aircraft or 15 months of production at past rates. CSeries will be face Airbus and Boeing at every opportunity for a sale, and pricing will win out and even if Bombardier does win a deal here and there, the price will be so low that it may be a money losing deal, and here is no way to recoup any losses as sales of Q400’s, CRJ, Learjets and Globals continue to decrease rapidly, and the future Global G7000 “cash cow” looks as if they may have another “cash bleeder” on their hands instead. These are dark times for the future of Bombardier and the future of the Canadian aerospace industry, most likely we are going to lose a major industry within the next 4 years.

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Well I have said it months ago that Bombardier’s stock (TSE:BBD.B) will become a “penny stock” by year’s end, and I missed it by 27 days, when January 27th, it hit $C 0.99 a share that is a market capitalization of only $US 2.11 billion, and I as expected today, the stock went further down … Continue reading →

UPDATE: Bombardier stock (TSE:BBD.B) has been at $1.00 all day today, and late this afternoon it went south of that “psychological” barrier and became a “penny” stock, as it closed at a 25 year low of $0.99 on the Toronto Stock Exchange. Investors are dumping their shares for good reasons. No new CSeries order since September, 2014, lost United deal to Boeing, 3 of the 4 first CSeries orders from 2009-2011 are NOT happening (Lease Corp. International, Odyssey, Republic add up to 53 ‘firm’ orders and 57 options) and the 4th is Gulf Air (2011 order for 10 x CS100’s and 6 options) that last week ordered 19 x A320/321 with 10 x A320 already on order, and their CEO Maher Salman Al Musallam comments on the CSeries are not optimistic “I don’t know, as a small airline, whether we are able to operate a third type or not”, “whether it’s going to be viable for Gulf Air to continue to renegotiate a delivery date with Bombardier or something else”, also today, the CEO of Gulf Air offered his resignation, no reason given. Meanwhile, Bombardier eyes Iran, but Iran will order 127 Airbus airliners this week, meanwhile Delta Air Lines order that Bombardier wants so badly, will not be any time soon and then will require a very good price, that will have to compete with Embraer, Boeing and maybe Airbus. Bombardier wants Federal government to buy 50% of CSeries, yet Quebec’s Mayors block East pipeline that western Canada desperately needs for its oil. If Bombardier gets money from the Feds, western Canada will NOT be happy with Ottawa. I say NO to any funding until current special voting shares by which 60% control is still in the hands of the 2 families, eliminated and then some sizable injection of capital by the 2 families that today control Bombardier and who orchestrated the current fiasco, otherwise I say NO to Federal money for Bombardier, too many other needs in Canada. Lastly, Bombardier needs to just stop talking about all the deals they are working on, it is bad PR when they lose and it is un-professional, when you sold something then brag about it but don’t brag about being in this or that campaign, because the sad reality is they will lose +85% of the campaigns when competing with the duopoly of Airbus and Boeing, it is just sad they are so “desperate” for any good news.

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This is the event few would have expected at Bombardier a few years ago, but today the Bombardier shares (TSE:BBD.B) went to $0.99 a share, the lowest in +25 years (since 1991), and it is a “penny” stock today, this is how bad the company is now perceive don the market, a total mess from … Continue reading →

UPDATE: United Airlines as expected has chosen the Boeing B737-700 over the CS100/CS300 offer from Bombardier and E195-E1 from Embraer. Bombardier stock has dropped 9.17% to a new low of $1.09 (21.1.16 4:21pm) on the news, which should not have been a surprise to those that read my blog. This was the first head to head battle between Bombardier’s CSeries and Boeing’s B737 line, in the end it was all about PRICE, and now Bombardier and all investors see what I have been talking about for some time, Bombardier will NOT be able to compete with Airbus and Boeing on Price. The Duopoly is going to see to it that the CSeries gets undercut on price on every deal, and Bombardier has to be really worried now. The United Airlines deal for 40 x B737-700’s was apparently closed at $US +/-23 million per aircraft (a whopping 71% OFF the List Price), and here lies the Achilles heel of Bombardier, it is not able to compete on Price with the duopoly of Airbus and Boeing, and with low fuel prices, fuel efficiency, new design, value proposition, etc. all take a back seat to Price (capital costs). The writing is on the wall, little Bombardier entered the Big League totally ill prepared for the fierce competition and now it is going to get really tough to make any profitable deal as Airbus and Boeing are prepared to defend their market from a new entrant that they know is very vulnerable and shaky. In a simple SWOT analysis, the THREAT of entering this narrow-body segment was the defensive and offensive position Airbus and Boeing were and are going to take against any new competitor, and this should have been a major RED FLAG for NOT entering this market segment, and Bombardier is now realizing the severity of its weak position vis-a-vis Airbus and Boeing as competitors, as they are no Embraer and ATR, which Bombardier battled with for years with it’s dying Q400/CRJ brands, and ultimately lost to in the past 4 years. Now, on to this next Bombardier PR disaster, Delta Air Lines interest in the CSeries, which is not much different than the United Airlines deal, and the result, which I do not expect to be anytime soon , will be the same. Delta’s very successful and forward looking CEO Richard Anderson has already said what it will take to win his airline’s order when he said “at the RIGHT PRICE, it’s quite a competitive airplane”, right price ? what price ? List price of the CS100 is $US 71.8 million, CS 300 is $US 82.0 million, Bombardier CANNOT compete with deals at 70% off and stay in this business for very long, no way, now how, the duopoly has economies of scale with large production numbers, many different models, and can offer discounts on other aircraft deals to sell their B737Max and A320neo products. On top of the duopoly, the narrow-body segment has 2 new very well financially backed entrants coming, the Russian government backed Irkut MC-21 and the Chinese government backed Comac C919, and it is going to be a great time for airlines to make sweetheart deals, but sadly Bombardier Aerospace (Commercial and Business Aircraft) will not be enjoying the next few years at all, and ultimately “Combardier” (China’s Comac buying Bombardier) is a real possibility in the next 4 years.

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Well it is official and as expected, United Airlines has chosen to order 40 x Boeing B737-700’s over the Bombardier CS100, CS300 and Embraer’s E195-E1. I touched on the reasons a few ago why Bombardier was NOT going to win this order, basically United Airlines operates 310 x B737’s already with 100 on order. It … Continue reading →

UPDATE: The national airline of Slovenia, Adria Airways has been sold for a mere $US 1.2 million, the buyer is an unknown German/Luxembourg company, 4K Invest that has a nice web page but absolutely no information about the company, it’s executives or past deals. It’s one of many recent “funny” deals going on in Europe’s airline industry. We had a Sukhoi “agent” invest into airBaltic looking to sell SSJ-100 regional jets, we have Ireland’s City Jet buying up to 25 x SSJ-100’s the first in Western Europe and very risky for any airline these days, and yet as quickly as the ink was dry on the Sukhoi deal, the owner of City Jet, Germany based Intro Aviation (aka “turnaround specialist”) is negotiating to sell the airline and bail out before any SSJ-100 operations begins ? does that seem odd ? To go through all the “trouble” of putting in a new Russian airliner that no one has bought in Western Europe. They praise the SSJ “game changer” as if they found the holy grail, and then sell the airline once a SSJ deal is done ? It shows that they do NOT have confidence in the long term success of the SSJ’s and City Jet. Who is the new buyer ? well apparently they are new to the airline business but not aviation. I wonder if they realize what they are getting into ? or is it the Russians coming through the back door ? it is all possible these days. Intro Aviation once was known for turning around troubled airlines, now it has lost it’s touch as on top of City Jet’s loses it could not turn around it’s own InterSky (Austria) DHC8/ATR-72 operation either, and tried to sell it in September, but no takers, so it shut it down in November due to a debt of EUR 5.0 million ?, while it also sold money losing VLM Airline in 2014 in a MBO (management buy out) and surprise and behold, it wanted to buy/lease 12 x SSJ0100’s right away (makes one wonder who funded the MBO ?) , seems SSJ’s orders follow the company. Intro Aviation was also one of the 3 German companies in the running to buy Adria Airways, which is a perfect target for SSJ-100 sales as it operates 7 x CRJ700/900’s today, and surely had it won, SSJ’s would be flying in Adria Airways livery in 2016, and maybe still will given that so little was paid and so little is known about K4 Invest. Russia’s President recently declared NATO as major security threat, and therefore Western European airlines should NOT be buying Russian airliners or leasing them, as they are built by the Russian military complex, Sukhoi is a big Russian arms manufacturer and is currently on the EU/US economic sanctions list, time to put the SS-100 SuperJet on that list as well. We cannot support the Russian arms industry and Europeans should not buying, leasing or flying on Russian airliners (basically that was the Latvian Government’s addition to airBaltic’s shareholders agreement in November, to stop a “undesirable” new investor form making a SSJ-100 deal going forward).When Putin thinks we are the enemy and talks of the possibility of using tactical nuclear weapons in a limited engagement we have no choice but to say NYET to Russian aircraft. “Beware of false prophets, who come to you in the sheep’s clothing, but inwardly are ravenous wolves” (Matthew 7:15), as the Russians are doing everything and anything possible to sell the poor selling SSJ100 (40+/- current sitting “white tails”) to the West, if it fails, then the Irkut MC-21 will fail as well, and for Airbus, Boeing, Comac and Bombardier and the West, that is a good thing.

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The Slovenian Government approved a capital injection plan of $US 3.3 million for national flag carrier, Adria Airways and simultaneously sold the airline to German investment group, 4K Invest (www.4k.ag), which is to inject only $1.1 million for the 91.58% owned by the government and pay Adria Airways another $US 100,000 ? The Slovenian Government … Continue reading →

SUMMARY: Bombardier finally sees that “aggressive” pricing for the CSeries is a must, as the “game changer” has no new order since September, 2014 and it is now perfectly clear to all that the fuel efficiency of the CSeries will be closely matched by Airbus, Boeing, Embraer, Comac and Irkut as they will all incorporate new generation fuel efficient engines in their new aircraft programs. This year, 2016, is the make it or break it year for Bombardier, all eyes are on sales, EIS (entry into service) and production ramp up, 12 months from now the future of the company will be clearer, one way or the other. The CSeries has now lost its main competitive advantage, its value proposition (most fuel efficient airliner) and like all the others it will have to seriously discount it’s price to win any new order, and it is not prepared or capable of waging a price war. A major price war is looming as the duopoly of Airbus and Boeing, will not only have to deal with Bombardier’s CS100/300 and Embraer’s E195-E2 at the low end, but head on competition from China’s Comac C919 and Russia’s Irkut MC-21narrow-body airliners as well within the next 5 years. It is going to get ugly for Bombardier, as surely it “hopes” that Airbus and Boeing will not continue with the slow selling A319neo or Boeing the Max7 programs (a segment that is NOT very big, and was overestimated by many), but the duopoly will stay in the segment, for if anything, just to make sure Bombardier does not get a foothold in the BIG league of commercial aircraft. A price war with the likes of Airbus, Boeing and the Chinese and Russian Governments spells disaster for Bombardier in the long run, it cannot sustain regular discounts of +40% and continue as a going concern, they just cannot compete on price at this level, where even today before the new entrants arrive, discounts of 50% from List Price are ‘common’ from Airbus and Boeing on large orders . The current United Airlines requirement for 30 new 100+ seat jets will be an example of what is to come, as United is a huge Boeing customer, with 310 x B737’s (700/800/900’s) in service today and another 100 B737Max9’s on order, there is NO way hell, Boeing will allow Bombardier to win over this customer, and the deal will probably go for $US 40+/- million per unit (50% off List Price) for the B737-700 as the NG line still needs to be filled before the MAX line takes over,. To win with United Airlines, Bombardier will be required to offer a huge discount on the $US 71.8 million CS100 and the $US 82.0 million CS300, that it would create a huge loss for the company, as it has no way of getting that loss back from its product line (unlike Airbus & Boeing that delivered 1,397 aircraft in 2015) yet a major North American order for the future success of the CSeries is a MUST if the program is to have a future. Bombardier unlike the duopoly, will have a low production rate of 10 units per month by 2020, not enough to spread its costs/losses, while the duopoly is planning on producing 122+ A320/B737’s per month by 2018, a greatly reducing unit costs, and they will fight to keep Bombardier out of it’s “turf”, especially after it announced it may go with the larger CS500 (165+ seat) jet down the road, a direct challenge to the A320/B737. Anyway, Airbus believes the CSeries will become an “orphan” aircraft, “a nice little plane”, that was probably forever doomed to be a poor seller, and Airbus should know, they were the first OEM Bombardier went to, in their attempt to sell the program last year ! All the indications are there that the market is not there, up-gauging of aircraft, low sales in the 100-150 segment by all to a lack of interest from lessors. Lastly, while the CSeries will have to deal with the duopoly, the $75 million a piece Global G7000 business jet will also have to deal with the duopoly if it plans on selling a lot, as the ACJ319/320 (Airbus Corporate Jets) and the BBJ (Boeing Business Jets) are in the same segment, a segment that has averaged only 16 units a year for the past 18 years, so the G7000 may sadly not be the “game changer” either.

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I have been quiet for awhile on Bombardier, watching what will unfold, with a heavy heart, seems that the new year is not going to be much better than last year, when Bombardier’s stock (TSX:BBD.B) lost 60.9% of its value, ROI (return on investment) was -44.0% and market capitalization is down to $2.51 billion, cash … Continue reading →

UPDATE: The 10 to 14 seat EV-55 Outback twin PT6A powered STOL utility aircraft continues its EASA CS23 certification, but the latest order by China’s Guangdong Long Hao Group for 50 x EV-55’s with plane unseen, no spec, no certification for 2 years at least, etc. raises serious concerns about what is going on at Evektor, as the Malaysian’s are screwing up the whole program with their lack of leadership, experience and knowledge in the industry. The Malaysian investor, Aspirasi Pertiwi Sdn Bhd which has only 9% of the voting shares yet controls the company ? is not living up to its Agreement with Evektor, and is apparently in breach of its Agreement with Evektor and changes are coming to the arrangement, as several investigations are forthcoming. It is very unfortunate that the EV-55 Outback is once again delayed but the aircraft will survive and be certified and then do very well commercially as it is very well positioned in the market. The Malaysians really have NO idea of Part 23 certification, the General Aviation market and aircraft production. The full inside story cannot be revealed yet, but it is a mess and this mess will be cleaned up through the appropriate legal processes in due course. Again, a warning to companies seeking investors, be real careful who you bring on board, the promise of money is not the only criteria, check out experience, knowledge and most importantly past achievements and failures.

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I have been updating the progress of the 10-14 seat Evektor EV-55 Outback twin PT6 utility, which I was involved with from the beginning in analyzing the market segment, helping to raise money from the Czech Ministry of Trade and Industry and then specifying the aircraft’s size, performance and price point. I was stunned to … Continue reading →

UPDATE: Canada’s first ULCC (ultra low cost carrier) is Winnipeg based NewLeaf, which will launch services to 7 Canadian destinations on February 12, 2016 with Boeing B737-400’s operated by Kelowna based Flair Airlines. It is not a perfect business model to start with, but given that Naked Jet/Enerjet and Canada Jetline have not been able to get their business plans executed for the past 2 years, it is better than nothing. In fact, this model was used to run Greyhound Air between July 1996 and September 1997, when Kelowna Flightcraft operated 7 x B727-200’s under its AOC for Greyhound Air, and Winnipeg was the hub, so it has been done before, but today the market landscape is different and it just may work. NewLeaf will offer fares as low as $99 one way but also will need to supplement it’s low fares with “non-ticket” revenue from baggage, seat selection, exit row, food and beverage fees, that today at US based ULCC’s make up around 45% of total revenue or 79% of the ticket price (i.e. Spirit Airlines), so expect that on average that $99 one way ticket will become on average a $+145 one way ticket when all is done and paid, still much lower than what Air Canada and WestJet charge today. Some people still think of WestJet Airlines as a low cost airline, but that story is long gone, as WestJet realized it did not have to be a low cost airline, just come close to Air Canada’s fares and the service would win over. Today Air Canada and WestJet Airlines have roughly the same passenger yields ($/RPM) at around $cents 0.192, both have the same average load factor of +/-81%, their PRASM (passenger revenue per available seat mile) are pretty much the same at $0.155, and Air Canada is reducing its units costs while WestJet’s keep going up. It is time for Canadians to have access to LOW airline fares, and have another choice over the duopoly that runs our airline industry, as we are the ONLY country in the developed world today without a low cost airline, and while Air Canada’s ‘rouge’ is a low cost subsidiary (mostly just due to higher seating density on its aircraft) it’s fares are the same as Air Canada’s, as its role is to make more money for Air Canada and not to reduce air fares to Canadians. It is estimated that 4.8 million Canadians fly each year from US airports that are close to our border (e.g. Buffalo, Detroit, Bellingham, etc.) to save on airfare ! This is the Canadian ULCC opportunity and challenge, to get some of those passengers back. With low frequencies and just 7 airports served, NewLeaf will not threaten Air Canada or WestJet but then 20 years ago WestJet started with 3 B737-200’s and 5 destinations and look at its evolution, every company has to start somewhere. Lastly, Iceland based ULCC operator WOW Air is coming to Canada in May, 2016 and is offering great deals to Iceland at $C 99 one way and $C 149 to Europe, it is about time Canadians had low cost options and let’s hope the low cost trend spreads fast and forces the duopoly to stop ‘milking’ Canadian air travelers !

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Well, Canada finally has another low cost champion, as NewLeaf Travel Company Inc. (http://www.FlyNewLeaf.ca) announces it will begin operating Boeing B737-400 commercial flights to 7 Canadian cities for as little as $99 one way under the AOC of Flair Airlines of Kelowna, B.C. on Friday, February 12, 2016, only 1 week short of the 20th … Continue reading →

SUMMARY: Consolidation in the Canadian regional airline industry is slower than I expected, but recent acquisitions by West Wind Aviation of Osprey Wings and Harbour Air (aka “World’s Largest Seaplane Airline”) acquisition of Salt Spring Air on top of EIC acquiring Provincial Aerospace and Chorus Aviation acquiring Voyageur Airways earlier in 2015 gives me some hope for more mergers and acquisitions (M&A) activity in this sector over the next 1-3 years. In fact, Harbour Air itself has sold 49% of it’s equity to a Chinese investor in 2015, and is now planning to enter the highly questionable Chinese seaplane market , just as it solidifies it’s dominant market position in and around the Vancouver area having also acquired Whistler Air (in 2012) and West Coast Air (in 2010), and then divested itself off Prince Rupert based North Pacific Seaplanes (in 2013). There are 6 privately owned Canadian regional airlines that could be in play in the next 2-3 years, as several airlines are well into their 2nd generation of management by owners and most do not have a 3rd generation waiting to take control and few are actually growing and basically stuck in their traditional market. Publicly owned Exchange Income Corporation (EIC) with 5 airlines now has shown that you can make money with regional airlines as long as you have good management, a good market position/niche and financing behind you. The industry is changing, in the north, most airlines are now First Nation owned and the remaining privately owned airlines will find eager investors if they truly want to sell and are prepared for suitors before they need a buyer, as most small airlines are unprepared to generate interest with potential buyers, as they don’t even know how to value their business’s worth, what are its attributes and how to attract a broader pool of investors willing to pay more for the company. Last, I will discuss the growth of seaplane airlines around the world and the need for new aircraft beyond just old landplanes with bulky and heavy floats attached, for the industry to really grow.

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I have previously discussed the Canadian regional airline market, and that consolidation is coming as family run airlines are looking to sell their airlines, as witnessed by Exchange Income Corporation (EIC) of Winnipeg (TSX:EIF), which has bought 5 Canadian private family regional airlines in the past 12 years, and surely eyeing more: Perimeter Aviation in … Continue reading →

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