Bombardier Near Deal to Sell Up to 125 Jetliners to Delta

A Bombardier CS300 jetliner in June at the 51st International Paris Air Show. Air Baltic of Latvia was the first airline to operate Bombardier's CS300 plane commercially, and the plane manufacturer earlier this week added seven more CS300 jets to the airline's order. Photo: AFP
Delta Air Lines Inc. is finalizing a huge order for a new Bombardier Inc. passenger jet, potentially breathing new life into the struggling Canadian plane maker's challenge to the industry's U.S. and European giants.
The No. 2 U.S. airline by passenger traffic plans to acquire as many as 125 CSeries jets, according to people familiar with the negotiations, in what would be a major victory for Bombardier.


The company has made a bold bet with its fuel-sipping jet, which has struggled to win orders as Boeing Co. and Airbus Group SE -- which both fought for the Delta deal -- have responded by offering big discounts to cement deals.
Delta's plans would boost the credibility of Bombardier's next-generation jetliner with big airlines, though analysts have indicated that buyers might demand significant price cuts and tough contract terms, putting the plane's long-term profitability at risk.
While falling oil prices have fueled airline profits, Delta cautioned Thursday that average fares remain weak

Bombardier is expected to reach a final agreement with Delta for 75 firm orders and options for 50 more by the end of April, when the carrier's board meets to review the proposed purchase, said the people familiar with the negotiations. Delta is seeking to replace its aging fleet of single-aisle McDonnell Douglas MD-88 jets, as it moves to fly some regional routes with larger jets.

A Delta spokesman said no final decision has been made. A spokeswoman for Bombardier said it is in discussions with a number of airlines, and it will disclose deals as they are finalized.

The proposed deal would be the single largest so far this year by number of aircraft. If completed it would be worth between US$5.3 billion and US$6.2 billion, based on list prices, depending on the mix of aircraft involved. But deals of such magnitude would most likely include steep discounts.
Such a deal would make Delta by far the largest customer for the Canadian jet, giving it a big stake in the future of the CSeries program.

Delta has a history of upsetting established jet makers and providing new entrants a foothold in its fleet. Predecessor Northwest Airlines was the first U.S. airline to purchase Airbus A320 aircraft.

Ed Bastian, Delta's incoming chief executive, said Thursday that the company's 2016 capital-spending guidance remains unchanged. He said Delta is focusing on a five-year domestic fleet renewal because "the MD-88s do need to retire, and we have roughly 115 of them." He said he hoped to have more information when the company holds an investor meeting in New York on May 16.

Bombardier's foray into the 100- to 160-seat single-aisle jet market has left it with a heavy debt load after repeated delays and technical setbacks. The aircraft will enter service with Swiss International Air Lines, a unit of Deutsche Lufthansa AG, in June, roughly 2½ years later than first intended.

In February, Bombardier cut nearly 10% of its global workforce and reported a fourth-quarter loss of US$677 million. Still, the company has said that it has enough cash over the next three years to ramp production of the CSeries.

The company has benefited from the US$2.5 billion it has raised since October after agreeing to sell almost half its stake in the CSeries jet program to the government of Quebec, Bombardier's home province, and selling a stake in its train-manufacturing business to a big Quebec pension fund.