Bombardier announces delay in CSeries first flight

Earnings Call Update:

• We’ve made substantial progress. First flight will be by end of June 2013 with EIS for CS100 a year later. CS300 timeline still EIS YE2014.
• BBD did not identify “major systems” that are taking longer to arrive for assembly. Delay won’t have an impact on cash assumptions of the business plan; contingency was already figured in.
• What comfort can you give us June target is achievable? Answer: We’ve been working with customers with transparency and consideration that early delivery positions could have some variation. It was important for us to maintain a target date to get all suppliers a harmonized delivery schedule. It made no sense at all to give them a break. We feel the harmonized schedule is now the end of June. There is now a commitment by the suppliers, you see the aircraft coming together.
• There will be some individual discussions for penalties from some suppliers.
• The fear is that four or five months out will see another delay? Answer: There’s a lot of things that can happen, but we are more at execution phase. We know where the suppliers are at. We have more visibility than at design stage. Assembly of the parts we’ve done so far are extremely well. We are testing some versions of the software and when we go to flight we’ll have the latest version. We have more visibility now.
• Potential customers are most impressed with the amount of testing we are doing up front.
• There is no delay on the engine; it will be certified by the end of this year.
• BBD was asked specifically if fly-by-wire was the reason for the delay. Answer: It is the most challenging.
• Complete static testing expected in April.
• Don’t anticipate much in the way of penalties for customers.
• 160-Seat CS300 is a customer option. It’s a question of seating density; it’s not another model.
• There are 55 Tier 1 suppliers and more than 300 more. Software is a big part of the challenge we have and software is everywhere in a product like this.

Our take: The aerospace analysts were remarkably and surprisingly sanguine about the delay. Media was much sharper in its questioning. Clearly, BBD’s telegraphing of the possible delay prepared the market for this.

Original Post:

Bombardier today announced a six month delay in the first flight of the CSeries, which had been planned for next month. The delay had been telegraphed for months, with officials saying a three to six month delay would not be a surprise or indicative of program difficulties.

The company also acknowledged a month-for-month delay for entry-into-service from December 2013 for the CS100, the first of two models, but believes EIS of the larger CS300 by the end of 2014 is possible.

BBD identified issues in the supply chain, without specifying where or who. It’s been public that there are challenges with China’s Shenyang facility, which is building fuselage sections for the airplane. BBD began assembling the sections at its Belfast plant as a back-up.

It’s also been acknowledged by BBD that the fly-by-wire system developed by Parker Hannifin is also a challenge. But neither company was identified in the press release issued at 6am ET today.

BBD has an earnings call 10am ET. Although aerospace analysts and media have widely expected the delay, we expect the Q&A to drill down on the issue.

Here’s the press release.

Here’s a Reuters article.