MONTREAL – Bombardier has taken steps to reduce the risk that a Chinese supplier will delay the first test flight of the CSeries, but an industry analyst who toured its facility remains concerned about its ability to produce sections of the fuselage once full production begins next year.
The Montreal-based aircraft manufacturer, which hopes to begin test flights by the end of the year, recently moved production of the mid-fuselage section from Shenyang, China, to an in-house facility in Belfast.
SAC Commercial Aircraft Company (SACC) continues to supply the rear fuselage section and has already shipped the first one to Mirabel, Que., where it has been joined with other sections.
Although this is positive, Walter Spracklin of RBC Capital Markets said the Chinese partner remains a risk to meet full production targets.
“We believe the facility’s ability to ‘repatriate back’ the fuselage components that were moved away from SACC remains a key uncertainty — as it was not made clear on this trip why SACC struggled,” he wrote in a report.
Cameron Doerksen of National Bank Financial said Bombardier (TSX:BBD.B) moved the mid-fuselage work in-house because SACC took on more work than it could handle and slow development progress, but intends to shift the work back for full production because of its lower costs.
“The SACC building is largely empty currently, but appears to be large enough to support the originally intended work volume on the CSeries,” he wrote.
The Chinese have been ramping up the complexity of parts it has delivered of the past five years for the Q400 fuselage and tail section. Doerksen expects Bombardier will pursue a similar strategy for the CSeries program.
“When the work was shifted to SACC from Mitsubishi in 2007 there some initial production issues, but these were quickly resolved and SACC is now a reliable supplier on the Q400.”
Doerksen said Bombardier indicated again that the first test flight of the CSeries remains on track. The schedule remains “very tight” and the analyst said the first test flight vehicle will have is rolled out by early to mid-November for the program to remain on time.
“There is a high degree of skepticism that the CSeries will meet the target test flight date, but we would not consider a short delay to be a major issue for the program,” he wrote, adding that the market assumes there will be a delay of at least several months.
Meanwhile, Bombardier says there are no plans at this time to resume negotiations to end a strike by 825 unionized Learjet employees in Wichita, Kan.
“We’re still in a holding pattern,” said business jet spokeswoman Danielle Boudreau.
The workers rejected a five-year contract that offered no raises the first year and a one per cent raise for each subsequent year. It would have retained pension plans, but increased the cost of health insurance premiums to the same level in place for more than 4,000 of Bombardier’s union and non-union employees in the rest of the United States.
Boudreau said the strike is having no impact on production at this time.
On the Toronto Stock Exchange, Bombardier’s shares gained five cents at $3.74 in afternoon trading.