Jens Flottau Frankfurt and Graham Warwick Washington

Three months before the planned first flight of its CSeries, Bombardier is grappling with supplier issues crucial to meeting its production cost targets for the 110/135-seat airliner. And with shareholders concerned as the Canadian airframer burns through cash at an unprecedented rate to develop the next-generation narrowbody jet, achieving early profitability is essential.

Central to the issue is the role of Chinese suppliers and their low costs in meeting Bombardier's pricing assumptions for the CSeries. The company pulled much of the work from its Chinese suppliers last year to mitigate delays, but said it was only temporary. Now industry sources tell Aviation Week Bombardier is in talks with Western suppliers to extend those agreements while retaining their pricing.

Bombardier describes reports of offers to transfer control of more work packages to Western suppliers as speculation and declines to comment further. But suppliers claim discussions on the CSeries production ramp-up underscore the financial pressure the company faces as the first aircraft nears its initial flight, now planned by the end of June. Bombardier already has cut back massively on discretionary spending and is negotiating aggressively with suppliers on future production costs.

Bombardier moved to improve its liquidity in January with a $2 billion bond offer, but is attempting a delicate balancing act. Expenditure on development of the CSeries, and new Learjet 85, greatly exceeds the cash flow from sales of its existing aircraft. A six-month delay to first flight has pushed back progress payments from CSeries customers, while launch pricing and the planned gradual ramp-up in production means deliveries will not generate positive cash flow before 2015.

Bombardier is promising shareholders a big boost in revenues from 2015, and has said publicly it will not offer deep discounts to win CSeries orders. This puts the company at a disadvantage in campaigns against Airbus and Boeing, which have said they will use pricing to keep the CSeries out of their markets. List prices for the larger 135-160-seat CS300 are $10-15 million less than for the competing A319 and 737-700, but Ryanair's order last week for 175 737-800s at 40-50% of list price shows how low the Big Two are willing to go. Ryanair did not consider the CSeries, but the deal makes clear the price pressure Bombardier faces in campaigns against Airbus and Boeing.

It is against this background that industry sources say Bombardier wants to place responsibility and risk for the Chinese work packages with Western suppliers while retaining the low costs of having the work performed in China.

The company initially placed manufacture of the center and rear fuselage barrel, center wing box, wing-body fairing and tailcone with Shenyang Aircraft (SAC), which is also building the fuselage of its Q400 regional turboprop. That plan was reversed for what Bombardier described as a limited time, and agreements covering production of 40 shipsets were signed with companies such as Aernnova, FACC and GKN Aerospace. According to industry sources, those contracts could now be extended to 60 units.