The CSeries may end up meeting the same fate as the short-lived Boeing 717. So says Bryan Bedford, the CEO and chairman of Republic Airways Holdings, CSeries’ largest customer to date. Bedford’s remarks seem rather curious considering one would assume he would be talking up the CSeries.
Republic placed a firm order in Feb. 2010 for 40 CSeries CS300 aircraft for delivery in 2015 onwards. The U.S. aircraft group said at the time that the aircraft would be assigned to its carrier Frontier Airlines.
Then in Dec. 2010 Airbus launched the A320Neo program. Airbus’ chief salesman, John Leahy, used the occasion to claim that Airbus’s new product offering in the narrowbody market, means there is almost no business case for the CSeries.
Within six months of the official launch of the A320Neo program, Leahy had persuaded Republic to sign a memorandum of understanding for the A319Neo and the A320Neo and then in Nov. 2011, Republic signed a firm order for 20 and 60 respectively. At the time, Airbus said the aircraft would be assigned to Frontier. It also highlighted in its press statement that Republic had chosen CFM International Leap-X engines.
This is an interesting engine choice, considering the Pratt & Whitney geared turbofan (GTF) engine powers both the A319/320Neo and the CSeries. I would have thought that if one was planning to operate both the A319/320Neo and the CSeries it would make sense to stick to the same engine type. Having a common type of engine across aircraft platforms helps with maintenance and spare parts support. But then again the engine-makers behind CFM, namely GE and Snecma, were probably incredibly keen to have their engines on Republic’s Airbus narrowbodies considering they have no desire to see the P&W GTF engine muscle in on their share of the narrowbody engine market.
Bombardier’s order-book still shows Republic’s order as firm. But if Republic cancels its order for CSeries, what would be the implications for Republic? It would lose the deposits and the pre-delivery payments that it put on the CSeries. But Airbus has the ability to make the deal so sweet for Republic, that the loss of some deposits and pre-delivery payments becomes inconsequential.
Also the amount of money Republic could stand to lose may be minimized further if they were smart enough to get to Bombardier to commit to firm delivery dates. Bombardier said that the CS100 would enter into service in Dec. 2013 followed by the CS300 about a year later. These milestones are becoming increasingly hard to achieve considering there is still no sign of a roll-out of the first aircraft. Theoretically, to achieve EIS for the CS100 in 20 months from now, one would expect the first CS100 aircraft to come out of the factory and achieve its first flight before the end of this year.
For Bombardier, an order cancellation from Republic would have huge ramifications. Republic today accounts for 40 of the 138 CSeries aircraft presently on firm order.
The low number of firm orders for CSeries has already led some leading industry figures to speak out. Air Lease Corp. CEO, Steven Udvar-Hazy, has publicly called on Bombardier to be more aggressive in its marketing and sales of CSeries. And he is right, because Airbus’s Leahy is being very aggressive in his marketing and sales of the A320Neo.
The history of how the 717 program came to a sudden end may also give Bombardier reason to be concerned.
In 2004, Filipino carrier Cebu Pacific Air had to make a choice between the Airbus A319 and the Boeing 717-200. It was a hugely important pitch for Boeing because the future of the Boeing 717 production line depended on it. Cebu Pacific was considered a good sales prospect for the 717, because at that time Cebu Pacific was operating the McDonnell Douglas DC-9, the precursor to the 717.
As history shows, Boeing lost to Airbus in that competition.
At the time, it was considered a huge win for Airbus, but Leahy’s strategy was simple. He allowed Boeing to present to Cebu Pacific executives first, then he went in and offered Cebu Pacific a deal they could hardly refuse. It worked. Following the loss in the Cebu Pacific pitch, Boeing announced it was shuttering the 717 production line. The 717 was buried.
Cebu Pacific benefited greatly from the healthy competition that existed between the 717 and the A319. So it could be argued that it is in all airlines’ interests to see the CSeries survive and prosper to a certain extent. After all, the best way to extract a good price, is to create a competition.