Thursday, April 9, 2015

Bombardier Shuffles Leadership as Russia CSeries Order in Doubt

Bombardier Inc. is bringing in a new leader for its commercial aircraft business and another chief financial officer as the planemaker faces fresh doubts about one of the largest orders for its troubled CSeries jetliner.

Fred Cromer becomes president of Bombardier Commercial Aircraft effective immediately as Mike Arcamone departs, the company said Thursday, and a search is under way for a new CFO as Pierre Alary retires. Alary will stay on the job until his replacement is hired.

The moves will let new Chief Executive Officer Alain Bellemare put his stamp on Bombardier after Pierre Beaudoin stepped aside in February amid slow sales and delays on the flagship CSeries model.

Cromer comes to the job after serving as president of International Lease Finance Corp., the jet-leasing company now owned by AerCap Holdings NV.

Bombardier announced the moves hours after saying it was confident it can resolve any financing issues from a Russian customer that warned it’s reconsidering an order for 39 CS300 planes.

There is a “firm agreement” for Ilyushin Finance Co. to buy the planes “and as such we are confident we can work together to overcome any concerns,” Marianella de la Barrera, a spokeswoman for Montreal-based Bombardier, said in an e-mail.

Ilyushin, among the top customers for Bombardier’s CSeries planes, is rethinking its purchase and will make a decision by the Paris air show in June, the company’s general director told London-based aviation journal Flightglobal.

Bombardier’s Class B shares fell 1.9 percent to C$2.55 at 9:32 a.m. in Toronto. The stock’s 37 percent slide this year through Wednesday was the steepest among major Canadian industrial companies, according to data compiled by Bloomberg.

A cancellation would be another setback for Montreal-based Bombardier, which is betting on the CSeries to drive sales growth over the next decade. Running more than two years late and $2 billion over budget, Bombardier is short of its order target and has yet to name a launch operator after its original customer, Sweden’s Braathens Aviation AB, backed out last year.

Ilyushin Finance is growing impatient with a number of delays that have pushed back delivery, spokesman Andrey Lipovetsky said, confirming General Director Alexander Rubtsov’s comments. The cost of the deal has risen, Lipovetsky said, citing limited access to capital markets after the U.S., Canada and the European Union imposed sanctions to force Russia to drop support for separatists in Ukraine. The Canadian government has barred Russian companies from taking advantage of cheap export-bank financing.

Financing Challenges

“There are financing challenges anticipated as a result of Canada’s sanctions,” de la Barrera said. “There is time however for IFC to source third-party financing solutions.”

Ilyushin Finance may cut the number of airplanes ordered or swap some for other types of planes, Lipovetsky said.

Bombardier is working to complete CSeries flight tests this year, with its 243 firm orders still short of a target of 300 by the time the planemaker’s largest-ever jetliner enters service. Bombardier now envisions a commercial debut in 2016 for a plane that was once supposed to be in use with airlines by 2013.

Other CSeries customers include Republic Airways Holdings Inc. and Macquarie AirFinance, both with firm orders for 40 planes. Republic said last year it’s considering whether to take the planes after a change in its airline strategy.

Qatar Airways Ltd said last month that it was also tired of waiting, seven years after Chief Executive Officer Akbar Al Baker first said he planned to order 20 jets, and will stick with a revamped Airbus Group NV plane due to come out before the end of the year.

(Bloomberg Business)

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