Bombardier Near Deal to Sell Up to 125 Jetliners to Delta
April 14 2016 - 6:10PM
Dow Jones News
Delta Air Lines Inc. is in the final stages of completing a deal
to acquire up to 125 Bombardier Inc. CSeries jetliners in what
would be a major victory for the struggling Canadian plane maker,
according to three people familiar with the negotiations.
A final agreement for 75 firm orders and options for 50 more is
expected by the end of April, when the carrier's board meets to
review the proposed deal, the people said.
Delta, which released its first-quarter earnings Thursday, is
seeking to replace its aging fleet of single-aisle McDonnell
Douglas MD-88 jets, as it moves to fly some domestic routes with
larger jets.
A Delta spokesman said no final decision has been made. A
Bombardier spokeswoman said it is in discussions with a number of
airlines, and it will disclose deals as they are completed.
The proposed deal would also represent the single largest order
by number of aircraft in 2016. The deal would be worth anywhere
between $5.3 billion and $6.2 billion, depending on the mix of
aircraft purchased, based on list price. A deal of this magnitude
would, however, carry steep price discounts.
A sale would make Delta the largest customer by far for the
Canadian jet, providing it a significant stake in the future of the
program. Delta is a shrewd buyer of aircraft and a deal would be a
potentially a major boost to Bombardier that fortifies the Canadian
plane maker's credibility in its global challenge to Airbus Group
SE and Boeing Co., currently the only manufacturers of large,
single-aisle jets.
The airline has a history of upsetting established jet makers
and providing new entrants a foothold into its fleet. The carrier's
Northwest Airlines predecessor was the first U.S. airline to
purchase Airbus A320 aircraft in 1986.
Ed Bastian, Delta's incoming chief executive, said Thursday that
the company's 2016 capital expenditure guidance remains unchanged.
He said Delta is focusing on a five-year domestic fleet renewal
because "the MD-88s do need to retire and we have roughly 115 of
them current." He said he hoped to have more information when the
company holds an investor meeting in New York on May 16.
Bombardier's foray into the market for single-aisle jets with
100 to 160 seats has left it with a heavy debt load after repeated
delays and technical setbacks. The aircraft will enter service with
Swiss International Air Lines in June, roughly 2½ years after
Bombardier first intended.
In February, Bombardier cut nearly 10% of its global workforce
and reported a fourth-quarter loss of $677 million. Still, the
plane maker has said that it had enough cash over the next tree
years to ramp up production of the CSeries, benefiting from a total
of $2.5 billion it has raised since October after agreeing to sell
almost half its stake in the CSeries jet program to the government
of Quebec, Bombardier's home province, and selling a stake of its
train manufacturing business to a big Quebec pension fund.
Under its new management, Bombardier has sought well-established
airlines to buy its CSeries in a bid to generate commercial
momentum. The plane maker, however, has suffered recent setbacks as
United Continental Holdings Inc. this year ordered
current-generation Boeing 737s.
After about 17 months without a new order, the potential Delta
deal would be Bombardier's second major CSeries sale agreement
since February with a flagship North American carrier. That month,
Air Canada, Canada's biggest airline, agreed to buy as many as 75
of the aircraft. The firm order, for 45 planes, could be worth
about $3.8 billion at list prices. Including options for an
additional 30 jets, the deal would be valued at about $6.4 billion,
Bombardier said, before any discounts.
Bombardier earlier this week added seven more CS300 jets for
Latvian airline Air Baltic, giving it a backlog of 250 firm
orders.
Ben Dummett and Susan Carey contributed to this article.
Write to Jon Ostrower at jon.ostrower@wsj.com and Jacquie McNish
at Jacquie.McNish@wsj.com
(END) Dow Jones Newswires
April 14, 2016 17:55 ET (21:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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