MONTREAL - Canada's lone aircraft maker has pinned its future on being able to buck a worldwide slump in airplane sales with a new environmentally friendly jet to be assembled in Montreal.
Bombardier Inc. announced Sunday that it is finally going ahead with the CSeries passenger jet, hoping its fuel-efficient engine will lure airlines coping with volatile fuel prices.
Company president and chief executive Pierre Beaudoin promised the CSeries would do nothing less than "revolutionize" the 100-to 149-seat commercial market.
Bombardier went ahead with the launch on the eve of Britain's prestigious Farnborough Air Show, with only a provisional order for 30 planes from German airline Lufthansa.
That's a far cry from the 50-100 orders the company had said it needed before moving ahead with the $3.3 billion venture.
But along with its provisional order, Lufthansa took out an option for 30 more jets. At a price of US$46.7 million each, the deal could eventually be worth more than $2.8 billion.
And on the cusp of one of the world's most important air shows, industry analysts predicted more good news announcements would be in store for Bombardier.
"(The CSeries) is going to sell like hotcakes," said Jacques Kavafian of Toronto-based Research Capital. "We think that before the show ends, they're going to book a lot more orders."
Kavafian indicated deals with Qatar Airways and International Lease Finance Corp. are likely in the works, while others with Shanghai Airlines and China Southern could be in the offing.
Bombardier confirmed Sunday that discussions with a number of airlines worldwide "are progressing well."
"We are engaged in active and very promising discussions with a number of airlines worldwide," Beaudoin told reporters in Farnborough.
Even without any firm contracts, Bombardier's workers joined Quebec's political class to hail the move to go ahead with the CSeries as essential for the country's aerospace industry.
The long-range jet will be designed and manufactured at its aircraft factory in Belfast, Northern Ireland.
But the manufacture of the aircraft's aft fuselage and cockpit will take place at its plant in Saint-Laurent, Que., while the final assembly will take place at a plant to be built in nearby Mirabel.
Quebec Premier Jean Charest said the CSeries will create 3,500 direct jobs in the province, along with several hundred spin-off opportunities.
"It's the entire Quebec economy that will benefit, not just Montreal but the regions as well," Charest told a news conference in Mirabel on Sunday.
The CSeries project will be financed partly by loans from Ottawa and the governments of Quebec, Northern Ireland and Britain.
Guy C. Hachey, president and chief operating officer at Bombardier Aerospace, called the CSeries aircraft program "a compelling business proposal" for both Canada and Quebec as well as Northern Ireland and the British government.
"It involves, among other things, the development of new technology, creation of employment and further consolidation of Canada's leadership in the aerospace industry," said Hachey.
"Our partners, including governments and suppliers, will benefit from the program's success."
Montreal narrowly beat out Kansas City, Mo., as the location for the assembly work. Charest acknowledged that his government "adjusted" its loan offer in light of the competition.
Quebec will invest $117 million in the project, while the federal government will inject $350 million.
Though the loans are interest free, both levels of government will recoup an undisclosed dividend for each plane sold.
"This is a situation where we all will emerge as winners," Charest said, adding his government is also committed to financing the building of the new plant in Mirabel.
Another major obstacle to the work being done in Canada was removed last week when Bombardier machinists voted 82.6 per cent in favour of a new tentative agreement -- provided the new planes are built in Quebec.
The workers agreed that up to 15 per cent of the employees would work under a six-year contract with longer probation periods.
The new deal includes a 3.25 per cent salary increase per year over six years.
"These jobs will attract young people to the aerospace industry," said Michel Arsenault, head of the Quebec Federation of Labour , which represents Bombardier's machinists union.
"They will help make aerospace to Quebec what the car industry is to Ontario."
Underscoring the risk behind the project is the fact Bombardier has never built a plane as large as the planned CSeries.
The 100-to 149-seat commercial market is currently dominated by Europe's Airbus Industries and Chicago-based Boeing Co., the world's two biggest commercial aviation companies.
"This is definitely the largest airplane, size wise, that Bombardier has ever endeavoured on," said Benjamin Boehm, director of the C-Series program.
"It's a move into the mainline market segment where we're targeting with this the larger mainline carriers."
Bombardier officials called the plane "the greenest of its class" and say it will be about 20 per cent more fuel efficient than its rivals.
That could provide a significant market opening for Bombardier at a time when the industry is racking up massive losses - about US$2.3 billion forecast for this year alone - and 25 airlines have shut down in the last six months.
"I think the CSeries could potentially be one of the best selling narrow-body airplanes in history because of its operational cost savings," analyst Kavafian said.
With record world oil prices, the costs of jet fuel has doubled in the last year and many airlines have cut jobs and reduced capacity to cope, or gone out of business.
Air Canada, Canada's largest air carrier, has cut 2,000 jobs and reduced capacity by about seven per cent to reduce expenses.
Executives at Lufthansa said the plane appealed to their need to keep fuel costs under control.
"Our initial evaluations of the CSeries family of aircraft and discussions with Bombardier over the last few months have evolved and made us believe that the CSeries family of aircraft clearly meets our stringent requirements for sustainable fleet development," said Nico Buchholz, senior vice-president, corporate fleet.
"After watching the development of the geared turbofan engine since the very early stages, we are confident that this next generation engine will deliver on its targets of double digit reductions in fuel burn, environmental emissions, engine noise and operating costs."
One of the world's major jet engine makers, Pratt & Whitney, will build the geared turbofan engine that will power the CSeries. Pratt & Whitney, which has major operations in the Montreal-area, is a division of United Technologies Corp.
The first of the CSeries are slated for delivery in 2013.
