Bombardier Exec’s Exit May Set Back C-Series

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Published: August 25, 2011

The head of Bombardier’s commercial plane unit is retiring in October, a surprise blow to its C-Series jet, which is facing a tough sell in the United States as the economy weakens.

Bombardier, the world’s third biggest commercial plane maker, said on Wednesday that Gary Scott, 60, will retire on October 1 to “devote more time to his family who need him at this time.”

Analysts, while initially unsettled by the news, said executives at the company satisfied them that Scott’s departure signalled nothing was amiss with the USD$ 3 billion C-Series development programme, even though the new, 110- to 135-seat aircraft has failed to attract a steady stream of orders.

“It is clear to us that this decision was motivated by a personal reason,” BMO Capital Markets analyst Fadi Chamoun said.

The C-Series, the biggest commercial jet ever planned by Bombardier, will compete with the smaller aircraft built by Airbus and Boeing, the industry leaders.

Orders for the plane, which is set to be launched in 2013, have been sporadic, raising concerns about the market’s appetite for the as-yet untested aircraft.

US ECONOMIC UNCERTAINTY MAY SIDELINE BUYERS

Analysts have said an order from Delta Air Lines, which already flies more than 400 Bombardier-made planes, would come as a strong endorsement for the single-aisle, fuel-efficient C-Series.

Uncertainty on whether the US is headed for another economic recession will likely mean that Delta will be disciplined about placing large aircraft orders, Chet Fuller, senior vice-president of sales and marketing of Bombardier’s commercial aircraft unit said.

“This is a very turbulent time and if you went back even a month there is a lot of uncertainty in the marketplace in US. If you were the largest carrier in the US you would naturally want to be prudent and exercise good business judgment,” he said.

“I personally believe that there has to be more clarity in where the US economy is going,” he said.

Asked if concerns that the global economy is weakening will hurt orders for the C-Series, Fuller said: “No, I don’t think so. If we were just selling to North America I would say certainly. But we are not selling only to North America.”

He mentioned Brazil, Indonesia, Russia, China and Turkey as countries whose economies were still “hot”.

Fuller said Bombardier is in advanced discussions with half a dozen potential customers on the C-Series.

SETBACK FOR PROGRAMME

The loss of Scott, a 30-year veteran of the aviation industry and a former Boeing executive, is a setback for Bombardier and the C-Series, said Canaccord Genuity analyst David Tyerman.

“He would be missed I would expect. He seemed to be very respected by investors. He clearly knew the business inside and out,” Tyerman said, adding that Scott was “very much the guy on the C-Series programme” at the Paris Air Show in June.

Guy Hachey, president and chief operating officer of Bombardier Aerospace, one of the two main divisions of Montreal-based Bombardier, will take over Scott’s job until a replacement is named.

Analysts said the company planned to look for a replacement both inside and outside Bombardier. They expected that an internal candidate was more likely to be successful as the person would already have detailed knowledge of the programme.

Fuller declined to comment on whether he was in the running for the job.

Scott joined Bombardier in 2004 as president of its new commercial aircraft programme and has been president of its commercial aircraft unit since April 2008.

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