Cs Form 211 Revised 2017: Fill & Download for Free

Boeing’s decision to file a Trade Dispute suggests otherwise. The question is a good one but I doubt any one opinion has all the facts - including this one. Allow me to offer an opinion that will no doubt, prove to be somewhat controversial and allow me to offer some background information along with my reasoning rather than just a blunt answer.Boeing once owned one of Bombardier’s subsidiaries, de Haviland (DHC) during the 1980’s and sold it after losing a contract to Airbus for airliners for Air Canada. They are fierce competitors (Boeing vs. Airbus) and overall, Boeing financially did not want to commit to upgrades to the tiny Twin Otter or the Dash 7 or new Dash (8) 100 and didn’t see a good fit between the two organizations and lots of overlap in expertise and suppliers once the Air Canada contract was finalized with Airbus. It took 4 years before the company was sold to Bombardier in 1992 and integrated with Canadair operations the Bombardier acquired in 1986. Little did anyone know at the time, that the Canadiar business jet, the CL-604, would begin the company’s path into the regional jet market.Boeing has not done well with any company it has acquired since it bought McDonnell Douglas. Every one of MD’s designs were eventually phased out and post sale support of existing airframes has been considered poor except for military products such as the F-18 and C-17. Boeing during this era was about marketshare and sales volume. It excelled at filling aircraft plants with orders and focused on large scale production that could number in the thousands.Boeing has never had good a stable relationship with any Canadian partnership except one in Manitoba and it’s small fry in the grand scale of Boeing’s international scope of sales, support and suppliers. Everything is literally - too small to be serious recognition to those in Chicago or Renton.A corporate mistake is a decision made by senior management of an organization that fails to recognize an opportunity that could be leveraged for value and financial gain. From Boeing’s perspective, why would it consider being a white knight for the C-Series if the pressure to move the company to the U.S. would not have been politically viable in Canada. Boeing has never entered into a licensing deal for complete aircraft. It will facilitate direct partnership stakes for sections for development of aircraft but not the entire platform. Each one was based on risk sharing both in terms of capital investments and profit sharing for each component. Many analysts still wonder if selling the fuselage manufacturing plant for its B-737’s and B-777’s to Spirit Aviation was a smart move. For Boeing it was brilliant given the era and labour union environment the company was facing. The engineering of the aircraft could be kept in house, had a successful track record and eliminated some long term pension liabilities the company needed to get off its balance sheet. That ultimately lead to how Boeing’s management would seek out other risk sharing partners in Japan, China abroad and internally inside the U.S. in South Carolina and Washington State. It would maintain control of design, production facility management and component integration while sub-contracting as many sub-assemblies as possible for all future commercial aircraft models. Legacy models no longer needed additional risk partners given the limited amount of capital costs involved. Once the B-767 and B-747 are phased out, the way Boeing will design, manufacturer and sell aircraft will follow a standard template as is being carried out with the B-737 Max and B-777 Max platforms.Boeing has no experience in buying or investing into a platform that is already completed as a finished product and would be only interested if it could buy the entire company - which would not be feasible given the market Bombardier is in (Business Jets and Regional airliners). Boeing made the decision to exit the MD-90 program not only because it overlapped with the B-737 but also because supporting two low cost, thin margin platforms made little financial investment sense where returns on capital are measured in single digits these days. Many believe Boeing hasn’t heavily discounted the B-737 to maintain marketshare - but they have for several key buyers of the airplane. If published accounts are true, the level of discounts that are actually higher than Bombardier and could also be considered predatory in nature.Boeing’s choices were clear when the company filed the FTC complaint and the current administration gladly went along with it. I seriously doubt Boeing executives predicted Airbus coming to rescue Bombardier for a very specific purpose and market segment. For Airbus, they are also banking on other opportunities including military and long term development collaboration in addition to keeping their new Alabama U.S. plant filled with orders. Boeing’s risk in not building a smaller airliner than the B-737 is marginal.If there has been a serious error made, it was by Bombardier. Their relationship with Pratt & Whitney is the primary reason the C-Series has lead a financial wrecking ball to Bombardier’s balance sheet. The terms of the deal were not well written and financial penalties were clearly limited. Pratt & Whitney itself is also suspect in its management leadership. They have not been a serious player in the high by-pass turbine market for several years as GE and Rolls Royce dominate the market. P&W’s military sales are what have kept the company afloat along with its famous turboprop PT-6 and PW100 series turbines, which ironically are designed and manufactured by Pratt & Whitney Canada. The decision to design a compact size geared high bypass ratio turbine, the new PW 1500G was a good decision but has clearly had some engineering, technical, production and material availability problems that did not have liability consequences. Airbus is using the same engine platform for the A318/319 NEO series and more importantly, has an alternative engine in the CFM International LEAP (which is not gear driven) and could afford to wait while Bombardier could not. CFM has outsold the PW 1000 / 1100 / 1200 / 1400 / 1500 / 1700 / 1900 series by a wide margin. CFM didn’t escape unscathed in new turbine development but they certainly have had less development problems than Pratt & Whitney. Bombardier did not consider offering two different engine platforms, which is not unusual but clearly high risk when both are brand new products.The C-Series development and production have followed a similar path as the Lockheed L1011 and Rolls Royce with its RB-211 engine. RR ultimately did have to declare bankruptcy and be bailed out by the British Government in 1971. Bombardier has required several government grants, loan guarantees (Federal and Provincial) including interest free loans to stay afloat.It can be easily argued that Boeing saw a weakness and wanted to exploit it after seeing what Delta Airlines paid for the C-Series airplane without investing any money other than a few phone calls by its lawyers to the FTC. Boeing doesn’t forecast serious need for a regional airliners in the 110 - 145 passenger segment that warrants a short haul version of its current B-737 Max and doesn’t want any sales being chipped away at by a competitor Airbus, Bombardier or Embraer. Others such as Comac 919 are not considered international threats (U.S. domestic consumption and some regional sales) to Boeing. Bombardier has a technical engineering partnership with Comac for the 919. More on that later.From a Boeing sales analysis position, it knows that leasing companies make up a large portion of their sales in the budget airline B-737 market. They want high production of capacity aircraft that in turn only require a 65% load factor for an airline to break even. That’s where many believe the threat exists, which is where the C-Series 300 can hit Boeing in the pocket book. When the prices that Delta paid are converted into lease payments and require far less passengers to break even - the equivalent of 40 - 45% load factor of a B-737 Max 8 or 9 model, at far lower lease payment rates. If a C Series 300 can be filled at 90% or more, the airplane would be a money maker for the airline and Bombardier almost immediately because lease payments instead of capital costs, are dramatically different in scale and volume (number of aircraft leased vs capitalized with large down payments).Bombardier has with the C Series, the same range for a given passenger configuration - with the new geared turbine engines. Airbus NEO / LEAP variants of the A319 - 321 and Boeing’s Max 737’s are all capable of 5,500+ km’s. That put Boeing on edge given the potential market opportunities that Bombardier would now have access too. This is particularly true around the Pacific Rim. Given that the U.S. has announced its withdrawal from the Trans Pacific Partnership (TPP) trade deal, Bombardier could be in a better position regarding import tariffs than Boeing. If Boeing could eliminate Bombardier’s C-Series from the market, it would be easier for them to compete against Airbus. Asian carriers that fly low volume routes during non-peak times of the year would greatly benefit buying a lower opex cost aircraft that Bombardier could fulfill.It is surprising that Embraer has (so far) escaped an FTC complaint by Boeing. Without a doubt a key reason is currency exchange rates, which has hurt Boeing more with Canadian currency than Brazilian because Canada’s trade with the U.S. exceeds a billion dollars per day and given current U.S. dollar value, enables Bombardier to give far larger discounts than Embraer can. When the U.S. dollar was at par with the Canadian dollar between 2008 and 2013, I doubt Boeing would have submitted a case to the FTC. It could be argued that Embraer has smartly waited out the decision to enter the 145 - 160 passenger configuration market.Addendum December 21, 2017 - Boeing and Embraer have entered into acquisition discussions. Boeing is in talks to buy Brazilian plane-maker Embraer?In my opinion, Boeing set in motion a low risk option to hurt its competition - even if it means Boeing’s commercial and military sales to Canada are significantly reduced by 50% or more. Boeing doesn’t see Canada as a significant revenue source over the next 10 to 20 years when compared to other market opportunities. It has sufficient contracts for Aircraft into Canada that future net new sales will be minimal. It will probably close down its facilities in Manitoba in less than 5 years time anyway.Addendum insert from CBC News: Boeing acknowledges Super Hornet sale to Canada effectively deadAirbus has nothing to lose with this deal and could expand into the U.S. with a North American built design that opens new opportunities that did not exist before. Bombardier is the ultimate loser in the program while Boeing will simply look at it as a low risk gamble that may or may not pay off. It is not clear if Bombardier has the option of buying back any share of the C-Series platform and regain control of the program in the future. One report states that Airbus has the option to buy out Bombardier’s ownership of the CS Series in 7.5 years and the Quebec Government stake in 2023. The terms of the deal are not well known or published other than the fact that Airbus will own 50.01 percent of the program and Airbus will invest funding to complete all final development and production costs. Because the Quebec Government and Airbus will actually own (either as collateral or actual ownership rights) more than Bombardier will, it is not clear how Bombardier will continue as an aircraft supplier to the airline industry. Airbus has its own problems integrating subsidiaries and working with risk partners as has been proven with the A400 and A380 platforms.Some experts are confused why Airbus would buy into the program when it has a very good product and sales program with its own A318/321’s. It hasn’t been as successful selling single aisle models into the U.S. compared to Boeing but it still has done reasonably well given the market environment it faces. Hidden strategic financial value to the deal with Bombardier is one of the key motivations for Airbus to make the deal including the new plant in Alabama, lower production costs than it currently has in Europe along with better EBITDA potential, which Boeing already enjoys. Those that think this can position Airbus to move the A321 upscale and bigger is questionable. In the end, it will have two aircraft platforms that compete in the same segment and one will be eventually dropped if the Airbus acquisition of the C-Series is allowed and completed.I seriously doubt Boeing will enter the fray if the deal does not proceed, as a buyer of the C-Series and do not believe it considered buying it before the Airbus deal was announced. It believes the B-737 platform is the minimum size the majority of airlines desire and given the cost of ownership, scale of production and level of acceptance, having a smaller model made no financial sense and it was easier to attempt to kill off the C-Series and let Embraer fill the smaller 100 to 125 passenger market that still exists for the near future.In the end, Bombardier’s days are numbered as a standalone competitor to Boeing and Airbus and Embraer will gladly fill the lower market that Bombardier can no longer afford to support given its balance sheet is depleted. If the Airbus deal is killed off, expect Bombardier to file for bankruptcy within a month of the announcement in which case, expect Comac or another Chinese firm to make a bid for the assets.While I’m at it, here is what ultimately has lead to Bombardiers predicament;Planned development of the C-Series began in 1996 after it withdrew from acquiring Fokker’s regional airliner platform (which itself went bankrupt immediately afterwards) believing it would be cheaper to develop from scratch when the market was already flooded with regional jet airliners it developed with th CRJ.Development began in 2004 but was halted not long after given the estimated capital costs and long sales cycle in 2006. This delay increased development costs that could not be contained given the specifications desired by airlines (passenger load and range).Using only one supplier for engines with limited partner liability and risk sharing penalties.Canadian dollarPoor middle management and cost controls including under estimating capital development costs and ability to access to capital markets on the same scale as its competitors.Distracted leadership at senior level which began to split Bombardier’s management in 2003, as all were vying for access to capital between its recreational products (ATV’s, Snowmobiles, Marine), Transportation (Commuter and long haul trains) and Aviation (Regional Jets and C-Series and Partnerships such as Comac) groups. The Bombardier family which was still the majority shareholder, finally had enough as the recreational products group was sold off as BRP with most of the family shares winding up in BRP.Pierre Beaudion’s leadership of the aviation group has never been stellar and finally resigned earlier this year (2017). For some reason he excelled at managing trains but not airplanes.The company did not roadmap or plan its future on an even keel. It did not commit resources that focused on continued improvements and new variants during successful years. Once it built the main platform, only minor revisions were planned or updated and frequently limited to new models and not capable of being retrofitted to early models.Production forecasts have never been achieved without heavy discounts because the company was never considered a serious competitor to Airbus or Boeing. It has never established long term contracts that included fleet management with stakeholders to the same level as Boeing and Airbus have achieved. When it did achieve mass production levels, it could never capitalize or leverage it for new aircraft models soon enough because of the lack of access to capital markets.Scale matters when it comes to producing and building large products that cost over $25M USD. The break even point between development costs and actual profits on capital return (ROI) diminish when production numbers are less than 300 aircraft per year. Airbus has learned that lesson with the two I mentioned earlier, the A380 and A400M.Addendum: Feb 2, 2018 - Boeing and Embraer continue merger talks. Source: Reuters -Boeing proposes Embraer tie-up excluding defense unit: sourceWith this recent news, it is possible that several nations may object to both the Airbus / Bombardier CS Series deal and the possibility of a Boeing / Embraer acquisition as this would reduce the number of world players with revenues that exceed 10 billion dollars, from 4 vendors to 2.Some experts and regulators are already concerned that Boeing and Airbus control approximately 80% of the commercial aviation market space.Have a nice flight!