This Could Lift Bombardier Stock
Since the recent lifting of economic sanctions against Iran, airplane manufacturers are stampeding over each other to get into this market. Iran has not bought a single airliner (from the West) in more than 30 years ago. Bombardier, Inc. (TSE:BBD.B) has been slow to the punch, hurting sale opportunities and adding downforce on Bombardier stock. Yet, Bombardier has an ideal product for the Iranian and Middle Eastern market.
The previous Canadian government seemed to go out of its way to hurt many of Canada’s top companies. In Bombardier’s case, when everyone else was re-opening embassies, setting up trade deals, and sending high-ranking delegations to Tehran, Canada kept the door to Tehran shut. This merely delayed the inevitable. Canada would eventually join the rest of the world in resuming diplomatic ties to Iran.
For Bombardier, though, the opening came just a little late. As of last January, Bombardier still needed approvals from Canada to operate in Iran. (Source: “Bombardier makes pitch to Iran Air as carrier expands,” The Globe and Mail, January 24, 2016.)
Qatar Airways was planning to buy Bombardier “C Series” jets only to scrap the idea because of production delays and internal restructuring. Iran Air could have been an ideal bounce customer, as it operates in the same regional space as Qatar Airways and responds to similar market forces. Instead, Bombardier stock dropped 4.5% on news of the Qatar cancellation.
Meanwhile, Airbus has secured a contract to supply 118 aircraft to Iran Air, worth $27.0 billion. And that was just the start of the fleet renewal. Iran Air has already invited Boeing to Tehran to discuss the modernization of its national fleet.
Meanwhile, Bombardier is still just sitting on the tarmac, looking pretty. This is only because of Ottawa’s delays in re-opening the country’s diplomatic ties that the Harper government so foolishly cut a few years ago.
It is no wonder Bombardier is seeking support from the Canadian federal government now. That very government dealt a major sales handicap to the Canadian aerospace industry. Iran’s appetite for new airliners and other technology didn’t suddenly materialize overnight. Analysts had warned for years that Iran would be a huge market, once released from the shackles of sanctions.
In fairness, the Trudeau government has tried to make up for its predecessor’s myopic outlook. Bombardier representatives traveled to Iran to promote the C Series family of aircraft with airline and government officials last November. This meeting occurred before the partial lifting of economic sanctions by Canada in February 2016 in the wake of the nuclear agreement.
Iran’s main domestic airline, Mahan Airlines, is an ideal target for the smaller 100-seat capacity Bombardier “CS-100.” Iran is a large country and the CS-100 would be an efficient workhorse, able to cover any distance, taking off and landing from any size of airport.
Brazil’s Embraer and Russia’s Sukhoi also have valid aircraft to offer, which compete directly against the C Series. Plus, these companies have a political advantage in that Brazil and Russia have maintained friendly relations with Tehran.
Iran’s authorities say that the country needs 400–500 commercial aircraft in the coming years. The average age of the aircraft fleet is about 20 years and just 140 airliners serve a country of 80 million people.
Since the lifting of international sanctions, Iran has already ordered 200 aircraft in three airline groups. If Ottawa wants to help Bombardier and BBD.B stock, it can start by filling the diplomatic void with Tehran.