More bad news from Bombardier, Inc. (TSE:BBD.B) this week. Bombardier stock was stabbed in the back twice from its Canadian peer—WestJet Airlines Ltd. (TSE:WJA).
The top executive of the Alberta-based airliner, while discussing his company’s fortunes with the press this week, downplayed Bombardier’s 100–150-seat “C Series” for the Canadian market.
“It’s too small,” WestJet CEO Gregg Saretsky said of the already ill-fated aircraft. “Both ourselves and Air Canada are buying bigger and bigger jets for domestic flights.” (Source: “WestJet Airlines Ltd seeks to slow Bombardier Q400 deliveries as Alberta economy struggles,” Financial Post, February 9, 2016.)
He made the remarks in an editorial board meeting with the Financial Post on Tuesday. It was not a slip of the tongue, as he repeated his views in another editorial board meeting with The Globe and Mail the same day.
If Bombardier had asked WestJet, the airline would have told Bombardier that the C Series is too small for its mainline needs, Saretsky noted.
“I don’t know if they had dated market research or they didn’t talk to enough customers to know,” he said. (Source: “WestJet says Bombardier’s C Series is ‘too small’ for its mainline service,” The Globe and Mail, February 9, 2016.)
Bombardier’s C Series is “not a great match” for what the world is looking for, Saretsky said in a videotape posted on the Globe web site.
Bombardier swiftly refuted Saretsky’s arguments.
Marianella de la Barrera, a spokesperson for Bombardier Commercial Aircraft, said the Montreal-based transportation behemoth spoke with various airlines before developing the C Series.
“We developed an airline working group, which was very instrumental in voicing the needs and wants of a clean-sheet aircraft. And some of them became customers,” de la Barrera said. “And some of them, even though they’re not customers yet, some of them still contributed to it and are now revisiting us and are potential customers.” (Source: Ibid.)
Bombardier flew the C Series to Calgary last year and showed it to WestJet, she said.
Bombardier has 243 firm orders for the C Series. The C Series program is CA$2.0 billion over its original CA$3.4-billion budget and the Quebec government has stepped in with a CA$1.0-billion financial package for the program. Canada’s federal government is considering a similar contribution.
Saretsky told The Globe and Mail that he generally opposes bailouts, but more help for Bombardier is something he can support.
Saretsky’s “Q400” turboprop comments were the second stab in the back of Bombardier.
He told the Financial Post that his company is in talks with the Quebec company to slow down deliveries of the Q400 turboprops it has on order as part of the broader strategy to cope with oil-rich Alberta’s deteriorating economy on the heels of the global crude price plunge. (Source: “WestJet Airlines Ltd seeks to slow Bombardier Q400 deliveries as Alberta economy struggles,” Financial Post, February 9, 2016.)
But he told The Globe and Mail that Bombardier has denied WestJet’s request to defer deliveries of Q400 turboprop planes: “They’ve said, ‘no, you’re committed to the dates,’ so we’ll take [the planes],” he said. (Source: Ibid.)
WestJet has ordered 36 Q400s from Bombardier, 25 of which have been delivered.
The airline has also asked Boeing Co (NYSE:BA) to defer deliveries of new planes.
The collapse in the price of oil has weakened WestJet’s revenue and has caused a major shift in capacity out of oil-rich Alberta to other markets.
Shares of WestJet and Bombardier have suffered quite a bit lately. WestJet has lost more than 50% of its market value since it touched a record-high of CA$34.00 in December 2014. It’s currently trading around CA$15.00.
Meanwhile, Bombardier stock has lost two-thirds of its market value over the past 12 months. BBD.B stock entered the below-CA$1.00 territory for the first time in 25 years last month.