It’s Time to Be Bullish on Bombardier Stock
Bombardier, Inc. (TSE:BBD.B) stock started to move up again on Thursday. The recent history of Bombardier stock puts too much blame on the company for the delays with the “CSeries.” Somehow, investors have singled out Bombardier for production delays, forgetting that every single aircraft manufacturer in the world today endures delays, military or civilian.
Airplanes have become more complex than ever. They use advanced materials, miles of cables and wires, while having to pass the most stringent safety tests. Perhaps I sound like a broken record, but I feel that investors forget these rather important details about what Bombardier stock represents: none other than the fourth largest plane-maker in the world.
But Bombardier is a world leader in railways and urban transportation as well. Still, the course of BBD.B stock over the past two years has meshed with the fate of the new Bombardier CSeries 100-to-150-seat airliner. Bombardier had suffered a few years’ delays in completing the first test flight. But deliveries have started and Swiss International Air Lines, the launch customer, has already been using it on regular routes. Air Canada (TSE:AC) and Delta Air Lines, Inc. (NYSE:DAL) ordered at least 40 new CSeries aircraft between them last winter.
Bombardier Has Made All The Right Moves for BBD.B Stock
A new order would certainly do wonders for BBB.B stock. There is a strong likelihood that more orders will come. As the plane proves itself in service, it will have its operational record to boost marketing. While that happens, Bombardier shares should consolidate its bullish course, making slight but significant increases. Investors may have missed one of these significant steps.
Ultimately, it comes down to an overused but honest cliché. The proof is in the pudding. They have a similar expression in Latvia, and they will be using it regarding the CSeries. Indeed, the Latvian airline AirBaltic has suffered a dip in reputation due to some incidents. It is trying to restore its reputation and Bombardier is part of that plan.
In Riga, the Latvian capital, journalists were introduced to the airline’s first of a fleet of “CS300” planes. This is the larger version of the CSeries family. So, Bombardier will have delivered both current versions of the CSeries as it prepares to expand to a global market.
This very fact, the actual delivery of the jet, should have moved BBD.B shares by a larger percentage than today’s 1.7% or so. This is especially the case, as so many analysts and investors said barely six months ago.
Bombardier Has the Right Plane to Boost Sales and BBD.B Shares
Bombardier shareholders should feel confident in the company’s success with the CSeries. It is, delays and all, a remarkable achievement. It can compete with the likes of Boeing Co (NYSE:BA) and Airbus on an equal footing in the small mid-range airliner market, one of the most competitive and active. The new CSeries aircraft uses 46% composites and 24% aluminum-lithium alloys. Investors don’t have to dwell with the technical benefits that these new materials imply.
Still, investors should certainly familiarize themselves with what these materials do to make the CSeries more attractive to the airlines which, all by themselves, will reduce the cost of flying by 15%. The plane offers other operational savings as well. The CS300 offers fuel consumption on average 20% lower than a comparable Boeing “737” and Airbus “320” or “321.” With two engines, the Pratt & Whitney Canada “PurePower PW1500G,” combined with upgraded aerodynamics, ensure lower fuel consumption, less noise, and fewer emissions.
All that translates into making a plane that airlines will find useful to their bottom lines. Other potential Bombardier customers are playing a wait-and-see game. They will watch how the CSeries performs for Swiss International Air Lines and for AirBaltic. Even a conservative betting man has sufficient cause to be bullish for the future. The fact that Delta and Air Canada ordered them before the deliveries even started represents a strong recommendation.
AirBaltic has ordered 20 CS300 jets. They will start regular service in November, providing a remarkable range of 6,000 km. They will fly to Abu Dhabi and potentially catch the eye of a number of other global airlines serving that busy hub. No better advertising for an airliner than to see competitors using them successfully.
If that is not persuasive enough, Bombardier is making more room to speed up production of the CSeries. Bombardier has recognized that investors want it to focus on getting the program up to full speed. As part of this restructuring, Bombardier has sold its amphibious aircraft program to Viking Air Ltd (based in British Columbia).
The Bombardier “415” aircraft was launched in 1994 and was based on the successes of previous versions, the “CL-215” and “CL-215T,” to position itself as the only aircraft in the world built specifically to fight fires. Bombardier gives the impression that it’s pruning dead branches. But times are hard and do not leave room for sentimentality. So, even though the amphibious aircraft program is part of its tradition, by selling it, Bombardier can better focus on its core business for higher growth.