(Adds comments from Bombardier sales VP, adds analyst quote
analyst)
Jan 21 (Reuters) - United Airlines UAL.N said on Thursday
it will buy 40 small planes from Boeing (N:BA) Co BA.N , dealing a
$3.2 billion blow to Bombardier Inc's BBDb.TO hopes of landing
a major customer for its fledgling CSeries program.
Separately, Southwest Airlines Co LUV.N said it had
ordered 33 of Boeing's 737-800 aircraft, a deal it struck in
December but announced on Thursday. ID:nL2N1550NL
Reuters reported last week that Boeing was poised to snatch
at least part of Chicago-based United's order for small jets
that seat about 100 passengers.
Boeing 737-700s can seat 126 people and will be flown by
United's pilots, reducing its reliance on contractors as a
shortage of regional pilots looms in the United States.
Canada's Bombardier has not landed an order in more than a
year for the CSeries, a new carbon-composite aircraft whose two
models seat between 100 and 160 passengers and are equipped with
fuel-efficient Pratt & Whitney UTX.N engines.
The orders suggest "good market demand" for aircraft after
sales fell last year, said Howard Rubel, an analyst at Jefferies
in New York. It also shows airlines prefer fewer models in their
fleets, making cockpits more familiar to pilots.
"Commonality works," Rubel said.
Reuters reported in October that Bombardier had offered the
CSeries to Southwest, a long shot since the airline maintains an
all-Boeing fleet.
The CSeries is due to enter service in 2016 after years of
delays and budget overruns. A spokeswoman for the Montreal-based
plane and train-maker declined to comment on United's
announcement. "For us it's business as usual as we continue to
pursue key campaigns," said spokeswoman Isabelle Gauthier.
Delta Air Lines Inc (N:DAL) DAL.N on Tuesday said it was
considering Bombardier's new aircraft.
"Our competitors will keep shooting at us but there is only
so much negativity you can project on an aircraft when airlines
are beginning to endorse it," said Colin Bole, a Bombardier
senior VP, sales and asset management, speaking to Reuters in
Dublin before the United deal was announced.
Another competitor for the United order, Brazil's Embraer SA
EMBR3.SA , declined to comment on the Boeing deal.
Gerry Laderman, United's acting CFO, told a quarterly
conference call that fuel prices do not play a role in long-term
fleet orders and that United is still considering narrow-body
aircraft from Bombardier, Embraer and Boeing rival Airbus Group
SE AIR.PA .
"As I mentioned, we will continue to look at aircraft and we
will continue to look at each of those types," Laderman said.
United is expected to buy more small jets because it lacks
planes in the 100-seat niche, Cowen and Co analyst Helane Becker
said in a research note.
Rubel said Bombardier is being squeezed by aggressive
pricing from Boeing and Airbus, which undercuts the smaller
rival. "Bombardier is in the middle of a rope-a-dope between
Boeing and Airbus," he said.
United, the second-largest U.S. airline by capacity, likely
paid well below half the $80.6 million catalog price for each
Boeing 737-700, industry sources said. The plane is being phased
out in favor of a newer model, the 737 MAX, and United's jets
are due to start entering its fleet in mid-2017.
Airlines typically enjoy discounts of 40 percent or more on
aircraft. Bombardier has been reluctant to deeply discount the
CSeries, a new product that has yet to recover development and
early manufacturing costs.
Boeing's 737-700 long ago recovered such costs, allowing
greater discounts for sales that help fill the production
schedule as it shifts to the MAX, due to make its first flight
this year.
Bombardier has 243 firm orders for the CSeries, shy of its
target of 300 by the time the plane enters service.
In a note to clients, Desjardins analyst Benoit Poirier
wrote on Thursday that CSeries orders "will remain the key
catalyst for Bombardier's share price," which closed down more
than 9 percent at C$1.09 ($0.7637).
"We expect the market to remain skeptical and believe there
is a real risk that the CSeries could be canceled if no orders
materialize in the next six months," Poirier wrote.
($1 = 1.4273 Canadian dollars)
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UPDATE 1-Delta CEO says mulling purchase of Bombardier CSeries
jets
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