Sunday, October 13, 2002

Tristate allies power up Bombardier

GE makes the engines, and Comair buys the jets

By James Pilcher
The Cincinnati Enquirer

MIRABEL, Quebec — It features a half-million square feet of manufacturing and testing space, some of the most technologically advanced manufacturing techniques in the world and an order book that makes companies such as Boeing or Airbus drool.

But Bombardier Aerospace's gleaming new facility about an hour outside Montreal would never have opened if not for two Tristate businesses — Erlanger-based regional airline Comair and Evendale's General Electric Aircraft Engines.

[photo] A worker at the Mirabel plant works on a GE CF-34-8 engine.
(Jim Callaway photo)
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“We have all come a very long way in 25 years,” John Giraudy, president of Bombardier Aerospace's regional aircraft division, told Comair officials last month when they took delivery on their first-ever 70-seat regional jet.

“Just as this jet is a symbol of your growth, so too is this facility a testament to the bond we have together.”

Comair helped create the concept of the regional jet, and was the first domestic carrier to use the untested plane, now one of the most successful business stories in airline history. And the jet is powered by different versions of GEAE's CF34, a derivative of an engine used on the military jet the A-10 Warthog.

That partnership has resulted in Bombardier's new plant, which opened in August 2001 at a cost of $170 million Canadian (about $125.8 million in U.S. dollars). The facility is devoted entirely to making 70- and 90-seat regional jets on a single integrated manufacturing line.

Company officials plan to produce about six planes per month at the plant next year, and will finish its first 90-seat jet by late spring. But since the 70/90-seat models are relatively new for the company and the market, Bombardier expects that production capacity to grow over the next few years, especially as demand grows for the larger planes. Each plane has a list price of about $28 million to $32 million, although airlines usually get a sizable discount if they buy in volume.

Bombardier also makes personal watercraft, snowmobiles and all-terrain vehicles as well as passenger train equipment and people movers.

Dominating a market

Business: Aircraft manufacturing; personal watercraft, all-terrain vehicles, and snowmobiles; passenger trains and people movers.
Headquarters: Montreal, Quebec.
Chief executive: Robert E. Brown, president and chief executive officer.
Employees: 80,000.
Ticker/Market: BBD.B/Toronto Stock Exchange; Frankfurt; Brussels.
Revenues (Fiscal year ending January, 2002): $21.6 billion (Canadian).
Profits (2001): $390.9 million (Canadian).

But the regional aircraft business is by far its financial rainmaker. Of the $21.6 billion in revenues the company reported in its last fiscal year, the aerospace division accounted for 56 percent. The company also makes business jets, but those are not considered as profitable or nearly as big a market, while regional jets generated $5.3 billion Canadian in revenue in 2001.

What began as an experiment has resulted in Bombardier becoming the market leader in the industry, with the company accounting for 79 percent of the world's regional jets that were made in 2001.

The market has become even less competitive since then, with Germany's Fairchild Dornier declaring bankruptcy earlier this year, although Brazil-based Embraer has made strides in the last two years.

Still, the results and the expansions show how far a company previously known just for making smaller business jets has come.

“There were a lot of doubting Thomases, but we took the leap of faith together and now look where we are,” Mr. Giraudy said.

As of Aug.31, the company had delivered 48 70-seaters, with another 148 remaining on order. Of those 70-seaters, Comair had 20 on order, and its parent company Delta Air Lines had another 26 on the way or already delivered.

“It's nice to get this first one, but we'll definitely be back,” Comair president Randy Rademacher said upon taking delivery of the first 70-seater.

Bombardier also is expected to deliver its first 90-seater to Mesa Air Group sometime early next year, and has 30 of the bigger planes on order, although neither Delta nor Comair has ordered this version.

In addition, there are another 310 44- and 50-seat regional jets on order with Bombardier, including 36 for Delta Connection, the division of Atlanta-based Delta that runs the regional network that includes Comair. Those planes are made just 45 miles away at Bombardier's older plant outside Montreal's Dorval International Airport.

“But if the airline wants to step up the size of the aircraft, we've kept our new models in one aircraft family,” Mr. Giraudy said. “We want the airline to feel as much as possible that they are buying just a slight variation of what they already have.”

Just two cancellations

Bombardier has not entirely escaped the downturn that has gripped all of aviation, however. This month, the company announced it was laying off 1,980 workers at its plants in locations such as Belfast, Northern Ireland; Wichita, Kan.; and Toronto. But company officials say that those reductions were to the business jet division, and would not affect the regional jet operation.

“We've only had two order cancellations for regional jets, and one company was Palestinian Airlines and the other was an Argentinean airline that is remaking its fleet,” company spokesman Burt Cruickshank said. “If anything, the North American carriers are coming to us more and more, and are dedicating more lines to regional jets.”

But just as Comair officials helped conceive the concept of the jet, it would not have been possible without the success of GEAE's durable and versatile CF34 model. Despite the much-heavier workload placed upon it than the engines of a less-frequently used mainline jet, the CF34 has displayed a strong service record, GEAE officials say.

In fact, GE is actually looking to grow its regional jet engine division, even while the company is cutting about 1,000 jobs this year and then another 1,800 next year, as announced Tuesday. Overall, the CF34 has generated well over $11 billion worth of firm orders and options since it began commercial service in 1992, and the company is looking for even more.

“We're anticipating that by 2010, 30 percent of all new aircraft deliveries will be regional jets, compared with 13 percent in the last decade,” GEAE spokesman Rick Kennedy said. “This jet has changed the nature of aviation, and we're happy to have been a part of the creation of it and part of the ongoing expansion.”

Bombardier's Mr. Giraudy also sang the praises of the GE engine last month, saying he was working with the company to make the differing variations between the 70- and 90-seat versions even more uniform. That in turn would help airlines make an even smoother transition between the planes when it comes to maintenance and training.

And he said that while the rest of the industry continues to struggle, he was “extremely pleased” at Bombardier's current position, which he said has been helped immensely by the new plant.

“We are really well positioned in an industry that is going through difficult times,” Mr. Giraudy said.


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