Clipped Wings: The Turbulent History of Bombardier's Attempts to Break into the Commercial Airline Industry

Clipped Wings: The Turbulent History of Bombardier's Attempts to Break into the Commercial Airline Industry - The CSeries Crash and Burn

Bombardier's CSeries program was supposed to be the company's golden ticket to success in the commercial airliner market. After investing over $6 billion into developing the plane, Bombardier launched the CS100 and CS300 in 2016, confident that airlines would flock to the technologically advanced and fuel-efficient narrow-body aircraft. However, right from the start, the CSeries was plagued by setbacks and challenges that ultimately led to its demise as a Bombardier product.

Despite generally positive reviews about the CSeries' performance and capabilities, sales were dismally low from the beginning. Bombardier's break-even target was 300 planes, but in the first 18 months after launch, they only managed to sell 360. Part of the problem was that the development delays increased costs dramatically, making the end price higher than expected. This made it difficult for Bombardier to compete with the lower prices Boeing and Airbus could offer for comparable planes like the 737 MAX and A320neo.

The CSeries also ran into issues with being certified and approved for service. Delays in the program meant deliveries to airlines were postponed, and carriers like Lufthansa and United began cancelling their orders. To make matters worse, Boeing accused Bombardier of receiving unfair subsidies and introduced massive tariffs on CSeries imports to the U.S.

By 2017, the CSeries was bleeding money and threatening the financial stability of Bombardier overall. So the company made the difficult decision to sell a majority stake in the CSeries program to Airbus, who rebranded it as the A220. Airbus was able to leverage its scale and influence to improve sales and production for the aircraft. But for Bombardier, it was essentially an admission of defeat - the company had failed to gain a viable foothold in the commercial airline market against the Boeing-Airbus duopoly.

Clipped Wings: The Turbulent History of Bombardier's Attempts to Break into the Commercial Airline Industry - Too Little, Too Late: Losing the Race for the Skies

Even before the CSeries struggles, Bombardier was falling behind Boeing and Airbus in the race to supply airlines with next-generation narrow-body aircraft. While its competitors were pouring resources into new fuel-efficient models like the 737 MAX and A320neo, Bombardier dragged its feet on committing to an all-new design. By the time the CSeries launched in 2008, Boeing and Airbus had a multi-year head start.

This complacency ultimately doomed Bombardier’s chances of making major inroads with the CSeries. Airlines began transitioning their fleets to the MAX and neo years before the CSeries entered service. Loyalty and fleet commonality meant carriers were reluctant to introduce an entirely new aircraft type from an unproven supplier like Bombardier. Even if the plane’s performance and economics were decent, the CSeries simply showed up too late to the party.

Bombardier banked on the CSeries being so advanced that airlines would have no choice but to purchase it. But the reality was that the MAX and neo, while less technologically sophisticated, were good enough. The incremental fuel efficiency gains of the CSeries weren’t sufficiently compelling for most carriers to justify the costs of adding a new aircraft type.

By stubbornly sticking with an older generation of planes like the CRJ and Q400, Bombardier surrendered a huge head start to Boeing and Airbus. When the company finally got around to launching the CSeries, the next-gen narrow-body market was already cornered. Airlines had committed their fleet renewal strategies around the MAX and neo. Breaking into this duopoly would have been an uphill battle even under the best circumstances.

With the timeline pushed back by developmental delays, Bombardier ran out of runway. Boeing and Airbus had already succeeded in getting their upgraded single-aisles to market years ahead of the CSeries’ 2016 entry into service. For most airlines, buying into the CSeries meant introducing an orphan jet that wasn’t worth the operational complexities. The plane’s technology strengths were nullified by its lack of commonality and scaled production compared to the MAX and neo.

Clipped Wings: The Turbulent History of Bombardier's Attempts to Break into the Commercial Airline Industry - Boeing and Airbus: Duopoly Rules the Runways

For decades, the commercial airline manufacturing industry has been dominated by just two major players - Boeing and Airbus. This entrenched duopoly made it extremely difficult for any newcomers like Bombardier to gain traction. Boeing and Airbus leveraged their scale, existing customer relationships, and supply chain advantages to protect their effective monopoly in the narrow-body aircraft market.

The Boeing 737 and Airbus A320 families account for over 75% of all single-aisle airliners in service worldwide. This ubiquitous presence across fleets globally reinforces airline loyalty to these two manufacturers. Carriers want to minimize complexity by sticking with common aircraft types. Pilot training, maintenance procedures, spare parts - it's simply easier for airlines to remain within the Boeing/Airbus ecosystem. And the manufacturers actively encourage this through incentives like preferential pricing for return customers.

By the time Bombardier entered the market with the CSeries, Boeing and Airbus had already forged deep, symbiotic relationships with airlines. Even if the CSeries had some technological and performance advantages over the 737 MAX and A320neo, it wasn't enough to outweigh the operational efficiencies of fleet commonality. For most carriers, the benefits of staying loyal to Boeing or Airbus far outweighed the risks of adopting an unproven aircraft type from a small player like Bombardier.

The scale and resources of Boeing and Airbus also hindered the CSeries. With established global production facilities and supply chains, Boeing and Airbus could manufacture and deliver planes far more quickly and cheaply than Bombardier. This allowed them to undercut Bombardier's pricing and make the CSeries less competitive from a cost perspective too. Bombardier simply couldn't produce enough planes to match Boeing and Airbus's economies of scale.

Clipped Wings: The Turbulent History of Bombardier's Attempts to Break into the Commercial Airline Industry - Bailed Out and Bought Out: From Beleaguered to Belonging to Airbus

Bombardier was grasping at straws to keep the CSeries program alive by 2017. With sales stagnant, costs ballooning, and reputational damage piling up, Bombardier had its back against the wall. Beleaguered and beaten, the company took drastic action to bail out the CSeries by selling a majority stake to arch-rival Airbus.

For Airbus, acquiring the CSeries provided a golden opportunity to expand its portfolio and directly counter Boeing's dominance in the 100-150 seat market. Airbus paid just $1 for a 50.01% share in the CSeries Aircraft Limited Partnership, but crucially also agreed to provide sales, marketing, and manufacturing support.

Almost overnight, the CSeries went from orphaned stepchild to having the full might of an aviation giant behind it. Airbus quickly rebranded the plane as the A220, designating it as part of the Airbus family. This gave confidence to airlines that had previously shunned the CSeries due to uncertainty about its future prospects.

The contrast was stark - whereas airlines saw the CSeries as a risky bet, the A220 was now a safe choice with Airbus's seal of approval. New sales started flowing in from carriers like JetBlue, Delta, and Korean Air that wanted the A220's capabilities but only if backed by Airbus's financial strength and production prowess.

For Bombardier, relinquishing control of the CSeries was a bitter pill to swallow. But the alternative was bankruptcy. Airbus brought financial relief, global scale, supply chain muscle, and most importantly - credibility. Bombardier retained only a 31% stake in the CSeries program - a far cry from the total ownership they had sought. But it was better than shutting down the CSeries altogether.

Letting Airbus take the reins was an act of desperation by Bombardier. But it gave the CSeries a new lease on life as the A220. For customers, any concerns about product support melted away now that Airbus stood behind it. And with Airbus in control, production issues were smoothed out and economies of scale began kicking in.

Clipped Wings: The Turbulent History of Bombardier's Attempts to Break into the Commercial Airline Industry - A Series of Unfortunate Events: Canceled Orders and Deferred Deliveries

The CSeries program was plagued by a series of blows from canceled orders and deferred deliveries that shook airline confidence in the aircraft and Bombardier itself. Despite initially racking up impressive purchase commitments, Bombardier began hemorrhaging orders as delays pushed back delivery timelines.

One of the first big cancellations came in 2015 from Republic Airways for 40 CS300 aircraft. Republic cited the uncertainties around when it would actually receive the planes as reason for the cancellation. This was a worrying red flag signaling that airlines couldn't reliably plan around CSeries delivery schedules.

Then in 2016, Indian low-cost carrier SpiceJet axed its order for 25 CS100/CS300 jets. With the Indian market seen as a prime growth opportunity for narrow-bodies, losing this order was a major setback. Again, the rationale was uncertainty about Bombardier's ability to deliver planes on schedule.

The biggest gut punch came in 2017 when United Airlines canceled its order for 45 CS100 airliners after a lengthy delay. For a US legacy carrier like United to ditch the CSeries was enormously damaging in terms of lost prestige and momentum. At the time of the cancellation, Bombardier had still not delivered any of the aircraft to United as initially promised.

All told, by 2017 Bombardier saw over 100 cancellations from customers like Lufthansa, Iraqi Airways, and Gulf Air. The reputation of the CSeries as an unreliable aircraft plagued by delays was firmly cemented. It became a vicious cycle as new orders dried up due to lack of confidence in timely deliveries.

The delivery delays themselves were often caused by broader organizational and production issues like parts shortages, labor disputes, and supply chain mismanagement. But these logistical problems fed the perception that Bombardier was fundamentally unable to deliver the CSeries aircraft on schedule.

For airlines, the order cancellations and delivery delays signaled unacceptable uncertainty from Bombardier. Operating schedules and fleet planning depend on manufacturers meeting committed timelines. The CSeries disruptions rippled out to undermine airline operations.

Clipped Wings: The Turbulent History of Bombardier's Attempts to Break into the Commercial Airline Industry - Up in the Air: Turboprop Turbulence in the Regional Market

Bombardier's struggles extend beyond the CSeries jet program - even in the regional turboprop market, the company has faced headwinds. Historically, Bombardier aircraft like the Dash 8 and CRJ200 served as workhorses on short-haul routes for regional carriers worldwide. But in recent years, changing market dynamics have led many airlines to re-evaluate and move away from turboprop equipment.

The rise of low-cost carriers utilizing narrow-body jets has redefined what passengers expect on regional flights. Bombardier's turboprops increasingly look outdated and unappealing to travelers who now demand jet-like speed and comfort on shorter routes. Airlines opting for jets over turboprops has been a rude awakening for Bombardier.

For example, in North America, United Airlines has shifted its regional fleet acquisition away from turboprops entirely. To better match mainline service, United is replacing smaller Bombardier CRJ200s with Embraer E175 narrow-body jets. This trend is playing out across the USA; regional jet departures are forecast to grow from 807,000 in 2019 to over 1 million by 2039. Turboprops are being left behind as airlines switch focus to regional jets.

In Europe too, turboprop usage is declining as carriers standardize fleets around Airbus A320/Boeing 737 families. Phase-outs of older planes like the Dash 8 by airlines such as Flybe and airBaltic reflect this. United Kingdom regional airline Flybe's 2019 bankruptcy has been partly attributed to falling passenger numbers as travelers avoided flying on their turboprop fleet.

The global pandemic has only accelerated this shift away from turboprops. In Australia, regional operator Rex Airlines is moving to an all narrow-body Boeing fleet, arguing that passengers perceive turboprops as less safe regarding airborne viruses. Air New Zealand has announced plans to withdraw its remaining turboprop aircraft as well.

The writing appears to be on the wall for legacy turboprop manufacturers like Bombardier. Airbus retiring its aging ATR fleet seals the deal. Travelers increasingly see turboprops as dated and undesirable for anything except the shortest of hops. Nostalgia aside, performance and economics now favor modern regional jets.

Clipped Wings: The Turbulent History of Bombardier's Attempts to Break into the Commercial Airline Industry - The Road Not Taken: Business Jets Over Airliners

Bombardier's core competency has always been in business jets rather than commercial airliners. While the company diversified into regional aircraft over the years, its heart and soul lies with luxurious private jets for wealthy individuals and corporations. Bombardier's managerial focus and technical expertise center on elite business aviation - not the cutthroat world of commercial aviation. This misalignment between organizational culture/values and strategy goes a long way to explaining the CSeries debacle.

Bombardier's business jet division accounts for over half of total company revenues. Flagship aircraft like the Global 7500 ultra long-range private jet compete head-to-head against Gulfstream and other high-end rivals. Bombardier has cultivated tremendous brand equity in the business jet sphere. Corporate names and celebrities alike clamor for the bespoke luxury and prestige only Bombardier's elite models can deliver.

Compare this to the remorseless brutality of the airline industry - paper-thin margins, high fixed costs, macroeconomic volatility and geopolitical risks outside management's control. Commercial aviation requires ruthlessly disciplined execution and scale economies to succeed - areas where Bombardier is untested.

In many ways, Bombardier was set up for failure from the start. The company channeled business jet resources and talent into the CSeries, rather than building a dedicated airline unit with aerospace veterans. But the culture of business aviation - selling customized opulence and exclusivity - is the polar opposite of pumping out cookie-cutter airliners at the lowest possible cost.

Add in how Bombardier's relationships and reputation with corporate jet clients clashed with the needs of no-frills commercial carriers. Chasing both business and commercial aviation simultaneously diluted focus - but Bombardier felt diversification was necessary to spur growth.

With the benefit of hindsight, Bombardier was spread too thin. The company couldn't transfer its business jet capabilities to the alien world of commercial aviation. Leadership saw the sector's tremendous profit potential but underestimated the competencies required to successfully compete.

Bombardier's board and management may have romanticized following the prestigious lead of Embraer into regional jets. But Embraer had the right DNA and discipline ingrained from its inception to support high-volume commercial programs. Bombardier - enamored with bespoke luxury - did not.

Clipped Wings: The Turbulent History of Bombardier's Attempts to Break into the Commercial Airline Industry - Grounded: The Future Looks Bleak for Bombardier's Airline Ambitions

After the CSeries debacle, Bombardier's future in the commercial airline industry looks decidedly gloomy. The company has stumbled badly in its attempts to diversify beyond business jets and establish itself as an aviation conglomerate. For all of Bombardier’s investments into developing the CSeries and other commercial aircraft programs, the returns have been disastrous. At this point, Bombardier is at a strategic crossroads regarding whether to continue pursuing its airline ambitions or refocus on business jets.

Industry analysts have called for Bombardier to cut its losses and exit the commercial aviation sector entirely. The CSeries catastrophe proved that Bombardier lacked the scale, experience, and discipline needed to succeed in this ultra-competitive space. Chasing airline business distracted Bombardier from its core strengths in business jets. Many believe Bombardier should now double down on private aviation to rebuild the company rather than fixate on past commercial aviation failures.

Bombardier CEO Eric Martel has hinted at this direction, acknowledging that “everything is on the table” regarding the future of Bombardier’s remaining airline programs. Martel took over in 2020 with a mandate to restore profitability after the CSeries debacle. Exiting commercial aviation would streamline Bombardier to focus on its most profitable business jet unit. And it could provide an infusion of capital to pay down billions in accumulated debts.

However, some argue Bombardier shouldn’t fully abandon commercial aviation just yet. The company still produces successful regional jet and turboprop models like the CRJ and Q400 that generate solid, stable cash flows. Ditching these programs would deprive Bombardier of diversity and leave it completely reliant on the cyclical business jet market. And exiting now would mean writing off substantial investments made over decades.