BUSINESS

Bombardier signs agreement to sell CS100 aircraft to Malaysian airline

03/17/2015 02:26 EDT | Updated 05/17/2015 05:12 EDT
MONTREAL - Bombardier has landed a letter of intent to sell 20 of its CS100 aircraft to a Malaysian startup carrier called Fly Mojo Sdn Bhd (flymojo).

A firm order would be worth US$1.47 billion, but could grow to US$2.94 billion based on list prices if options for an additional 20 CS100 planes are picked up.

If the purchase goes through, the Malaysian airline would become the first customer and operator of the 110- to 125-seat CS100 aircraft in the region.

Bombardier (TSX:BBD.B) has received letters of intent or conditional orders for 603 of its CSeries aircraft, which include both the CS100 and the larger CS300, but only 243 firm orders.

Cameron Doerksen of National Bank Financial said the Malaysian commitment isn't the large order from a major airline that the market would like to see. But the analyst believes the number of senior government officials who participated in the signing ceremony suggests it will be firmed up.

"The commitment from flymojo is also notable because it will be the first CSeries customer in Southeast Asia, a key aviation growth market," he wrote in a report.

Doerksen said delivery slots for the first 24 months of production are largely filled, which should give Bombardier time to firm up interest and generate new orders.

The CSeries is a new family of narrow-body, twin-engined jets that Bombardier has been developing for several years at a cost of US$5.4 billion.

They are larger than Bombardier's earlier CRJ jets and Q400 turboprops and move the company closer to a market segment long dominated by Boeing and Airbus.

The world's third-largest aircraft manufacturer has completed nearly half of the targeted 2,400 hours of flight testing required to win certification, expected by year-end.

Walter Spracklin of RBC Capital Markets said questions remain about the total market potential for the CSeries given that industry orders for 100- to 149-seat planes is well below the 7,100 units Bombardier is anticipating over the next 20 years.

"The clean sheet design and market leading efficiency of the CSeries will likely drive and stimulate new demand in the 100-149 seat segment; but no question, the accuracy of Bombardier's total market potential for the CSeries still remains a question," he wrote.