Jet maker Bombardier used 'aggressive' pricing to win big Delta order
Bombardier scored a major order for its new CSeries passenger jets from Delta Air Lines Inc on Thursday, boosting the Canadian manufacturer's stature in the airline industry even as it faces a long road back to profitability.
The order for 75 CS100 jets, worth an estimated $5.6 billion based on the list price, was the first from a major U.S. airline for the CSeries program, which is years behind schedule and billions of dollars over budget.
Quebec-based Bombardier hopes the deal marks a turning point in its attempt to break into the fleets of top airlines and serve the niche market for 100-seat planes that larger rivals Boeing and Airbus have neglected.
Securing the order, however, does not appear to have come cheap for Bombardier, with its chief executive conceding the company had been "aggressive" on the pricing of its jets in order to clinch the deal.
Aerospace industry sources involved in negotiating similar deals estimated discounts as high as 75 percent may have been offered to reboot the CSeries program with a big order, matching some of the most aggressive pricing seen lately in the market.
Commercial jets typically sell for roughly half of their catalog prices before adjustments for inflation, according to those familiar with the business.
Bombardier said it would book a $500 million "onerous contract" charge in the second quarter related to the Delta order and a separate order from Air Canada in February.
Bombardier scored a major order for its new CSeries passenger jets from Delta Air Lines Inc on Thursday, boosting the Canadian manufacturer's stature in the airline industry even as it faces a long road back to profitability.
The order for 75 CS100 jets, worth an estimated $5.6 billion based on the list price, was the first from a major U.S. airline for the CSeries program, which is years behind schedule and billions of dollars over budget.
Quebec-based Bombardier hopes the deal marks a turning point in its attempt to break into the fleets of top airlines and serve the niche market for 100-seat planes that larger rivals Boeing and Airbus have neglected.
Securing the order, however, does not appear to have come cheap for Bombardier, with its chief executive conceding the company had been "aggressive" on the pricing of its jets in order to clinch the deal.
Aerospace industry sources involved in negotiating similar deals estimated discounts as high as 75 percent may have been offered to reboot the CSeries program with a big order, matching some of the most aggressive pricing seen lately in the market.
Commercial jets typically sell for roughly half of their catalog prices before adjustments for inflation, according to those familiar with the business.
Bombardier said it would book a $500 million "onerous contract" charge in the second quarter related to the Delta order and a separate order from Air Canada in February.