Will Bombardier Launch a CS500?

For the past several years, Bombardier (TSX: BBD.B  ) has been working to develop its C Series aircraft. As one of few aircraft being launched with an entirely new frame, Bombardier is counting on the C Series to drive a large portion of the company's future growth. With growth as a goal, what's next for the C series, and will the company launched a large iteration of the aircraft?

Development and features
A key selling point of the C Series is the all-new ground-up design. Even as Boeing (NYSE: BA  ) and Airbus, a subsidiary of European Aeronautic Defense and Space (NASDAQOTH: EADSY  ) , have been improving the 737 and A320 with features that improve fuel economy and comfort, both aircraft are still based around decades old designs. With a total development cost estimated at nearly $4 billion, Bombardier has already invested a lot of time and money in the C Series and will want to make the most of the program.

Stretched aircraft
Aerospace manufacturers frequently make multiple capacity iterations of the same aircraft as it not only saves on development costs, but airlines can also benefit from the interchangeability of certain parts. Boeing and Airbus have used this method to develop new versions of the 737, A320, and many other aircraft far faster and cheaper than if they were to design all-new models.

New versions of aircraft with increased passenger capacity are a common iteration seen across many Boeing and Airbus models. Even at launch, Bombardier is showing a larger capacity version of the CS100 called the CS300, but this could just be the start of the C Series' growth.

The manufacturer has already trademarked the names CS500 and CS900. While this is no guarantee that these planes will ever come to be (after all, trademarking a name is a lot cheaper than modifying a commercial airliner), this action shows that Bombardier is at least considering using these names.

As previously discussed, it's far more cost-efficient to stretch an existing model (especially one as newly developed as the C Series) than it is to develop an entirely new aircraft. Therefore, if Bombardier does want to make a near-term entrance into the larger aircraft market, it will almost certainly involve a stretched version of the C Series.

Comparisons
The first Boeing 737 aircraft were built in the late 1960s and are now out of production. Replacing them was the Next Generation series (737-600, 737-700, 737-800, 737-900) introduced in the late 1990s and early 2000s. More recently, Boeing has unveiled the 737MAX series (737 MAX 7, 737 MAX 8, 737 MAX 9) with its latest set of updates.

Airbus has built its narrow-body line around the A320, creating a larger group of planes known as the A320 family. The A318 and A319 are both smaller than the A320, and the A321 is a larger stretched version. Like Boeing, Airbus is launching updated versions of the family, as it shows off the new A320neo as the two largest commercial jetmakers fight for the narrowbody segment.

Based around industry trends, it would make sense for Bombardier to launch a CS500 and CS900. Many airlines benefit from the similarities between aircraft of the same family as it reduces maintenance costs and increases pilot flexibility. As such, having enough iterations to service a larger portion of the market is a major selling point for manufacturers and would be beneficial to Bombardier.

Arrival time
Investors shouldn't expect a Bombardier CS500 or CS900 to arrive soon, since Bombardier is still working on the launch of the CS100. With the larger CS300 expected to arrive after the CS100, the launch of the CS300 could be good timing for an announcement relating to a possible larger C Series iteration such as a CS500 or CS900.

With the amount of time and money Bombardier has put into the C Series program, the company obviously expects to get a lot out of it. The launch of larger stretched versions of existing models would help to boost the total returns of the program. That, along with the fact that Bombardier has already trademarked the names, leads me to believe there is a very good chance Bombardier will eventually launch a CS500 aircraft and, depending on how it's received by buyers, begin the development of an even larger CS900 aircraft.

More growth opportunities
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 24, 2013, at 8:28 AM, mbk726 wrote:

    While not necessarily the article's focus, it has its history of the 737 wrong. The first generation, the 100 and 200 series, first flew in the late 1960s. However, the next development came in the 1980s with what's now known as the Classic series -- the 300, 400, and 500, though the 500 didn't actually fly commercially until 1990. The Next Generation series, 600 through 900, came thereafter as the article suggests.

  • Report this Comment On December 25, 2013, at 1:24 AM, billiam32765 wrote:

    They would be silly to do this, and try to compete with the excellent A320neo and B737MAX, not to mention all those thousands of (cheaper) used current versions for sale/lease. They'll have to discount to win sales, and the mature programs have amortized their development costs already. Airbus/Boeing's production efficiency is also great after decades of improving this. The CSeries is a niche aircraft in between the ERJs/CRJs and the globally established narrowbodies, so the situation is not as simple as it made to seem here.

    If they can't sell enough of the original two versions (without big discounts), how would returns be boosted by spending huge sums on one or two more?

    Investors...beware.

Add your comment.

DocumentId: 2775689, ~/Articles/ArticleHandler.aspx, 4/20/2014 6:53:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

TREND TRACKER: Get Rich When the Web Goes Dark

It's time to say "goodbye" to your Internet! One bleeding-edge technology is about to put the World Wide Web to bed. And if you act right away, it could make you wildly rich. Experts are calling it the single largest business opportunity in the history of capitalism… The Economist is calling it "transformative"... but you'll probably just call it "how I made my millions." Big money is already on the move. Don't be too late to the party – find out the 1 stock to own when the Web goes dark.


Advertisement