At the recent Farnborough Air Show outside London, England (the largest in the world this year), the groundwork was laid for Canada to grab a larger share of international airplane orders. Bombardier Inc. of Canada is trying to squeeze in between the two giants of the industry − Boeing Inc. and Airbus SAS − to produce the next generation of more fuel-efficient single-aisle passenger jets, employing lighter materials and a new engine made by Pratt & Whitney.

Due to skyrocketing increases in fuel prices, the world’s airlines are set to lose billions of dollars this year. The only exceptions are some airlines owned by oil-rich nations. The airline industry is traditionally highly cyclical and the woes of the passenger carriers usually seep backwards into reduced orders from the manufacturers. However, at this time, Boeing and Airbus seem abnormally relaxed due to enormous order backlogs that stretch out for as much as six-years-worth of production. Even huge cancellations will not affect either company for many years.

The workhouses for the two companies are the 737 (Boeing) and the A320 (Airbus). These remain about 40% cheaper to run than many of the older planes that are still being used by some airlines, particularly in the United States. However, both the 737 and the A320 are themselves based on technology that was originally developed between 10 and 20 years ago. It is time for new ideas and that is where Bombardier’s plans come in.

Bombardier is finally going ahead with its C-Series 130 jet, designed to carry 110 to 130 passengers. Lufthansa has placed the first order − a letter of intent for 30 and an option on another 30 − with an expectation of initial delivery in 2013. The planes will cost close to $50 million each and will compete directly with the smallest versions of the 737 and A320.

The C-130 will utilize fully composite wings, made of carbon fiber, and will employ a new geared turbofan engine made by Pratt & Whitney, based in East Hartford Connecticut. The new geared technology will allow a differential in speeds by which the turbine at the back of the engine turns the fan at the front, reducing noise and fuel usage. Operating costs are expected to drop by 15%.

Why are Boeing and Airbus not jumping into this market? First, they still have huge order backlogs for their current product − 2,243 planes on backlog for the 737 and 2,634 for the A320. Second, their financial resources and engineering efforts are being directed in other areas. They are going more aggressively after the large plane market, the 787 in the case of Boeing and the A350 in the case of Airbus.

Why is the C-130 so important for Canada? The wings will be made in Belfast (Ireland), the fuselage in China and the cockpit in Saint-Laurent Québec. Final assembly will take place in Mirabel Québec. First estimates are that the C-Series will create 3,500 badly needed jobs in a Québec manufacturing sector that has been buffeted by the climb in value of the Canadian dollar.

Bombardier is a storied company in the province of Québec with its genesis in the “ski-doo” snowmobile invented by the namesake founder of the firm. In the airplane market, the company has enjoyed tremendous success in selling regional jets. But now customers want slightly larger planes and ones that cut down on noise pollution and fuel usage. It remains to be seen what will be the reactions of Boeing and Airbus, as well as Bombardier’s chief competitor to date in the smaller plane market, Embraer Inc. of Brazil. Canada is said to have the fourth largest aerospace industry in the world.

For the impacts on Canada’s construction forecasts (including industrial markets), see the Market Insights story dated July 21st.

This entry is partly based on material appearing the The Economist magazine (July 19 08) and the The Globe & Mail newspaper (July 14 08).

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News.

» View all comments (0 total comments)

Post Your Own Comments 

» Not a member? Register now to become one. Otherwise, login to post your comments on this article.

11/20 - Labor Markets in a Recession − Production Workers to Take a Pasting

11/17 - The Most Serious Letter in the Alphabet

11/14 - Canada’s Construction Starts have Underperformed in 2008

11/11 - What President-elect Barack Obama will mean for Canada

11/10 - The Wise Old Rooster

» Back to Alex's Blog