The first stake into the heart of America’s strength in commercial jet technology and global military strength was placed by the PM of Canada, Justin Trudeau. Prior to the USA look-alike Progressive regime of 2016, Canada was an integral part of the economic and security of North America.
America and Canada were viewed as identical governmental twins. The US openly gave technology via outsourcing manufacturing contracts to Canada.
Take the example of Space Systems Loral was a premier Silicon Valley designer, manufacturer, and integrator of reliable communications satellites and satellite systems for an international roster of commercial and government customers. SSL’s assisted the US Government with classified satellite designs and launches. In addition, the company “provided the U.S. Government with a variety of instruments including antennas on the Voyager spacecraft and a ranging system on the GRACE satellites. SSL’s commercial platform has also been leveraged for numerous unique applications, such as GOES Weather satellites, Air Traffic Control in Japan, and a propulsion system for NASA’s Lunar Atmosphere and Dust Environment Explorer (LADEE).” On June 26, 2012 SSL was acquired for $875 million dollar by the Canadian aerospace firm MacDonald Dettwiler and Associates (MDA) with the approval of the US Government. The Canadian military fought bravely in Afghanistan shoulder to shoulder with American troops. Prior to the manufacturing being outsourced to Canada, SSL’s competitors were Boeing Satellite Systems, Lockheed Martin, Thales Alenia Space (French), Airbus Defense and Space (French) and JSC Information Satellite Systems (i.e.NPO PM-Russian). Over 20 major American companies have moved their operations to Canada as the corporate tax rate is only 15%, however the effective corporate tax rate in Ontario is 26.5%. -to name a few US companies -- GMC, Ford, Pratt-Whitney, Valero, Advanced Micro Devices, etc. Now, Canadian progressive socialist policy is geared towards a focus that America is no longer a partner but a competitor. This clearly is seen with the $20 billion plus to bail-out Ontario based Bombardier Inc. (Bombardier) a job-creation manufacturer of transportation equipment. The Company carries out aerospace manufacturing through its second business segment Bombardier Aerospace (BA) and Lear Jet. With a workforce of 70,900, the French Canadian company has seen its profit margins slip into the red from -13.49% to -29.39%. Bombardier needs bail-out monies from the Quebec Government to rescue its sinking stock price. On February 22, 2016, financial analyst Mourad Haroutunian, announced that “On Wednesday, the struggling company, which is more than two years late and about CA$2.0 billion over budget with its “C Series commercial jets,” announced that it was laying off some 7,000 of its workers, including nearly 3,000 in Canada.” The Federal Government under the Trudeau progressives have already given Bombardier more than a CA$1.0 billion but the French speaking managers want more. The usual argument of “too big to fail” that was used by President Obama to bail out General Motors is the same rational for more Canadian Federal bail-out funds. Bombardier does not have innovative technology to save, but only 70,000 plus employees who need jobs. After political pressure,Air Canada (TSE:AC), said it would buy up to 45 of the Bombardier C Series jets with an option for 30 more. The entire deal is valued at $3.7 billion and an additional $2.5 billion for the extra 30. If the company continues to burn cash flow and unable to pay its debt obligations, stock trader speculation is that the Airbus Group would buy Bombardier. (it would make sense as both parties speak French and adhere to the French approach to competing with America’s Boeing and Lockheed Martin.)
In January 2016, United Airlines announced that it would order 40 Boeing 737-700 jets instead of the Bombardier C-Series. However, the Trudeau government driven Air Canada sale is seen by critics of the deal as not a “real sale” that would affect the sinking fortunes of Bombardier. The market validation of Bombardier was affected only by few points. For 2016, the company is projecting to generate between $16.5 billion and $17.5 billion in revenues, but that applies to all its business segments. For its commercial aircraft manufacturing will show a negative “EBIT of approximately $550 million, mainly due to the dilutive impact of the initial years of production of the C Series aircraft program.” The C Series is optimized for the 100- to 150-seat market segment.
The Bombardier commercial aircraft market forecast from 2015-2034 painted a rosy picture:
- World 60- to 150-seat fleet forecasted to grow to 15,000 units by 2034 with revenues of $48 Billion USD.
- Annual 60- to 150-seat revenues to grow to $48B IN 2034
- Regional Carriers will continue to up-gauge to 60- to 100-seat aircraft
- A broad renewal and growth of the 100- to 150-seat fleet is forecasted
The C Series really has a competitive advantage in price compared to its global competitors, but it has a high risk of ownership of obsolescence and maintenance. Bombardier’s C Series 100- to 150-seat family of aircraft (The CS100) offers operators potential savings of between USD$ 7.5 to 12 million per aircraft. The power plant is a Pratt & Whitney (US United Technologies) PurePower® PW1500G engine.
On the other hand, Boeing’s 737-700 (100-150 seats category, but max seats are 126) and 737 Max7 (140 seats) family of aircraft. Price is $70.9 Million but can fly 1,337 nautical miles farther at 3,440 nautical miles. Electronic engine control is the key feature of the improved propulsion control system (PCS) on all next-generation 737 airplanes. Installed on 737-700 (100-150 seats) is the CFM56-7 engines. Boeing and CFMI designed the next-generation 737s with a propulsion control system (PCS) that maximizes engine efficiency and operability. The PCS design of 737-600/-700/-800/-900 airplanes is a full-authority digital-electronic engine control, or FADEC, which is significantly different than the PCS on all earlier 737 models. CFM International is a joint venture between GE Aviation, a division of General Electric of the United States and Snecma, a division of Safran of France.
It would appear that Bombardier is a nationalized airline manufacturer of the Canadian Government in the true sense as Airbus is also subsidized by the French Government.