Lufthansa deal buoys Bombardier

BERTRAND MAROTTE

Globe and Mail Update

March 11, 2009 at 11:04 AM EDT

MONTREAL Bombardier Inc. has silenced the doubters who were beginning to question the viability of its ambitious new C Series jet aircraft program.

The Montreal-based plane and train maker said Wednesday that it now has a firm purchase agreement from Deutsche Lufthansa AG its launch customer for 30 C Series in a deal valued at $1.53-billion (U.S.).

The news sent the company's up by 31 cents, or almost 12 per cent, to $2.90 in morning trading on the Toronto Stock Exchange.

Until now, Bombardier had only a letter of interest from Lufthansa for up to 60 aircraft.

Lufthansa signed the letter last July, becoming Bombardier's launch customer. A flurry of letters of interest or orders was expected to follow, but none materialized, leading many analysts and observers to wonder if the program would ever get off the ground.

The 110- to 149-seat aircraft represents a major push for Bombardier into the manufacture of larger, more mainstream planes.

The 30 aircraft ordered by Lufthansa will be operated by its subsidiary, Swiss International Air Lines Ltd.

Lufthansa also agreed to options on an additional 30 C Series aircraft.

Having Lufthansa known throughout the airline industry for its stringent engineering and technical standards sign this purchase agreement for our C Series aircraft, confirms their confidence in the airplane and the future of the program, Gary Scott, president of Bombardier Commercial Aircraft, said in a statement.

The C Series family of jets is scheduled to enter service in 2013.

The jet program will benefit from generous funding from the Canadian, Quebec and British governments.

The firm order from Lufthansa is a big boost for Bombardier, which faces a slump in its corporate-jet division due to the global economic downturn.

Analyst Benoît Poirier of Desjardins Securities said the news was a positive development. He rated the stock as a buy and estimated a one-year target price of $6.50.

We view this news as a positive, especially since it was announced yesterday that Qatar Airways had ended talks with Bombardier concerning a potential order.


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