MONTREAL - A chorus of skeptics were silenced Wednesday after Bombardier Inc. (TSX:BBD.B) confirmed the production of its CSeries jet when Deutsche Lufthansa AG placed a firm order for 30 aircraft.
The order for the 110-seat model, which follows a letter of intent signed last July, would have a total list price of US$1.53 billion, although Bombardier Aerospace didn't disclose the selling price.
"Obviously they (Lufthansa) have a big belief in Bombardier and the world pays attention to them," Bombardier commercial aircraft president Gary Scott said in an interview.
He added that as one of the first customers for the CSeries planes "they got a very good deal, but that goes along with the risk of being the launch customer and the demands we will place on them to help us."
Scott said Bombardier expects other customer announcements this year, with momentum building as the CSeries gets closer to delivery. The new plane could replace some 5,000 older aircraft that are flying today.
In addition to the 30 firm orders, Lufthansa has also taken options on another 30 CSeries planes.
The announcement propelled Bombardier's stock to surge by more than 10 per cent early in the day before closing up 4.6 per cent. Its class B shares increased 12 cents to $2.71 with above-average volume at the Toronto Stock Exchange. The stock remains at the low end of its 52-week trading range, which is from $2.22 to $8.97.
Scott said Bombardier is confident it will be able to deliver the planes in the second half of 2013.
The order comes as some analysts had feared that a lack of interest would force Bombardier to shelve the new aircraft for a second time.
But Scott said Bombardier, the world's third-largest aircraft manufacturer, is steadfast in its commitment for the CSeries, even as the attention of some potential buyers has been diverted by mergers and a slowing economy.
Among those Bombardier had hoped to secure as a customer was Northwest Airlines, which was consumed by its merger with Delta Airlines.
Despite a dramatic drop in fuel prices, the plane is expected to be attractive once fuel increases with an economic recovery, said Scott.
Aviation analyst Jacques Kavafian of Research Capital said the Lufthansa order is significant, even if it wasn't for the CSeries.
"There were a lot of skeptics out there thinking that Bombardier might kill the CSeries so this puts to rest all that talk," he said in an interview.
While the market is currently not conducive to placing orders, clients will change their minds when the economy picks up, he said.
"Nobody's got any sales, so I think Bombardier outsold everybody this year with this order," Kavafian added.
David Newman of National Bank Financial said he expects orders will eventually come from the Middle East and China, which is supplying the centre fuselage.
Alaska Airlines along with customers in south east Asia, Australia and New Zealand could also benefit from the plane's range.
"There continues to be reports of an unnamed lessor (not believed to be GE given the Pratt & Whitney engines) negotiating for about 20 units," he wrote.
Development of the CSeries is expected to cost $3.3 billion, which will be shared among Bombardier, suppliers and government.
The Canadian government has pledged $350 million, Quebec $118 million and 155 million pounds from Northern Ireland.
The aircraft will be operated by Lufthansa subsidiary Swiss International Air Lines Ltd. They will replace its fleet of 97-seat Avro RJ100s that service European destinations.
"Our purchase agreement with Bombardier for CSeries aircraft is a renewal of Lufthansa's commitment to commercial success balanced by environmental and business policies oriented toward sustainability and passenger comfort," Nico Buchholz, Lufthansa's senior vice-president for corporate fleets, said in a release.
As a result of Lufthansa's order, Bombardier placed firm orders for Pratt & Whitney engines that will power the CSeries. Final assembly will be completed at a plant to be built in Mirabel, north of Montreal, employing more than 3,500 people.
