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Bombardier Shelves Next Generation C-Series Aircraft January 31, 2006

Posted by Andrew in Uncategorized.
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Canada’s Bombardier Inc. announced today that it has stopped development of it’s newest commercial aircraft, the C-Series. Attributing the canceling of the program to weak demand and poor market conditions, Bombardier’s board voted to kill the $2.1 billion program. Backed by Canadian and British governments, Bombardier hoped to develop a long-range aircraft that could seat between 110 and 130 passengers. Pierre Beaudoin, president and chief operating officer of Bombardier Aerospace, said that the aerospace manufacturer would “now concurrently continue to explore the CSeries’ potential as well as pursue opportunities in the regional aircraft market.” Only Northwest Airlines, currently in Chapter 11 bankruptcy protection, had signaled interest; however, the carrier had no firm orders. Even so, within the last few years, Bombardier’s Aerospace division has reached a crossroads. With many carriers parking their fifty-seat regional jets due to high fuel costs, the manufacturer can no longer reap profits from the once prosperous regional jet market. At the same time, Bombardier’s main competitor, Embraer, has introduced a new family of regional jets, that seat between 70 and 110 passengers. Despite their recent introduction, these airplanes have earned high regard from both passengers and their operators. Without any direct competition in this market, Embraer is poised to profit tremendously from this rapidly burgeoning portion of the market. Ironically, Bombardier’s saving grace may be their turboprop division. Often maligned as loud and slow, within the last few years Bombardier has developed a turboprop aircraft that rivals jets in speed and matches them in comfort. Dubbed the Q400, the aircraft seats upwards of seventy passengers and can fly over one thousand miles. Although currently in operation with only a few carriers, the Q400 is competitive with regional jets on legs of up to 500 miles in terms of time, and burns nearly half the fuel. In an era of high jet fuel costs, those cost savings are tremendous. A half decade ago, the fortunes of Bombardier and Embraer were reversed. Facing lagging sales in its turboprop market and fierce competition in the fifty-seat regional jet market, Embraer took a huge gamble and launched the Embraer 170 family with a clean slate design. Bombardier will undoubtedly try the same eventually, even though some touted the C-series as Bombardier’s means to ascend to the top of the regional jet market. Today, though, Bombardier’s management gave a vote of no confidence in the program, choosing to bide their time before firmly committing to a capital intensive endeavor.

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Virgin America Moves Closer to Launch January 20, 2006

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Media mogul and CEO of Virgin Atlantic Airways Richard Branson has moved one step closer to receiving Federal Aviation Administration (FAA) approval for the launch of his newest low-fare airline, Virgin America. Playing off of the success of popular transatlantic carrier Virgin Atlantic, Branson plans to launch an airline that will “unite Virgin’s world renowned customer-focus… to create an airline that offers more- more options, more comfort, more entertainment.” Due to federal regulations requiring those who hold a majority ownership to be US citizens, Branson will not be a full time member of the airline’s board. Although the upstart airline has been quiet about the routes it plans to serve, it is believed that the airline will be based in the San Francisco area and will operate Airbus A320 aircraft. Some sources believe that Virgin America will be a near copy of Jetblue Airways, but with a chic British personality. Either way, the entry of Virgin America into the highly competitive US domestic market bodes badly for other carriers. Even with the recent shutdown of Washington D.C based Independence Air, another airlines entry into the market will erode the revenue of current players in the market. With some legacy carriers turning the corner financially in the past few months, Virgin America’s entry will benefit the customer, but at the same time may force several more carriers into bankruptcy.
Additional Source: Virginamerica.com

Northwest Pilots Vote to Freeze Pensions January 12, 2006

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Photo: Aeroposte Editor

Concerned with the tenuous financial condition of bankrupt legacy carrier Northwest Airlines, the airline’s five thousand pilots overwhelmingly voted to approve a freeze of their pension plan today. Eighty-two percent of Northwest’s pilots, represented by the Air Line Pilots Association (ALPA) backed an immediate freeze of the program. The latest agreement allows Northwest management to begin transitioning from the current pension plan to a more cost effective one, in which “pilots and the company will contribute a portion of their salary to a retirement account, with no promise for a fixed payout.” Although the latest agreement is a positive step for the ailing carrier, further agreements must be forged between Northwest and the unions representing the airline’s flight attendants and ground personnel. If an impasse remains by January 17, the carrier will ask the bankruptcy court to reject all unfavorable union contracts. In retaliation, the various unions have threatened to strike if their contracts are rejected by the bankruptcy court.

Independence Air to Cease Operations this Thursday January 2, 2006

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Ferocious competition and high fuel-costs claimed another American airline today. Low-fare carrier Independence Air (Flyi), which operated as a regional feeder for United Airlines before abandoning the legacy carrier, published a press release outlining its shutdown in the coming weeks. All operations will cease by Friday, December 6, and all airline employees will be terminated Thursday evening. Customers with future flights after the shutdown may rebook with Independence Air free of charge if they plan to return before the airline shuts down. Otherwise, passengers are encouraged to look to other airlines, as congressional law requires other domestic carriers to accommodate stranded passengers. Although Independence Air’s business plan was tragically flawed, for a span of a year and a half, the crafty carrier dramatically lowered ticket prices across the nation. In particular, those in the Washington D.C area benefited, as Flyi operated its central hub at Washington Dulles, in direct competition with legacy carrier United Airline’s hub there as well. Passengers should be prepared for dramatic airfare hikes to all destinations Independence Air served, but in particular smaller regions like Burlington, Vermont or White Plains, New York.