Can You Trust an Aircraft Manufacturer?
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We tend to be pretty annoyed when an airline delays our flight. Anywhere from the minor inconvenience of a half hour delay to the major interruption of a five hour delay can leave passengers ticked at their air travel experience. But while airlines delay flights for various reasons, they themselves have been experiencing delays in recent years that have impacted the composition of their fleet of aircraft.
Dreams of Dreamliners
Boeing (NYSE: BA) made quite a promise to airlines worldwide: they would build a plane that produced less noise, created a better passenger experience, and would be more economical to run thanks to a 20 percent reduction in fuel consumption. With all of these benefits in mind, airlines began to line up to place orders for the 787 Dreamliner. Everyone was excited. The airlines could fly better planes that cost less to operate, and Boeing could call their 787 program a success.
Yet, the Dreamliner did not take off a smoothly as everyone hoped it would. Years of delays, partially caused by Boeing’s strategy of having outside groups build large sections of the plane, reminded airlines that, like their passengers, they cannot expect everything to be on time.
Buses in the air
While Boeing was focusing on the 200-290 seat aircraft segment with its 787, Airbus, a subsidiary of European Aeronautic Defense and Space Company (NASDAQOTH: EADSY.PK), was busy constructing an airliner that would take the Boeing 747’s place as the largest ever flown. The A380 would hold over 500 passengers in two full decks and was already seeing orders from airlines (and one very rich Saudi prince who later sold his private jet) to fly on long distance routes.
But the A380 was not going to arrive at the gate on time either. Delays were blamed on the A380’s lengthy wiring system and deliveries for the first few years were cut to reflect production delays.
One more time
Boeing and Airbus have long dominated the airliner market with the exception of regional jets. But Canadian transportation company, Bombardier (TSX: BBD.A) (TSX: BBD.B) is making a move on the narrowbody segment of airliners with its new C Series aircraft. The C Series has many of the same selling points as the Dreamliner (improved fuel economy, better passenger comfort, less noise) but fits into the 110-160 passenger segment. Before the plane has taken its maiden flight, Bombardier already has orders for more than half its 2014 target.
Followers of the C Series progress will note that the maiden flight was supposed to have happened by now anyway. What was going to be a Nov. 2012 flight is now scheduled for the last week of June. Bombardier’s executives continue to say the C Series is on track for this flight, and with the date so close, it appears Bombardier may actually be able to do it.
The latest aircraft developed by Boeing, Airbus, and Bombardier have all promised tangible benefits when compared to existing aircraft. However, repeated delays at all three companies have caused airlines to lose trust in aircraft manufacturers. Bloomberg quoted a senior VP of Bombardier’s commercial aircraft division as saying “There is no faith, trust or belief in anything an airframe maker says today because of the program performance,” to reflect this trust deficit surrounding aircraft manufacturers. Will airlines continue buying planes? Well, it’s really not an option for them, and with only a few main manufacturers airlines also have limited choice in the matter. But some have speculated that these continual delays will lead to airlines delaying their orders. And in the end everyone may just experience more delays.
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Alexander MacLennan owns shares of Bombardier. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!