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Strategies & Market Trends : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: Ditchdigger who wrote (8923)	9/21/1998 9:39:00 PM
From: Sergio H	Read Replies (2) \| Respond to of 29382

DD, Nice write-up on Bombadier in this news release. Not much longer before we see the stock break to new highs.: MONTREAL, Sept 21 (Reuters) - Already the world's third-largest civil aircraft maker, Canadian aerospace and transportation equipment manufacturer Bombardier Inc. (Toronto:BBDa.TO - news) is targeting larger rivals such as Boeing Co. (NYSE:BA - news) and Airbus Industrie [ARBU.CN] with its ambitious plan to build a 90-seat passenger jet. Earlier this month, Montreal-based Bombardier surprised analysts by revealing C$2.1 billion of orders for the 50- and 70-seat versions of its Canadair Regional Jet and unveiling a bold C$1-billion initiative to build a 90-seat model. The orders boosted Bombardier's company-wide order backlog to more than C$20 billion, enough to keep its aerospace and rail-vehicle manufacturing plants operating for a full two years. Coupled with its plans to further stretch its Regional Jet, the 90-seat plan initiative also signaled Bombardier's determination to maintain and perhaps expand its roughly 50-percent share of the lucrative global market for regional jetliners. ''I don't think the market has understood the magnitude of what has taken place,'' said a Canadian analyst who declined to be identified. The analyst was referring in part to a key C$712 million order placed by the wholly-owned CityLine unit of Deutsche Lufthansa AG (quote from Yahoo! UK & Ireland: LHAG.F) on September 17 that included 10 of the 70-seat Canadair Regional Jets. The order was significant because Bombardier's German rival, Fairchild Dornier, had been looking to Frankfurt-based Lufthansa as the launch customer for its own 70-seat 728JET. The order also followed a pattern for repeat business that Bombardier is counting on to boost its revenues and profits in coming years. Lufthansa, the fourth customer for the 70-seat Regional Jet, has commitments to buy a total of 55 jet aircraft from Bombardier. At the Farnborough air show in England earlier this month, Bombardier made its expansion strategy clear by announcing it would seek partners for the C$1-billion development of a 90-seat version of its Canadair Regional Jet. The new jet would give airlines that are already Bombardier customers the option to stay with the Canadair Regional Jet family as their own operations grow and they need economical aircraft but with larger capacity. ''We know that a family of aircraft is what airlines really want, to save on maintenance and parts,'' said Amir Karim, analyst at Goldman Sachs & Co. in New York. Offering a complete line of regional jets allows Bombardier to retain its existing customers, rather than let them stray to larger rivals such as Seattle-based Boeing and Europe's Airbus consortium. At Farnborough, Boeing touted its new 100-seat 717-200 regional jetliner, while Airbus unveiled plans to produce a 100-seat A318 jet. Fairchild Dornier, which produces a 30-seat jet and turboprop aircraft, wants to build a line of jet aircraft with 50, 70, and 90 seats. That development program would cost about US$850 million. If it proceeds with its plan to build a 90-seat version of its Regional Jet, Bombardier said the first deliveries of the aircraft would be made in 2003, a full two years before Dornier is slated to deliver its 90-seat 928JET. Since the inception of its original 50-seat Regional Jet program in the late 1980s, Bombardier's aerospace division has focused on the fast-growing and profitable regional airline market niche. Regional airlines in the United States and Europe were profitable through the early 1990s when the major carriers were losing billions of dollars. Much of the regional airlines' growth has come as larger carriers shunted feeder traffic to them and focused on serving their own major airport hubs. Fuel-efficient, fast and quieter regional jets, which generally have a capacity of 30 to 90 seats, have been replacing turboprop aircraft on those shorter-haul routes. ''Some more knowledgeable observers than I have said that regional jets are not going to change regional airline operation, they are going to change the U.S. national air transportation system,'' said Walter Coleman, president of the Regional Airline Association, a Washington-based trade association. Coleman said he expects passenger traffic growth for U.S.-based regional airlines in 1998 to match its 1997 growth of seven percent. According to the European Regions Airline Association, which has 72 airline members, passenger traffic for its members grew by 13 percent in 1997, well in excess of the intra-European operations of Europe's major carriers. Goldman Sachs analyst Karim estimates that the market for regional aircraft could grow to 450 deliveries in 2002 from about 300 this year. In aggregate money terms, that could represent a doubling of industry sales from C$4.5 billion this year to C$9 billion in 2002/2003 because the new planes will be larger and more expensive. Bombardier's 90-seat jet plan will not affect the company's results for at least two years. In the meantime, barring a North American or European recession, its order backlog gives the company's revenue and earnings outlook a valued transparency. ''That kind of visibility and predictability of future revenues and earnings is something unique in the marketplace,'' said Karim. That may explain why Bombardier's share price has been less affected than other major Canadian stocks by the recent downdraft in North American stock markets. Bombardier's Class B shares were off 15 Canadian cents on Monday to C$17.90 on the Toronto Stock Exchange. The stock's 52-week high is C$22.45 versus a 52-week low of C$12.63. ($1=$1.53 Canadian)