Bombardier shares drop to 22-year low on new jet delays
Bombardier's stock hit a new 22-year low on Friday amid reports that its new Global 7000-8000 business jet may be delayed and initial concerns that a major Chinese airline turned to Boeing instead of the Montreal-based company's CSeries.
The shares hit a low of $1.84 in early trading but were down 2.5 per cent, or five cents, to $1.95 in later trading on the Toronto Stock Exchange.
That followed a more than 10 per cent dip on Thursday.
The last time Bombardier's shares plunged so low was in 1993.
Program 'under review'
Thursday's selloff followed a Bloomberg report that cited a company official who said the Global program was under ``a full review,'' including the schedule for deliveries.
Analyst David Tyerman of Canaccord Genuity says such a delay should not come as a surprise given that Bombardier hasn't provided an update on the development of the Global 7000 and 8000, including the date for first flight.
He says he's assuming the plane will be two years late and delivered in 2018-19.
Tyerman also says investors might have some concern about the impact of economic problems in China and Greece. Asia Pacific and Europe are two big areas of business for Bombardier's rail and aerospace divisions.
The rail business is largely dependent on orders from government. In aerospace, the regions account for about 18 per cent of the $20 billion in annual revenues.
CSeries orders sluggish
Bombardier could also be taking a hit from the lack of CSeries orders.
China Eastern Airlines announced it is buying 50 Boeing 737 aircraft for its budget subsidiary, China United Airlines.
Boeing said the order is for planes with 160 to 189 seats, larger than the CSeries. However, the order from China's third-largest airline will reportedly also include upgraded Max variants.
Walter Spracklin of RBC Capital Markets initially issued a report suggesting the order could include the 737Max-7, which holds 125 seats and would be a direct competitor to the CSeries.
He later amended it to reflect the larger plane size.
"While the 737-800 is not a direct competitor to the CSeries, the order from China Eastern...does likely reduce the probability of a CSeries order from China Eastern in the near term,'' he wrote in a report.