TORONTO (AFX) - Bombardier Inc. and Brazil's Embraer are seen likely to share a large order for regional jets expected shortly from Northwest Airlines Corp.
Minneapolis-based Northwest, which is reorganizing under Chapter 11 bankruptcy protection, is expected to place the order in the next few weeks.
The nation's fourth-largest airline by traffic is not only looking to replace 105 aging DC9 aircraft, it has launched a low-cost subsidiary to handle its regional flying. The subsidiary, named Compass, received approval from the U.S. Department of Transportation last week.
The Northwest order is one of several that executives of Montreal-based Bombardier have been waiting on for most of 2006, and is urgently needed to bolster a dwindling regional jet backlog.
As of July 31, Bombardier had only 73 regional jets in its backlog -- less than a year's total production. Of those, 30 were to go to US Airways Group Inc., but that order is in limbo after pilots at its regional carrier PSA rejected proposed pay rates for the aircraft.
Other potential U.S. orders, most notably from Delta Air Lines Inc., are much further away. And while Bombardier has been successful in developing new European clients -- MyWay Airlines of Italy, which ordered 19 CRJ900s this month, is the latest -- those orders tend to be smaller with extended delivery schedules.
Despite news reports indicating that Northwest would give the nod to Embraer, whose ERJ family has been making great inroads in the U.S. airline market, industry observers say the order will be split with long-time supplier Bombardier.
The most likely scenario, observers say, is that Northwest places the larger, 100-seat ERJ190/195s at its main operation, while the smaller 70-90 seat Bombardier CRJ700/900s will be used by the new regional subsidiary.
If so, Northwest's fleet plan would be surprisingly similar to that of ACE Aviation, which also restructured its fleet as it emerged from bankruptcy protection in 2004.
The Bombardier CRJs are considered more cost-efficient than the ERJs at that size range, a key consideration for a carrier struggling to get out of bankruptcy.
Additionally, the existence of 126 small CRJs in Northwest's fleet gives credence to analyst expectations that Bombardier will get part of the order. They say a main factor in keeping operating costs low is having the fleet's aircraft of the same or similar models. Northwest's existing regional airline partners -- such as Pinnacle Airlines Corp. -- fly CRJs, so it's most likely that Compass will too.
Moreover, they note, Bombardier holds a deposit from Northwest for 13 CRJ aircraft that were removed from the backlog when the airline filed for bankruptcy protection. Those monies may be forfeited if the new order goes to Embraer.
Spokesmen for Bombardier and Northwest declined to comment on the deposit.
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