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An uncertain global economy and a deep sense of caution among aircraft buyers may result in Bombardier Inc. (BBD.B-T) missing sales targets for its new C-Series regional jet, an analyst said on Thursday.
Bombardier, the world's third biggest commercial airplane maker, may not meet its target of selling 300 of the narrow-body, 110- to 135-seat aircraft by the time they enter service late in 2013, RBC Capital Markets analyst Walter Spracklin said.
"While we were encouraged by the interest the airlines demonstrated in the C-Series, there was certainly a lack of urgency to place significant new orders," Spracklin said in a note to clients.
"Combine this with the emerging macro headwinds, we believe airlines are more inclined to delay their renewal programs," he said after conducting a survey of 26 potential C-Series customers.
The 26 possible customers represent an estimated 35 percent of the 100- to 149-seater aircraft market in operation globally today, Spracklin said.
Bombardier's stock has been pressured recently by news that Delta Air Lines (DAL-N), a potential major customer, was no longer in the market to buy more planes.
Meanwhile, Pratt & Whitney, the makers of an all-new turbofan engine for the C-Series, said the engine had "operated flawlessly" during its first flight test program, allowing tests scheduled for 2012 to be carried out early.
"Results confirmed our earlier sea level test findings validating the geared turbofan's overall engine design," said Bob Saia, vice-president of next generation product at Pratt & Whitney, a unit of United Technologies Corp (UTX-N).
The C-Series is at the center of Montreal-based Bombardier's ambitious $3-billion plan to build its biggest regional commercial aircraft yet, at a time when the market for smaller planes is shrinking. The fuel-efficient C-Series will compete with the smaller aircraft from industry giants Boeing Co (BA-N) and Airbus.
Despite promises that the C-Series' operating costs will be 15-percent lower than those of similar aircraft, potential buyers are edgy about a new, untested plane that is different from their existing fleets, RBC analyst Spracklin said.
"Overwhelmingly, the costs and complexity associated with introducing a new aircraft type into their fleet was the number one hurdle facing their decision to purchase C-Series," he said.
Orders for the C-Series, which now total 133, are likely to remain small, around the 10-aircraft level that has characterized existing orders, Spracklin said.
Bombardier's stock is down 20 percent this year partly on concerns about C-Series sales.
Spracklin expects the stock price to remain range bound unless the macroeconomic environment improves, Bombardier is able to boost sales of its other regional jets or there is some positive demand or development news on the C-Series program.