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Bombardier to cut regional jet production

Tags: Bombardier

Bombardier Inc. (BBD.B-T) is cutting production of its CRJ family of regional commercial jets from January as airlines delay new orders during uncertain economic times, the world's No. 3 civil aircraft maker said on Tuesday.

The company said it plans to transfer around 350 employees working on the 60- to 99 seat jets to other programs, and will not cut jobs.

"The changes to our production rates reflect the current economic conditions and a slowdown in CRJ orders," said Bombardier spokesman John Arnone.

Bombardier still plans to deliver around 90 of the jets in 2011, as forecast. It said it will offer 2012 forecasts after its fiscal year ends on Jan. 31, 2012.

The Montreal-based company, which also makes trains, warned in August that the production cuts were likely if CRJ orders did not pickup.

"It reflects a general uncertainty in the airline business as to which direction the economies are going -- not just in Canada and the U.S., but indeed, globally," said independent airline analyst Robert Kokonis.

Bombardier's aerospace division also produces business jets and commercial turbo-prop planes. It is working on the C-Series, a new entry in the 100- to 149-seat long-range jet category, dominated by Airbus and Boeing (BA-N), which is expected to hit the market in 2013.

Bombardier's top competition in the regional jet space is Brazil's Embraer. But Mitsubishi has a new jet slated to begin flying next year, and Russian and Chinese companies also have new planes in the works.

"The regional aircraft side of the business has become a smaller as a proportion of the overall business than it once was, and it's probably even a smaller proportion of the profitability of the company," said analyst David Tyerman.

He said most analysts had already factored a CRJ production cut into their forecasts.

Bombardier's Arnone said the long-term prospects for the planes were strong.

Tyerman agreed with the long-term outlook, as did CIBC World Markets analyst Michael Willemse.

"Given ultimate replacement needs at Bombardier's traditional customer base, we expect commercial aircraft shipments at BA to eventually rebound back to the 90-100 level over the next few years," Willemse said in a note to clients.
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