Horizon Air seeks to delay deliveries of Bombardier Q400s

By Ross Marowits, The Canadian Press

MONTREAL - The economic slowdown hit Bombardier Aerospace's (TSX: BBD-B.TO) regional aircraft business after its largest North American Q400 customer said it wants to delay the delivery of the turboprops.

Horizon Air, which operates the world's second-largest fleet of Q400s, said Tuesday that it was in talks with Bombardier to delay delivery of eight aircraft because it needs more time to unload its less fuel-efficient jets.

The Seattle-based airline placed a firm order for 15 of the aircraft last year for a total list price of US$393 million. It also has unexercised options for 20 more planes.

But in a regulatory filing Tuesday, the airline said it was in talks with the Montreal-based aircraft manufacturer about delaying the delivery of the aircraft until 2010 and beyond.

The sister airline to Alaska Airways wants to operate an all-Q400 fleet after it sells its less fuel-efficient regional jets and smaller turboprops.

"We had hoped the CRJ700s would be remarketed sooner than they were and we're just trying to be smart with our finances and not take on more assets than we can put to work so we're just spreading it out," Horizon spokeswoman Jen Boyer said.

The airline has already sold two of its fleet of 20 CRJ700s and all of its Q200 planes.

Unloading the planes was hampered during the late summer by rising fuel prices, although interest has increased as fuel continues to become cheaper.

"We're getting buyers now, but we're just being conservative," said Boyer.

As of Sept. 30, Horizon had a fleet of 63 Bombardier planes, including 34 Q400, nine Q200 and 20 CRJ700 aircraft. It sold its 50-seater Q200s in October and wants to ultimately reduce its fleet to 46 Q400s.

The revised delivery schedule would see Horizon, which has already received the first aircraft in the order, take delivery of another Q400 in the fourth quarter, down from three originally planned.

Five would be delivered in 2009, down from 11, five in 2010 and three thereafter.

The deferral indicates Horizon is having trouble reselling its CRJ700s, Desjardins Securities analyst Benoit Poirier wrote in a report.

"We view the Horizon announcement negatively; it shows that Bombardier is not insulated from the current economic downturn and the difficulties plaguing airlines around the world," he said.

Poirier added he remains confident that Bombardier will be able to reshuffle the 113 Q400 backlog and deliver the planes to another airline.

"We do not believe that the company will have to modify its turboprop production rate in the near future."

Bombardier declined to comment on confidential discussions with clients, but said it has no confirmed aircraft deferrals.

"Bombardier's commercial aircraft order book remains strong yet we acknowledge there are challenges facing the industry," spokesman John Arnone said from Toronto.

"Airlines are reviewing their fleet mix to deal with not only fuel prices, but also capacity reductions."

Meanwhile, Bombardier said that former FAA administrator Jane Garvey has resigned from its board after a year of service to join the transition team of U.S. President-elect Barack Obama.

Garvey has been among those rumoured to be named transportation secretary.

Bombardier shares lost 21 cents to close at $4.11 Tuesday on the Toronto Stock Exchange.