Bombardier Near Deal to Sell Up to 125 Jetliners to Delta

Delta Air Lines Inc. is in the final stages of completing a deal to acquire up to 125 Bombardier Inc. CSeries jetliners in what would be a major victory for the struggling Canadian plane maker, according to three people familiar with the negotiations.

A final agreement for 75 firm orders and options for 50 more is expected by the end of April, when the carrier's board meets to review the proposed deal, the people said.

Delta, which released its first-quarter earnings Thursday, is seeking to replace its aging fleet of single-aisle McDonnell Douglas MD-88 jets, as it moves to fly some domestic routes with larger jets.

A Delta spokesman said no final decision has been made. A Bombardier spokeswoman said it is in discussions with a number of airlines, and it will disclose deals as they are completed.

The proposed deal would also represent the single largest order by number of aircraft in 2016. The deal would be worth anywhere between $5.3 billion and $6.2 billion, depending on the mix of aircraft purchased, based on list price. A deal of this magnitude would, however, carry steep price discounts.

A sale would make Delta the largest customer by far for the Canadian jet, providing it a significant stake in the future of the program. Delta is a shrewd buyer of aircraft and a deal would be a potentially a major boost to Bombardier that fortifies the Canadian plane maker's credibility in its global challenge to Airbus Group SE and Boeing Co., currently the only manufacturers of large, single-aisle jets.

The airline has a history of upsetting established jet makers and providing new entrants a foothold into its fleet. The carrier's Northwest Airlines predecessor was the first U.S. airline to purchase Airbus A320 aircraft in 1986.

Ed Bastian, Delta's incoming chief executive, said Thursday that the company's 2016 capital expenditure guidance remains unchanged. He said Delta is focusing on a five-year domestic fleet renewal because "the MD-88s do need to retire and we have roughly 115 of them current." He said he hoped to have more information when the company holds an investor meeting in New York on May 16.

Bombardier's foray into the market for single-aisle jets with 100 to 160 seats has left it with a heavy debt load after repeated delays and technical setbacks. The aircraft will enter service with Swiss International Air Lines in June, roughly 2½ years after Bombardier first intended.

In February, Bombardier cut nearly 10% of its global workforce and reported a fourth-quarter loss of $677 million. Still, the plane maker has said that it had enough cash over the next tree years to ramp up production of the CSeries, benefiting from a total of $2.5 billion it has raised since October after agreeing to sell almost half its stake in the CSeries jet program to the government of Quebec, Bombardier's home province, and selling a stake of its train manufacturing business to a big Quebec pension fund.

Under its new management, Bombardier has sought well-established airlines to buy its CSeries in a bid to generate commercial momentum. The plane maker, however, has suffered recent setbacks as United Continental Holdings Inc. this year ordered current-generation Boeing 737s.

After about 17 months without a new order, the potential Delta deal would be Bombardier's second major CSeries sale agreement since February with a flagship North American carrier. That month, Air Canada, Canada's biggest airline, agreed to buy as many as 75 of the aircraft. The firm order, for 45 planes, could be worth about $3.8 billion at list prices. Including options for an additional 30 jets, the deal would be valued at about $6.4 billion, Bombardier said, before any discounts.

Bombardier earlier this week added seven more CS300 jets for Latvian airline Air Baltic, giving it a backlog of 250 firm orders.

Ben Dummett and Susan Carey contributed to this article.

Write to Jon Ostrower at [e-mail] and Jacquie McNish at [e-mail]

(END) Dow Jones Newswires

April 14, 2016 17:55 ET (21:55 GMT)

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