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Aviation boss's billion dollar bet

updated 2:29 PM EDT, Thu July 12, 2012
STORY HIGHLIGHTS
  • Aviation company Bombardier is investing around $3.5 billion in 100 to 150-seater aircraft
  • Canadian group will compete with well-established rivals Boeing and Airbus
  • Ambitious plan comes against the backdrop of eurozone financial crisis
  • Bombardier CEO Guy Hachey says it is a "major bet for the corporation"

(CNN) -- Canadian aviation company Bombardier is taking a "major bet" on the notoriously cut-throat passenger plane market, spending around $3.5 billion to compete with well-established rivals Boeing and Airbus, its chief executive Guy Hachey says.

The money will be invested in Bombardier's new C Series aircraft, which has the capacity to seat 100 to 150 passengers.

Bombardier faces obstacles, including the dominance of its competitors in the market and the eurozone financial crisis, which has hit the aviation industry hard. But the company is in a strong position to target a market that has been "under-served" by the major players, Hachey said.

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"So far, we've been serving customers up to about 100 seats, more in the regional segment. Now we're cracking into more of the mainline segment. We're investing about $3.5 billion -- for the size of our company that is a very significant investment," he told CNN.

"If you look at our company we have two groups -- a group of about $10 billion on the rail side and $10 billion in aerospace. But it is a major bet for the corporation."

Cutting edge design

Hachey said Bombardier's competitive edge lies in the design of its planes. Until now, this market had largely been served by the Airbus A320 and Boeing 737.

However these smaller versions of planes -- called "shrinks" --- were also much heavier.

The other option was Brazilian company Embraer's E-195 -- known as a "stretch" -- but it cannot fly as far in one go.

In comparison, Hachey said Bombardier's C Series will deliver an "optimized product" built specifically for the 100 to 150-seat market. On its website the company says its aircraft will be lighter and more fuel efficient, yet provide a "best-in-class, wide-body cabin environment."

Taking on the major players

Bombardier's ambitions -- even with this new approach to design -- are high, given the long history of Airbus and Boeing in these markets.

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Founded in 1942, Bombardier is a relatively new kid on the aviation block. The company expanded from trains to planes in the 1980s and is now the third largest aircraft manufacturer.

Its aerospace division now employs 33,600 people, with an annual turnover of £8.6 billion. According to Hachey, the company now has the scale to take such challenges.

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Hachey is hoping to capitalize on demand for around 7,000 aircraft in the 100 to 150-seat segment over the next 20 years. So far Bombardier has secured 330 commitments and 138 firm orders for its new aircraft.

Hachey, who worked in the automotive industry for 30 years before moving to planes, said: "We feel very comfortable with the level of production we have going forwards, so we are very happy with our position."

Beyond Europe

As European markets continue to take a battering, Hachey says Bombardier will be expanding its focus elsewhere. In the past year the company has doubled its sales force in emerging countries, with a renewed push in the U.S.

We've been very strong in Europe so we are feeling the impact of the economic uncertainty
Guy Hachey, Bombardier CEO

"In Europe typically things have been slower than usual, and this is a fortress market for us. We've been very strong in Europe so we are feeling the impact of the economic uncertainty," Hachey noted.

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"The good thing is the rest of the world is not necessarily in the same shape. If you look at emerging countries we've been doing very well," he said.

"We're focusing elsewhere. The U.S. has also been picking up which is a very, very important market for us."

Sheena McKenzie contributed to this report

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