What does US Airways know that I don't?

Well, the orders have been announced. However one concept that I fail to grasp is how splitting the order makes business sense to US Airways? I would assume that splitting the order means that they now have to spend twice as much for training, maintenence etc…. One thing not mentioned in this article is that GE has been chosen as the sole engine supplier for both Embraer and Bombardier jets however I still don’t think that saves US Airways as much money as chosing only one company to supply them with RJs could have. Does anyone have any thoughts about this?

Bombardier lands major contract

By TERRY WEBER
Globe and Mail Update

Bombardier Inc. said Monday it has struck a deal with Arlington, Va.-based US Airways Group Inc. for the sale of as many as 275 regional aircraft with a potential value of $10.4-billion.

The agreement is part of a bigger pact, which will see Bombardier Aerospace split a massive order with Brazilian rival Embraer SA.

Together, the two will fill a record order from the U.S. carrier, which is working to bolster its business recovery plan after emerging from bankruptcy protection earlier this year.

Under the transaction, Bombardier has received a firm order for 85 aircraft worth $3.3-billion.

The agreement also calls for 90 so-called reconfirmable orders — orders with a scheduled delivery date but also give the buyer the right to formally cancel — and 100 options, which can be exercised for a mix of Bombardier models.

Deliveries are scheduled to begin in the fourth quarter and continue through to the second quarter of 2005.

The firm order for 85 regional jets includes the transfer of 36 Bombardier firm orders from GE Capital Aviation Services to US Airways. That means Bombardier’s current order backlog will increase by a total of 49 jets.

The combined value of the deal — including all orders and options — could go as high as $10.4-billion, Bombardier said.

Bombardier’s class B shares were up 3.4 per cent or 13 cents to $3.93 in early afternoon trading in Toronto.

The joint pact marks an unusual joint effort for Bombardier and Embraer, which have been battling for years with each accusing the other of unfair trade practices and receiving unfair support from their respective governments.

“This commitment by US Airways is a clear indication that the regional jet revolution is continuing,” Steven Ridofli, president of Bombardier’s regional jet unit, said in a statement.

Under Bombardier’s portion of the agreement, US Airways has firm orders for 60 CRJ Series 200, 50-seat single-class aircraft, and 25 CRJ Series 700, 75-seat dual-class aircraft.

The 50-seat order for the CRJ Series 200 aircraft is scheduled to be delivered beginning in October, 2003 to US Airways Express subsidiary, PSA Airlines.

All firm order CRJ aircraft will be delivered by April, 2005.

As well, US Airways also has placed firm orders for 85 Embraer 170, 70-seat, dual class aircraft, with the first delivery scheduled for November, 2003 to MidAtlantic Airways, a regional jet division of US Airways, Inc. US Airways also has the option to convert the Embraer 170s to Embraer 175s with 76 seats. All Embraer 170 deliveries are to be received by September, 2006, US Airways said in a statement.

US Airways described Monday’s announcement as “another key element” of its business recovery plan.

US Airways emerged from bankruptcy March 31 and announced it was planning a “significant” regional jet fleet purchase.

“These new regional jets will enable US Airways to generate additional revenue by growing our route network and competing more vigorously in short to medium length haul markets,” US Airways president and chief executive David Siegel said.

Monday’s announcement also follows reports last week that Bombardier is warning its unionized employees at aerospace facilities in the Montreal area it may have to lay off thousands of workers unless they agree to major concessions.

Hammered by the prolonged slowdown in the aviation sector, Bombardier announced earlier this year that it was laying off 3,000 workers at its aerospace plants, with 1,200 coming from its operations in Belfast and the remaining 1,800 taking place in Toronto and Montreal.