UPDATE 2-Bombardier strikes CSeries deal with Iraqi Airways

Tue Nov 19, 2013 5:45pm EST

* Iraqi Airways signs letter of intent for 5 jets, 11 options

* Deal, including options, valued at $1.26 bln

By Susan Taylor

DUBAI/TORONTO, Nov 19 (Reuters) - Bombardier Inc said on Tuesday it has signed a letter of intent to sell five CSeries jetliners to Iraqi Airways, the first new deal since June for the aircraft, which the Canadian planemaker has spent billions developing.

Iraq's national carrier will buy five of the CS300 jets with options for 11 more. The news from the Dubai Airshow lifted Bombardier's shares modestly with investors continuing to be tentative, awaiting more closely watched "firm" orders for the new plane.

The deal, which is valued at $387 million at list prices, but swells to $1.26 billion with options, follows the first flight of the CSeries in mid-September.

The CSeries, a $3.4 billion development program that brings Bombardier into competition with the lower-capacity planes built by industry giants Boeing Co and Airbus, has suffered from several delays and sluggish demand.

Testing was slow to start, but is advancing according to plan, CSeries program director Sebastien Mullot told a Scotiabank Transportation and Aerospace Conference in Toronto on Tuesday.

Nearly 200 hours of flight and ground checks have largely confirmed that the first test aircraft is behaving as expected, Mullot said. Bombardier expects to start flying second and third test vehicles in the coming weeks and intends to run daily test flights, he added.

"As far as confirming the true performance from a take-off, landing, fuel-burn standpoint, it's something that is going to occur more in the first half of 2014," Mullot said at the conference.

As Bombardier gathers data to back up its claims for the CSeries' fuel and operating cost efficiency, there will be less need to discount prices to sell planes, Mullot said. "From now on, you should see the pricing trend going up."

Bombardier has secured 177 firm orders for the CSeries, but has repeatedly said it will reach 300 firm orders by the time the first jet is put into commercial use. Its target date for that is September 2014.

Bombardier also announced on Tuesday that low-cost Thai carrier Nok Air placed a firm order for two Q400 turboprops with options for two more planes and purchase rights for another four, a deal worth up to $258 million.

The Montreal-based plane and train maker also said that Abu Dhabi Aviation signed a letter of intent for two Q400 aircraft, worth about $70 million based on list prices.

Bombardier shares rose 3 Canadian cents, or 0.6 percent, to close at C$4.70 on the Toronto Stock Exchange on Tuesday.