Analyst: Bombardier could be hurt by delayed merger

A transportation analyst says the U.S. Justice Department’s efforts to block the merger of American Airlines and US Airways could be bad news for Bombardier’s efforts to win an order for regional jets.

Analyst Turan Quettawala of Scotia Capital says the lawsuit will likely delay a potential order for an estimated 40 aircraft that had been expected to be awarded, until there is a definitive ruling by a bankruptcy judge.

He says the government’s intervention is more negative for Bombardier than Brazilian rival Embraer because the Canadian manufacturer was viewed as the favourite since American Eagle is already a big operator of Bombardier’s CRJ700.

The analyst wrote in a report that a delay in the merger could hurt Bombardier’s potential sales advantage over Embraer, which has fewer near-term production slots available. Embraer recently won orders from United Airlines and Republic Airlines.

Quettawala says Bombardier needs to win the order to maintain its regional jet market share in the U.S. and its production rates after 2014.

Canadian airlines could also be hurt as investors question the industry’s efforts to consolidate and improve profits, but the impact should be muted for Air Canada and WestJet Airlines because the market remains disciplined, he added.

The Justice Department says the merge will reduce competition, leading to higher fares and fees for baggage and ticket changes.

© 2013 The Canadian Press