Bombardier Inc (BBDb.TO) on Friday reported a bigger-than-expected quarterly loss as it delivered fewer business jets and warned of a weakness in the market for smaller jets.

Shares in the Montreal-based plane and train maker fell 3.0 per cent in early trading, as the results showed the company faces pressure in its traditional business at a time when it is focused on winning customers for its new CSeries program of narrow body jets.

Business jets revenue declined nearly 19 per cent in the second quarter. The sector, a key source of cash flow, accounted for more than a third of total revenue.

Chief Executive Alain Bellemare said on a conference call there had been "significant softness" in the market for smaller size business aircraft.

"It's a very competitive segment of the market so there's significant pricing pressure and we're going to continue monitoring this and making sure we are pushing sales and then we'll see where it goes," he said.

Bombardier's Chief Financial Officer John Di Bert said the company would boost spending in 2017 on the Global 7000 business jet, even as it winds down CSeries investment.

Bellemare said there is a strong backlog for the Global 7000 and Bombardier is working to get the long range business jet's production up to 50 aircraft a year as quickly as possible.

Commercial jets revenue rose more than a quarter, but margins weakened as the company spent heavily on the CSeries.

Bombardier's CSeries program suffered another setback. The company announced today that one of its customers, Ilyushin Finance Co., a Moscow-based leasing company, scaled back its order for the jets from 32 CS300 aircraft and options for an additional 10 CS300, to 20 CS300 aircraft and one Q400 aircraft with options for five additional Q400 aircraft. 

“This is certainly going to cause some questions [about the CSeries program],” said Greg Taylor, senior portfolio manager at Front Street Capital, in an interview with BNN.  “Optics aren’t great; but it’s not the end of the world – [Ilyushin] is not their biggest customer.” 

In February, Bombardier received a CSeries order from Air Canada, the first contract for the aircraft in nearly a year and a half. 

Bombardier, which has secured $1 billion for the program from Quebec, said it is still in talks with the Canadian government about further investment.

Bombardier's free cash flow usage dropped to $490 million in the quarter from $808 million a year earlier. It had $3.34 billion in cash and equivalents at the end of June.

Bombardier reported a net loss of $490 million, or 24 cents per share for the quarter ended June 30. A year earlier, it had a profit of $125 million, or 6 cents per share.

Excluding items, the company reported a loss of 6 cents, bigger than the 5 cents analysts on average had expected, according to Thomson Reuters.

With files from BNN