Bombardier To Launch New Business Jet

September 30, 2010

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Bombardier said on Thursday it will build a new large-cabin business jet now that the market for executive aircraft was showing signs of pulling out of a slump.

Bombardier said the new Global planes will build on its existing line of business jets, the Global 5000 and the Global Express XRS.

The Montreal-based company will announce details about the aircraft on October 18 at the National Business Aviation Association convention in Atlanta, Georgia.

"People will regard this as a positive thing and they should," Canaccord Genuity analyst David Tyerman said.

"It's hard to put metrics on it... We don't know for sure because nobody breaks out profitability by airplane, but as you get up into the very higher end of the market, price sensitivity may be a little bit lower."

It is likely Bombardier will garner significant customer interest in the new jet, but "risks are plenty," UBS analyst Tasneem Azim said in a note.

"The required investment and timing of this programme will have key implications on Bombardier's balance sheet and free cash flow," Azim wrote.

"We would note that the overall (business jet) demand and pricing remains sluggish."

The business jet market is showing signs of stability after one of its toughest years in 2009, but industry experts say a return to annual growth in deliveries is at least a year away.

Earlier this year, business jet manufacturers and suppliers said rising flight activity and a steady decline in the number of used aircraft for sale competing with new planes signalled that the market had likely hit the bottom of its decline.

Bombardier was widely expected to announce an expansion of its Global line following the successful 2008 launch of the Gulfstream G650, a large-cabin business jet, Tyerman said.

The timing of the announcement may also reflect the completion of development work on Bombardier's CRJ1000 aircraft, which would free up engineering resources, he said.

Bombardier said earlier this month that the business-jet sector was showing signs of a recovery, based on fewer order cancellations.

The company also said it will continue to be affected by the economic downturn in fiscal 2011, with 15 percent fewer business jet deliveries and 20 percent fewer commercial plane deliveries than in 2010.

Business aircraft made up 46 percent of Bombardier Aerospace revenue in fiscal 2010, followed by commercial aircraft at 27 percent and aircraft services at 15 percent.

That market was hit hard in 2009, when demand tumbled after five years of annual delivery increases as companies restricted spending and tight credit made purchases difficult. Jet makers cut thousands of jobs as orders slumped.