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Bombardier still confident demand for new Global 7000 business jet will take off


Bombardier Inc.’s head of business aircraft says demand for the new, ultra-long-range Global 7000 “hasn’t wavered,” even after the company delayed the private jet’s debut by two years. In July, Bombardier announced that the large-cabin private jet won’t enter into service until the second half of 2018 after previously promising a 2016 launch date. The delay was reminiscent of the problems Bombardier’s commercial aircraft division has experienced with the overdue and over-budget CSeries jetliner, which has seen its entry-into-service date postponed multiple times. But David Coleal, who became president of Bombardier Business Aircraft in mid-June, said he’s not worried about losing sales because of the holdup. “It’s basically a class-defining aircraft — there’s nothing like it,” Coleal said in an interview Wednesday. “That’s why even with the delay, while it’s been very disappointing for our customers, the demand hasn’t wavered.”

He added that he’s learned from some of the mistakes that were made with the CSeries, which saw its debut pushed back to 2016 from 2013 and has so far cost US$2 billion more than expected. “That’s what organizations do: they make sure that they take the feedback, look at what went well, what didn’t go well, and always incorporate that into the next product development cycle,” Coleal said. He added that he feels “very confident” about the 2018 entry-into-service date.

Analysts of the global business jet market have warned that Bombardier could end up losing market share to its competitors because of the delays to the 7000 and its longer-range sister aircraft, the 8000. Gulfstream Aerospace Corp.’s new 650ER business jet entered into service at the beginning of this year and boasts a range of 7,500 nautical miles, only slightly less than the 7,900 nautical miles targeted by Bombardier’s 8000. However, it has a smaller cabin and Coleal argues that it’s more akin to the existing Global 6000.

Bombardier cut production of the Global 5000 and 6000 in May and laid off 1,750 workers, citing weakness in China, Russia and Latin America. Coleal said production of those aircraft is now at the right level but the company remains flexible in case the market changes. “We’re always looking at the market forecasts and spending time with our customers and making sure we get a good pulse on what we think the future looks like,” he said. “If there is a surge in demand, you want to make sure you can capture it. If there’s going to be a downturn, you want to make sure you’re not over-producing. It’s a balance.” Although Bombardier doesn’t break out its business aircraft results by brand, J.P. Morgan analyst Seth Seifman said the Global jets are “Bombardier’s most valuable brand and the most important contributors to aerospace earnings and cash flow.”

In 2014, adjusted earnings before interest and taxes for the business jet division were approximately US$500 million, and Seifman said the Global jets “likely contributed roughly all of this.” On the other end of the spectrum are the smaller, cheaper, shorter-range Learjets (Bombardier also builds a mid-size private plane called the Challenger). These are the least profitable of Bombardier’s business aircraft and weigh on the division’s margins. The company suspended development of the new Learjet 85 in January, blaming “weak market demand.” The bottom half of the private jet market collapsed during the financial crisis and never really bounced back, while deliveries in the top half of the market remained steady. As a result, high-end models are forecast to make up 67 per cent of global production between 2015 and 2024, up from 50 per cent before the 2009 crisis, according to aviation research firm Teal Group Corp.

Coleal was head of Learjet from 2008 to 2011 before leaving for a stint at Spirit Aerosystems, and he said the brand remains “a very important piece of the business.” Overall, demand for business jets remains “robust” despite weakness in key markets like China, he added. “The fundamentals of the market are still there,” he said. “Demand is good. We’d like it to be stronger, of course, but given some of the uncertainty in the U.S. based on the economy, some of the things going on in China, it’s moderate but we’re not panicking at all.”

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