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Bombardier leading player in BizAv jet recovery

May 9, 2012, Montreal - Bombardier Inc.’s large and mid-sized jets are leading a recovery in business aircraft sales as U.S. corporations upgrade their fleets with cash stockpiled after the 2008-09 financial crisis.


May 9, 2012
By Bloomberg Businessweek

Those planes offer a bright spot in a market battered by
slumping demand for the smallest models, said Steve Ridolfi,
president of the business-jet unit at Montreal-based Bombardier,
the world’s biggest maker of business aircraft by revenue.

 

“We’ve had the U.S. corporates come back into the
marketplace, which was something that was lacking in 2009 and
2010,” Ridolfi said in a telephone interview. “They’re back
in, looking to re-fleet and they are a big driver of that
marketplace.”

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Business buyers are one of three pillars of the private-jet
industry, along with wealthy individuals and operators such as
NetJets, the aviation unit of Warren Buffett’s Berkshire
Hathaway Inc. Each type of purchaser represents about one-third
of the global market, Ridolfi said.

 

Bombardier’s earnings report tomorrow will give analysts
and investors an opportunity to seek information about business-
aircraft performance in the first quarter. The manufacturer drew
about half of its $8.6 billion of aerospace revenue from such
planes last year, and growth in deliveries outpaced a global
decline.

‘Fairly Positive’

“Manufacturers have been giving out perspective on what
they are seeing, and it seems things are fairly positive,”
Cameron Doerksen, an analyst at National Bank Financial in
Montreal, said in a telephone interview.

 

“Activity is OK.”

Bombardier projected about 180 business-aircraft deliveries
this year. That would be in line with 2011, when shipments grew
21 percent from 150 the year before, according to data from the
General Aviation Manufacturers Association.

 

The value of business-jet deliveries will probably climb by
6 percent this year and 8 percent in 2013, market research firm
Teal Group said in a report published last month. Shipments of
the planes sank 29 percent from their 2008 peak until the end of
2011, Teal Group said.

 

Sales at Bombardier have benefited most from rising demand
for large aircraft such as the Global 5000, which has a list
price of $49 million. Bombardier had a backlog of future orders
amounting to 34 months of production for its Global jets as of
Dec. 31, exceeding its 24- to 30-month target.

Long-Range Flying

The Global 5000 can seat eight to 17 passengers, depending
on the cabin configuration, according to the planemaker’s
website. Its maximum range of almost 6,000 miles (9,600
kilometers) is almost 50 percent farther than the distance
Boeing Co. (BA) (BA) lists for its 737-800 jetliner.

Worldwide deliveries of large-cabin jets, weighing more
than 50,000 pounds (22,700 kilograms), were little changed at
200 last year, General Aviation Manufacturers Association data
show. Deliveries of medium-sized jets — weighing 12,500 to
50,000 pounds — rose 15 percent to 375 units. Shipments of
light jets dropped about 46 percent to 106.

 

“The light aircraft space is still very challenging,”
Ridolfi said. “Our competitors there are suffering as well.”

Last week’s bankruptcy filing by Hawker Beechcraft Inc.,
the private-jet maker owned by Goldman Sachs Group Inc. (GS) (GS) and Onex
Corp. (OCX), showed the strain on the industry. Hawker, maker of the
Hawker 4000 business jet and Beechcraft King Air turboprop,
reported more than $900 million in net losses in the past two
years as plane sales and U.S. military contracts waned.

Corporate-Profit Signal

Business-jet sales typically lag behind growth in company
earnings. U.S. corporate profits climbed sequentially for 12
straight quarters through the end of 2011, reaching $1.99
trillion in the three months through December, according to the
most recent data from the Commerce Department.

 

“You’re starting to see the utilization of aircraft trend
back to more normal levels,” said Peter Arment, a Sterne Agee
& Leach Inc. analyst in New York who has a neutral rating on
Bombardier. “We’re still seeing globally the high-end market is
very strong.”

 

3M Co., the maker of products ranging from Post-it Notes to
fuel system tuneup kits, said in February it plans to upgrade
its corporate fleet. St. Paul, Minnesota-based 3M buys new
planes periodically to ensure safety and improve efficiency,
Jacqueline Berry, a spokeswoman, said yesterday.

 

Ridolfi said Bombardier expects to get “a lot of contracts
done and dusted” at the European Business Aviation Convention &
Exhibition, which begins May 14 in Geneva. Qatar Airways Ltd.
has already said it plans to announce a large Bombardier
business-jet order at the event.