BUSINESS

Bombardier preparing for light business aircraft recovery with Learjet upgrades

05/14/2012 11:34 EDT | Updated 07/14/2012 05:12 EDT
MONTREAL - Bombardier Aerospace is preparing for the eventual recovery in the light business aircraft market by launching two Learjet planes next year that upgrade existing models for the first time in more than a decade.

The Learjet 70 and 75 models will have new technologies such as avionics and more powerful fuel-saving engines.

"This will put us in an advantageous position once the market (recovers) because we will be ready with brand new planes," spokeswoman Danielle Boudreau said Monday from Geneva.

The Montreal-based manufacturer is also introducing a Learjet 85 made of composite materials in 2013.

The Learjet 70 and 75 models were announced Monday at the European Business Aviation Convention & Exhibition (EBACE).

The market for the smaller business aircraft was hit the hardest by the financial crisis and deep global recession that began 3 1/2 years ago. Demand remains "soft" but Boudreau said Bombardier has done better than its manufacturing rivals during the downturn.

The new models use the fuselage of the existing Learjet 40 and 45 but have more powerful engines and winglets that reduce fuel burn by up to nine per cent. The Learjet 40 was introduced in 2002, a decade after the Learjet 45.

They also have a next generation cabin management system, the Vision Flight Deck with a state-of-the-art avionics suite, superior aircraft performance and lower operating costs, according to Bombardier.

"It is almost like a new aircraft," Boudreau added in an interview.

Flight tests were completed last August and entry into service is scheduled to begin in the first half of 2013.

Bombardier (TSX:BBD.B), the world's third-largest aircraft maker and largest manufacturer of business aircraft, said it has firm orders, letters of intent and other commitments for more than 50 aircraft.

The Learjet 70 and Learjet 75 have list prices of US$11.5 million and US$13 million respectively.

Travelling at a cruise speed of March 0.75, or 75 per cent of the speed of sound, the planes will have a maximum range of more than 2,000 nautical miles.

The smaller plane can carry six passengers and two crew members non-stop between Chicago and Sao Paulo, Brazil. The Learjet 75 can accommodate up to eight passengers.

The planes will be assembled in Wichita, Kan., with wings made in Toronto and the fuselage coming from Belfast, Northern Ireland.

The Learjet upgrade is part of the US$2 billion Bombardier is spending this year on development projects for the Learjets, Global 7000 and 8000, and CSeries commercial jet.

Bombardier CEO Pierre Beaudoin told shareholders last week that the transportation giant's massive investments in new plane and train products will transform the company and help its stock price to recover.

The Learjet family of aircraft have an order backlog of five months of production, less than Bombardier's six- to nine-month target.

"These new jets represent the fusion of Learjet heritage, customer input and the design innovations Bombardier is renowned for throughout the industry," stated Steve Ridolfi, president Bombardier Business Aircraft.

Benoit Poirier of Desjardins Capital Markets said the product announcement was positive.

"It will ensure Bombardier has a presence in the low end of the business jet segment at a low capital cost," he wrote in a research note.

He described the two aircraft as "minor derivatives" of the existing Learjets.

Meanwhile, Qatar Airways announced letters of intent to buy 10 larger Global 7000 and 8000 business aircraft, worth about US$700 million.

The Middle Eastern airlines is also launching a marketing alliance with Bombardier's fractional ownership subsidiary Flexjet. Flexjet has a similar arrangement with Korean Air since 2010.

Flexjet fractional owners gain elite travel status for a year when travelling with Qatar Airways through four North American gateways, including Montreal, to and from the Middle East and beyond.

Owners can also fly with Qatar Executive, the airline's private jet service using Bombardier business aircraft.

In return, Qatar Airways' customers can access more than 5,000 U.S. airports on Bombardier business jets operated by U.S. air carrier Jet Solutions.

The head of the rapidly growing airline said last month in Montreal that it was in no rush to add Bombardier's CSeries aircraft to its growing fleet.

Akbar Al Baker said it has shelved the order for now because it is busy preparing to receive four new aircraft types _ Boeing 787, Airbus A350 and A320Neo and another he didn't want to identify. The company is spending more than US$50 billion for 270 airplanes.

Nonetheless he remains interested in eventually ordering 20 to 30 of the larger version of the 110- to 149-seat commercial plane, plus adding as many options. The aircraft would be used for Qatar's regional service and flights of less than 2 1/2 hours from Doha.

On the Toronto Stock Exchange, Bombardier shares were unchanged at C$3.80 in Monday. Over the past year, they have plummeted from a peak of $7.25.