Bombardier launches new Learjet business jets

Bombardier Inc. launched two new entry-level business jets Monday as Qatar Airways said it would purchase 10 of its larger Global executive jets.

It was perhaps just the latest indication that the market for business jets was showing early signs of recovery in the aftermath of the global financial crisis.

The Montreal-based manufacturer unveiled its new Learjet 70 and 75 at the European Business Aviation Convention & Exhibition in Geneva. The aircraft are expected to enter the market in the first half of 2013 and have list prices of $11.5-million and $13-million, respectively.

Bombardier said it already had 50 firm orders, letters of intent and other commitments for the new aircraft, which, if exercised, have a combined value of $650-million.

The aircraft, which will replace the Learjet 40 and 45 on which they are based, will compete directly against the Cessna Sovereign and Embraer’s Phenom 300.

The new Learjets are expected to make Bombardier more competitive in the entry-level segment, which has been hit hard since the recession, with a new interior, updated engines and major upgrades to the avionics, including the introduction of Vision Flight Deck, which the company recently introduced on its Global Series.

“It has been challenging,” Danielle Boudreau, a Bombardier Business Aircraft spokeswoman, said about the market for smaller business jets. “In the entry level of the business jet market, a lot of the customers are entrepreneurs and they have been hit pretty hard by the economic situation.”

Bombardier hasn’t been alone in facing those challenges. Hawker Beechcraft, which is partially owned by Toronto’s Onex Corp., is undergoing a restructuring under Chapter 11 protection after its aircraft deliveries fell and it was bogged down by $2.5-billion in debt.

General aviation airplane deliveries fell to 1,865 units worldwide last year, from 1,932 units in 2010 and 4,272 at their previous peak in 2007, industry figures show.

Fadi Chamoun, a BMO Capital Markets analyst, noted Bombardier delivered just 15 Learjet 40/45 planes in 2011, a 75% drop from 60 aircraft delivered at the peak of the prior cycle in 2007.

But he says the upgrades to the Learjet family are coming at the right time.

“The aircraft fared well from a performance standpoint (speed and range) and we believe this major upgrade in interiors and avionics should enhance its competitive position in this highly competitive segment of the business jet market,” Mr. Chamoun said in a note to clients. “The timing also makes sense to us, as the business jet cycle continues to progress and this segment, which has lagged thus far, appears to be poised for a recovery in coming years.”

The new Learjets, which have already started test flights, will be built on the same assembly line as the 40/45s in Wichita, Kan.

While the lower end of the business aircraft spectrum has been hit the hardest, Bombardier’s larger luxury jets, its so-called Global family, have seen robust demand with its well-heeled customers in a better position to weather the recession. Some analysts are even forecasting Bombardier will soon increase its production rates for the Global family on the back on this demand.

The company banked another order for 10 of its new Global 7000 and 8000 from Qatar Airways Monday in Geneva, valued at $650-million based on list price.

The Global 7000 and 8000 jets are expected to enter service in 2016 and 2017, respectively.

[Business.FinancialPost.com]