Can Bombardier Overtake Gulfstream in the Business Jet Market?

Canadian jet manufacturer Bombardier is in a bit of a spot these days. In spite of selling the highest number of business jets in 2013, it trailed General Dynamics' Gulfstream by a billion dollars in revenue. But it wasn't always like this, as Bombardier's been the biggest revenue grosser in the industry for eight years straight until 2013, when Gulfstream barged in with its new G650 large jet and took the industry by storm. Bombardier swallowed the bitter, pill but without a doubt it will fight tooth and nail to regain its lost position. Here's a peep into Bombardier's playbook and its competitive advantages.

Bombardier's got a good product mix
Bombardier is present in all three categories of business jets - light, medium and large through its Learjet, Challenger, and Global families - unlike Gulfstream, whose offerings are concentrated just on the medium and large segments. This well balanced portfolio has ensured that Bombardier stayed ahead of competition both in terms of number of units sold and revenue earned for almost a decade.

It's true that the recovery in the business jet market has been mostly limited to large cabin jets, but sales trends for smaller jets have improved in the recent past. According to calculations of aviation consultant Brian Foley, shipments of smaller jets were up 20% in the first six months of 2014. The Canadian plane maker could be a gainer once again if these trends continue.

Challenger 350, source: Bombardier

Bombardier has been ruling the mid-size jet market with its best seller Challenger 300. In 2013, the company sold seven more Challenger 300s than in 2012. Catering to the super mid-size category, the clean sheet Challenger 300 has coast-to-coast range of 3065 nautical miles (nm) and has been a segment leader. Bombardier has upgraded the Challenger 300 to 350 with new twin Honeywell HTF7350 engines, and is ready to take on the competition head on. Deliveries of Challenger 350 began in June 2014, and the response has been good with NetJet ordering 200 units and becoming its launch customer.

In the light jets segment, the Learjet brand has done well, with Learjet 60 being a best-seller, but the segment has been the worst hit by the recession. Bombardier has replaced older models with the advanced Learjet 70 and 75 that came into service in the second half of 2013. It's now trying to pep things up by bringing in Learjet 85, which is under development. Though Learjet deliveries fell by 10 units in 2013, it is being said that new launches will revive demand in the segment.

Large Global jets are selling well
U.S.-based conglomerate Honeywell International forecasts that 9,250 new business jets will be delivered through 2023 and roughly 55% of the fleet will consist of large jets. Even Bombardier's research shows that the segment would witness a faster growth rate than other categories. 

Bombardier has been present in the large jet segment since 1996 with its high-end, high-speed, large-cabin, long-range (particularly transcontinental) Global family jets. Bombardier 5000 is capable of carrying 11 passengers (including three cabin crews) covering 4,800 nautical miles at an economical cruise speed. Global 6000's range is 6000 nm and has fast refueling capability, additional windows, bigger luggage space and a better display system.

Though Bombardier doesn't sell as many large jets as Gulfstream and lacks a best-seller like the G650, the Global family has had a smooth run-up in the last decade, even during recession. The chart provided below describes the company's growing deliveries in the past 10 years. After a minor lull in 2009 and 2010, deliveries were back on track the very next year and have maintained steady growth since then. In 2013, Global deliveries improved 15% compared with the year-ago period, to 62 units. Even in the first half of 2014, Bombardier has grown deliveries of Global jets by five units from last year's levels to 36.

Source: Corporate Jet Investor. Chart made by author. Deliveries include Global families 5000 and 6000.

Going in for the kill
To further solidify its position in the large segment, Bombardier is bringing two new models-Global 7000 and Global 8000. These jets are expected to carry sticker prices of $75 million and $71 million respectively.

The longer-range category typically drives the large jet market, and Bombardier has played its cards right. Global 7000, which is expected to enter service by 2016, will be able to travel 7,300 nm. Global 8000, slated for service in 2017, will cover 7,900 nm. Moreover, it will be the first to use Honeywell's JetWave Ka-Band satellite connectivity platform in its Global family jets. This will allow passengers to enjoy high-speed Internet while flying. As demand for uninterrupted Internet connectivity within the fliers goes up, Bombardier will be a key beneficiary.

Bombardier expects to fetch an additional contribution of approximately $2 billion to $3 billion annually within the next five years from large jet deliveries. 

Parting thoughts
Bombardier has been a key player in midsize business jets, but is also looking to widen its scope in the large jet segment as the future looks tilted toward the category. Its Global families have created a niche for themselves, and it's expected that upcoming versions will help the company grab a bigger market share. Once Bombardier's new planes take to the skies, the company stands a fighting chance to regain its top position.

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