Visitors check out aircraft at the 7th Latin American business aviation fair in Sao Paulo in August.MAURICIO LIMA/AFP / Getty Images
Bombardier Inc. is making good on its vow to vigorously defend itself at the very high end of the business jet segment with plans for a new plane to directly take on rival Gulfstream Aerospace Corp.'s popular G650.
"Our intention is to grow our leadership position and the time is right to move forward with" an extension of the lineup of jets in the company's top-end Global family, Bombardier Aerospace head Guy Hachey said Thursday.
The launch of the new large business jet - details of which are to be unveiled later this month at the National Business Aviation Association convention in Atlanta - is not without risks.
"Bombardier certainly has its work cut out for it in terms of responding to the G650, which in many respects breaks new ground and carves out its own niche at the top end," said Raymond Jaworowski of consultancy Forecast International.
The Gulfstream G650 - scheduled to enter service in 2012 - will be the fastest, widest and longest-range business jet on the market. It will be 20 per cent bigger than Bombardier's largest existing business jet, the Global Express XRS, which seats between eight and 19 passengers.
UBS Securities Canada Inc. analyst Tasmeen Azim said in a research note Thursday that the timing and cash required for the new business jet program "will have key implications on Bombardier's balance sheet and free cash flow. We would note that the overall [business jet]demand and pricing remain sluggish."
The market for business jets, which were hit hard in the global recession, has been showing signs of stabilization but most observers agree it's years away from full recovery, although demand for large aircraft has held up fairly well.
Industry players have been speculating for months as to whether or not Bombardier would opt for a stretch version of the XRS or take the riskier, more costly decision to go with a brand-new clean-sheet model if it decided to challenge Gulfstream with a new plane.
The decision is critical because Bombardier already has two major development programs going: the new C Series long-range commercial airliner and the Learjet 85 business jet.
A stretch version of the Global Express XRS would entail development costs of between $200-million to $300-million (U.S.), while an all-new model would cost about $1-billion, according to analysts' estimates.
Desjardins Securities analyst Benoît Poirier said in a research note that he expects Bombardier to settle on a stretch version, which would be less costly and also allow it to reduce Gulfstream's first-to-market advantage by one or two years. Gulfstream is a unit of U.S. defence giant General Dynamics Corp.
Whatever option chosen, Bombardier is clearly not about to relinquish its leadership position in the large business jet segment, where it has about 35 per cent of the market, Ms. Azim said.
"We believe Bombardier will likely garner significant customer interest in the expanded Global family. This will help Bombardier protect and potentially grow its market share in this segment," she wrote.
Bertrand Marotte