Protecting one's turf doesn't come cheap.
Bombardier says it plans to spend more than $1-billion (U.S.) to develop two new ultra-luxurious, long-range business jets that will provide it with much-needed firepower against rival Gulfstream Aerospace Corp.'s new G650.
The price tag is more than double what some industry observers had expected if Montreal-based Bombardier opted for just one derivate plane of its already existing Global Express XRS high-end jet. The two new planes will be XRS derivatives.
A brand-new, clean-sheet aircraft would have cost in the vicinity of $1-billion.
Bombardier chose instead to produce two new models - the Global 7000 and the Global 8000 - based on the existing XRS platform but that will include a completely new engine and wings.
"We're offering two new jets instead of one. And we're integrating advanced technology, with a whole new engine and wing. So that's why the program will cost over $1-billion," spokeswoman Danielle Boudreau said in an interview from Atlanta on Tuesday, where Bombardier unveiled details of the new program at the National Business Aviation Association convention.
The new Global 7000 and 8000 are slated for delivery in 2016 and 2017, respectively. Gulfstream's G650 is scheduled to enter service in 2012.
The cabin of the Global 7000 will be 20-per-cent larger than that of the G650, and Bombardier claims it will set the benchmark for large-business-jet spaciousness and comfort.
The Global 8000, on the other hand, is intended to compete on distance, with a slightly faster speed than the G650.
The price tag for either model is expected to be in the $65-million range.
Bombardier already has its hands full with other major development programs, including the new C Series long-range commercial jet for which the company has earmarked $2-billion.
But it could not afford to stand by and let Gulfstream - a unit of U.S. defence giant General Dynamics Corp. - take away from its market share in the large-business-jet segment, said Raymond Jaworowski of consultancy Forecast International.
"It's definitely something they had to do," he said.
Richard Aboulafia of the Teal Group consultants said there is the risk the new business-jet program will be affected by delays - which he believes are likely - in the C Series project.
"It could have a knock-on effect," he said.
Bombardier executives have said they are confident any delays in other programs would not have an impact on the new Global 7000 and 8000 project.
Bombardier has forecast the number of large business aircraft to be sold globally over the next 20 years at 4,500. Its currently owns about 35 per cent of the highly lucrative segment.
UBS Securities Canada Inc. analyst Tasneem Azim said in a recent note that Bombardier "will likely garner significant customers in the expanded Global family. This should help [Bombardier]protect and potentially grow its market share in this profitable segment."