Bombardier's Global 5000 jet
Bombardier Inc. will suspend production of its large-cabin Global 5000/6000 luxury jets for a period of time next year, two people familiar with the matter said.
The Montreal plane maker made the announcement to employees Wednesday morning, according to Yannick Houle, president of Unifor Local 62, which represents workers at Bombardier's Global completion centre in Dorval, Que.
Mr. Houle declined to say how many days of production downtime the company would take on the aircraft. Another source said it was 20 days. It wasn't clear whether the days would be consecutive nor whether workers would be reassigned or go on furlough.
A Bombardier spokesman declined to comment, saying the company doesn't talk about adjustments to its production rates unless it's on a scale that's material to workers and suppliers.
"We're really in a situation where the market for business aircraft is more difficult," Mr. Houle said. "We've generally had increases in our production cadence but over the past year, the news has been more negative when it comes to the Globals."
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The latest production plans highlight the extent to which the company believes the market for private aircraft will remain under pressure.
Sputtering demand for business jets is a major challenge for Bombardier management as it labours to boost earnings and cash after two straight annual losses.
The Global family of business aircraft has historically been the company's most profitable line of planes.
"The business jet market will stay soft for a while," Bombardier chief executive officer Alain Bellemare told Bloomberg in an interview after the company's second-quarter earnings report Aug. 5. "There will come a time where it will start to get better. We just don't know when."
The CEO told analysts on the call that management felt it has struck the right production level for the Globals given current market demand, but that it might have to do "a bit of fine-tuning up or down."
Bombardier cut production of the Global 5000 and 6000 models last year to a rate of about 50 annually to better match its supply to demand. It also pushed back the introduction of the bigger Global 7000/8000 models amid continued market weakness. Orders for the all-new Global 7000, which seats 17 people and has a maximum range of 13,705 kilometres, are promising and the backlog is "pretty strong," Bombardier has said. The company is working to get the jet into service by the second half of 2018.
Bombardier's smallest luxury jets, the Learjet family, have not escaped the pressure. Competition in the segment is heated and that has depressed pricing. Analysts are now openly questioning whether the company is weighing a sale of the business.
In its latest annual survey of operators and buyers of corporate aircraft, U.S. aerospace supplier Honeywell International Inc. forecast a slowdown in orders that would persist at least through the end of this year. While geopolitical uncertainty is tempering demand in some regions of the world, a slide in oil and gas prices has also crimped new plane deals in others, according to the survey. Demand in the United States, by contrast, is holding up.
Over all, Honeywell forecast that up to 9,200 business jets will be delivered globally from 2015 to 2025, worth an estimated $270-billion (U.S.). That's a drop of 3 to 5 per cent in the value the supplier predicted in the previous year's forecast.
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Nicolas Van Praet