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Bombardier's Global 7500, the first business jet to have a queen-sized bed and hot shower, is shown during a media tour in Montreal on Dec. 19, 2018.

Christinne Muschi/Reuters

Bombardier Inc. is launching its new Global 7500 private jet during the worst industrywide sales slump since the 1980s. But the company is betting the luxurious aircraft will attract a key group of customers whose ranks are growing globally even if the economy isn’t: billionaires.

The Canadian plane maker, on Dec. 20, delivered the first of roughly 20 Global 7500 jets to be built this year and next, a tastefully-appointed model with granite bathroom floors and a double bed. Customers who’ve put deposits down for their own US$73-million 7500 were sent a video of the celebratory launch event. They include some of the world’s wealthiest people.

“We’d love to have something bulletproof [against economic downturns] but we know that’s not necessarily the reality,” David Coleal, head of Bombardier’s private jet business, said in discussing the company’s latest offering. “[Still], if you’re buying one and you’re in this price point, you’re buying for a reason. And usually you have the means to kind of balance the economic ups and downs.”

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Bombardier chief executive Alain Bellemare is relying on the 19-passenger Global 7500 – the biggest, fastest and most expensive private jet the multinational has ever built – to help fuel a turnaround effort as the company shifts its strategic focus towards private aircraft and trains. The jet, which can fly New York to Hong Kong non-stop, is expected to generate a minimum of US$2.5-billion in annual sales by 2020. It is sold out to 2021.

The debut of the Global 7500 comes as plane manufacturers grapple with the worst sales down cycle in 30 years. Worldwide deliveries peaked at 1,136 units in 2008 before falling 45 per cent to a trough in 2017, according to JPMorgan. Sales of large cabin jets, those with a range of more than 5,000 nautical miles and room for at least 10 passengers, have held up better. But the historical correlation between luxury jet sales and U.S. corporate profits in particular appears to be cracked; companies have posted strong earnings in recent years but private jet sales haven’t followed.

Today, the market is showing early signs of recovery. The number of private aircraft flights are up. And inventories of used private aircraft are down, which means buyers will turn to new planes if they can’t find a preowned model. Still, aerospace manufacturers remain wary that the strong sales volumes of old will return.

Bombardier shared some internal data with The Globe and Mail that bolsters its confidence in the health of the high end of the market. Bombardier competes in the segment with its Global family, which includes the 5000, 6000 and 7500. Two new Global planes that improve on the range and fuel burn of existing models are slated for introduction in 2019 as Bombardier doubles down on large cabin jets.

The company’s research shows the number of high net worth individuals on the planet (those with a minimum of US$100-million in assets) climbed by 10 per cent from 2015 to 2017, outpacing the growth in global gross domestic product. That means the pool of potential customers for private planes grew.

More specifically, the number of billionaires worldwide increased by about 15 per cent to 2,754 in 2017 as the wealthy benefited in part from healthy equity market returns, according to research firm Wealth-X. The combined estimated assets of those individuals rose 24 per cent year over year as they race further away from the general population.

Bombardier already has many of these individuals as customers and it is trying to woo more of them. The company’s research shows 18 per cent of the world’s billionaires and 28 per cent of the biggest public companies (annual revenue topping US$60-billion or more) use a private jet or own one outright. That suggests a massive untapped interest.

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The entry of more Global 7500s into service should reflect positively on the product and on the Bombardier brand, which may lead to sales of other jets in the company’s lineup, said Dan Fong, an equity analyst at Veritas Investment Research in Toronto. That said, luxury products are not completely immune to a recession, he said.

One possible scenario in a downturn is that jet sales fall overall and high net worth individuals and other buyers opportunistically “beat up manufacturers on price,” Mr. Fong said. “So you could have a pick up in large cabin jet volumes but at the expense of manufacturer revenue and margin.”

Bombardier plans to double production of Global 7500s to as many as 40 in 2020. The company is taking a US$250-million working capital contingency to make sure it has enough people and materials to work through the production increase. The plane’s biggest competitor is General Dynamics Corp.'s Gulfstream G650, which has been on the market for six years.

aiming high

Bombardier’s private jet franchise, led by the

Global 7500, is key to CEO Alain Bellemare’s

turnaround effort as he tries to boost revenues

from the business to US$8.5-billion by 2020.

Business jet demand, however, has not recov-

ered in tandem with corporate profits in recent

years.

Bombardier Global 7500

Capacity:

19

Fight deck: Next-generation fly-by-wire tech

Engines:

GE Passport

Cabin

Divided

into four

separate

living areas

1.91m

Top speed

982km/h

Range

14,260km

2.49m

Length: 33.9m

Gulfstream G650

Capacity:

19

Engines:

Rolls-Royce BR725 A1-12

1.96m

Cabin

Top speed

982km/h

2.59m

Range

12,964km

Length: 30.41m

Pool of potential business aviation

customers has grown

High net worth individuals worldwide

255,810

226,450

212,615

2015

2016

2017

Number of business jet deliveries added

to global aircraft fleet

In units, by size

1,200

Heavy

1,000

Medium

Light

800

600

400

200

0

‘97

‘99

‘01

‘03

‘05

‘07

‘09

‘11

‘13

‘15

‘17

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE:

bombardier; gulfstream; statista; j.p.morgan

aiming high

Bombardier’s private jet franchise, led by the Global

7500, is key to CEO Alain Bellemare’s turnaround effort

as he tries to boost revenues from the business to

US$8.5-billion by 2020. Business jet demand, however,

has not recovered in tandem with corporate profits in

recent years.

Bombardier Global 7500

Capacity:

19

Fight deck: Next-generation fly-by-wire tech

Engines:

GE Passport

Cabin

Divided

into four

separate

living areas

1.91m

Top speed

982km/h

Range

14,260km

2.49m

Length: 33.9m

Gulfstream G650

Capacity:

19

Engines:

Rolls-Royce BR725 A1-12

1.96m

Cabin

Top speed

982km/h

2.59m

Range

12,964km

Length: 30.41m

Pool of potential business aviation

customers has grown

High net worth individuals worldwide

255,810

226,450

212,615

2015

2016

2017

Number of business jet deliveries added

to global aircraft fleet

In units, by size

1,200

Heavy

1,000

Medium

Light

800

600

400

200

0

‘97

‘99

‘01

‘03

‘05

‘07

‘09

‘11

‘13

‘15

‘17

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE:

bombardier; gulfstream; statista; j.p.morgan

aiming high

Bombardier’s private jet franchise, led by the Global 7500, is key to CEO Alain Bellemare’s

turnaround effort as he tries to boost revenues from the business to US$8.5-billion by

2020. Business jet demand, however, has not recovered in tandem with corporate profits

in recent years.

Bombardier Global 7500

Capacity:

19

Fight deck: Next-generation fly-by-wire technology

Engines:

GE Passport

Cabin

Divided

into four

separate

living areas

1.91m

Top speed

982km/h

Range

14,260km

2.49m

Length: 33.9m

Gulfstream G650

Capacity:

19

Engines:

Rolls-Royce BR725 A1-12

1.96m

Cabin

Top speed

982km/h

2.59m

Range

12,964km

Length: 30.41m

Pool of potential business aviation customers has grown

High net worth individuals worldwide

255,810

226,450

212,615

2015

2016

2017

Number of business jet deliveries added to global aircraft fleet

In units, by size

1,200

Heavy

1,000

Medium

Light

800

600

400

200

0

1997

‘99

‘01

‘03

‘05

‘07

‘09

‘11

‘13

‘15

‘17

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: bombardier; gulfstream;

statista; j.p.morgan, Business Jet Monthly – June 2018

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