Bombardier aeronautic, adapting to survive (Part 2)
With a profit margin exceeding 8%, the Bombardier business jet division is healthy despite a price war in the sector with discounts ranging from 10 to 25% for smaller models. Larger aircraft such as Global are selling without significant discounts, which means that the launch of the Global 7500, followed by 6500 and 5500 by the end of 2019, should be able to generate profits from 2020. One of the great strengths of Bombardier business jets is the exceptional quality of the interior finish; As the customer sees and touches, Bombardier’s reputation with buyers helps keep it at the top.
The Learjet 75 is in the category of business aircraft where the competition is the highest and must be granted discounts to succeed in selling. The production of the Learjet 75 is around a dozen aircraft a year. The Wichita test center is essential for Bombardier, while the other Learjet facilities in this city currently accommodate the surplus production as the interior finish of the Global 5000 and 5500. If Bombardier still has not sold this division, it is because the replacement cost of the facilities is probably higher than its market value.
The Challenger 350 is the most popular business jet at the moment and it is not for nothing, because in its price range, it offers above average performance and it is the most reliable business jet; we end up lacking superlatives to describe it. This program still has many good years ahead.
Bombardier Business Aircraft claims that it delivers twice as many Challenger 650s as any other competitor in its class. The production rate of this program is around 25 aircraft a year, this is clearly enough to be profitable. But it should not be too late before developing his replacement; when we ask the question about it, the Bombardier Business Aircraft people are telling us that right now they are focusing on bringing the Global 7500 and the 6500 and 5500 into production. The problem with this answer is It looks a lot like what we were told 10 months ago when we asked questions about the Global 8000.
The people of Bombardier Business Aircraft are wise guys who foiled everyone last May in Geneva while David Coleal pulled out of his hat not one, but rather two rabbits by announcing the Global 5500 and 6500 to the general surprise (rabbits worth nearly $ 50 million each). Since managers are like hockey players and they do not hesitate to reuse a good feint, we can expect everything from this division including the replacement announcement of a Challenger 650.
About the Global aircraft program; there are already more than 850 units that have been built in all variants and everything indicates that in a few years it will exceed the Challenger as the best-selling business jet. Deliveries of business aircraft will increase from 135 in 2018 to nearly 150 in 2019 thanks to the production ramp up of the Global 7500. The three new variants of the Global, the 5500, 6500 and 7500, will undoubtedly be the new milk cows of Bombardier.
Aftermarket services on business aircraft grew by more than 10% between 2017 and 2018. This is a sector where profit margins are significantly higher than those of new aircraft. If the high salaries paid to technicians by a manufacturer like Bombardier may have hurt its competitiveness in the past, in the context of a labor shortage as is the case for service technicians throughout the world, it becomes an advantage since it can more easily attract labor. In addition, business jet owners typically have fewer than three aircraft and do not have a structured maintenance department such as airlines. It is therefore easier for a manufacturer to sell turnkey maintenance contracts to buyers. This sector is expected to experience strong growth over the next few years.
The sale of Bombardier business jet training activities to CAE is more like an outsourcing of business deemed non-strategic that allows for quick cash flow for this asset. It is a good decision to have sold this business unit, as the $ 645 million that CAE will pay far exceeds the profits that Bombardier would have been able to make.
inter next texte we will take about Bombardier Aerostructures
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