Canadian aircraft maker Bombardier (NASDAQOTH:BDRAF) is fortifying its presence in the super midsize business jet market with an upgraded version of its popular Challenger 300 -- the Challenger 350. The new model, deliveries of which started from June this year, comes with some unique features and has already gathered a handful of orders. But with the business jet market finally waking up after its post-recession slumber, plane makers across the board are scurrying to attract buyers. General Dynamics (NYSE:GD), Textron, Dassault, and Embraer are all zeroing in on the $21 billion market with new offerings. In such a scenario, can Bombardier's new Challenger 350 make its mark?

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Source: Bombardier.

Demand for business jets is growing -- slowly
Demand for business jets was consistently strong until the 2008 recession crippled global economies. Market deliveries plummeted 23% and 39% in the next two consecutive years. There was an uptick in 2011, when sales of business jets registered 62% growth, only to be followed by a lull in the following two years. Aviation consulting firm Rolland Vincent Associates expects business jet deliveries to be roughly 718 in 2014, a 9% jump from last year, reflecting a slow but steady growth rate.

Research conducted by the PR Newswire shows that the market could grow at a compounded annual growth rate of 6.9% to $33.8 billion in 2020 from the current $21-billion level. Bombardier's own estimates show 24,000 business jet deliveries globally over the next two decades. A lot of the incremental demand is expected to come from the Middle East, although the economic recovery in the U.S., steady demand from Latin America, and potential growth from China would continue to support sales.

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Source: CNBC.

An upgraded Challenger is here
Bombardier is the world's largest seller of business jets, with 32% market share in 2013 in terms of deliveries. The company owes a lot of its success to the popularity of its Challenger and Global models. In fact, when Bombardier launched the Challenger 350 in May 2013 at the EBACE 2013 (European Business Aviation Convention & Exhibition), it raised some eyebrows because the predecessor, Challenger 300, was doing extremely well.

Since its launch in 2004, the Challenger 300 has ruled the super mid-size business jet market. Its main scoring points have been its coast-to-coast flight range, great cruise speed even for long distances, spacious cabins, and operating costs that matched or surpassed rival offerings. Bombardier has delivered around 400 Challenger 300 jets to date.

Despite the success of the Challenger 300, Bombardier went for an upgrade because it anticipated intense competition from new planes its peers were launching. Gulfstream upgraded its G200 model and introduced the new G280 with a bigger cabin, greater carrying capacity, and luggage space. Then there's Embraer's Legacy 500, entering service in October, Dassault's Falcon 2000LXS, and Textron's Cessna New Citation X, scheduled to enter service in 2014. 

Bombardier has priced the Challenger 350 at $26.5 million, higher than the G280 at $24.5 million and the Legacy 500 at $20 million. But then Challenger 350 offers full tank and full seat loading flexibility, which isn't available in the other two, as well as a better standard avionics package. It also offers better flight range -- 3,200 nautical miles compared to its predecessor's 3,065 nm -- features new powerful engines from Honeywell, and carries more baggage than the Challenger 300.

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Source: Bombardier.

Order flow is strong
Bombardier's confidence in the Challenger 350 doesn't seem totally unfounded, as it's received a good number of orders. U.S.-based conglomerate Berkshire Hathaway's subsidiary NetJets, which rents and offers fractional ownership of business jets, has become Challenger 350's launch customer and ordered 200 jets. The 10-year deal is worth $5.4 billion. NetJets shares a long-standing business relation with Bombardier and uses the latter's jets for its Signature series launched in 2012. Bombardier has tailored NetJets' fleet with advanced entertainment systems, custom wood veneer, and distinguishing colors. Of the 200 jets, eight will be delivered this year.

Though NetJets' order is the largest, Challenger 350 has found other takers, too. Swiss airline VistaJet confirmed orders for 20 jets with options open for placing additional orders in coming years. Of the 20, roughly 10 will be delivered in 2014. FlexJet, which was Bombardier's fractional jet ownership division earlier, has also ordered for a large fleet of jets that includes Challenger 350 (number not specified). Presently, Bombardier will offer both the Challenger 300 and 350 to its buyers, but expects more customers for the upgraded version.

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Source: Bombardier.


With signs of life visible in the business jet market, there's a scramble for market share. Most big players are coming out with new offerings. Bombardier has been a key player, and it wants to cement its position with the new Challenger 350. The company has designed the plane with market preferences and rival offerings in mind, and the current order influx shows that Bombardier has done its homework well.

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