Amid a global economic recovery, the business jet market is returning into shape, but with more demand for large cabin/heavy jets, growth in the light and medium categories looks slightly challenged. Canadian aerospace major Bombardier (OTC:BDRAF) is one of the oldest players in the global aviation industry and sits pretty with a huge portfolio serving all the three major segments of business jets -- large, medium, and light. The company's light Learjets have enjoyed great popularity in the pre-recession days, and the plane maker is trying to recreate the magic with its new light jet offerings. Here's the lowdown on the latest light jet market dynamics, Bombardier's new planes and their prospects.
Light jet market sees a silver lining
Aviation experts hope for better industry dynamics in 2014 as they feel that 2013 should have marked the bottom. Last year, deliveries in the light jet category dropped 17% compared with the previous year mainly due to the decline in deliveries by Bombardier and Cessna, the aviation arm of Textron (NYSE:TXT). Bombardier's light jet deliveries fell 26%, while Cessna witnessed a 23% drop. However, Embraer saw a nice 17% surge in its light jet deliveries.
The oversupply situation in the light jet market is still persisting, with the main reason being the sensitivity of buyers who are still avoiding purchases. But the situation seems to be improving as deliveries of smaller jets (medium and light) have increased 20% in the first half of 2014 compared with the same period a year ago and could get better in the coming years. Experts believe that newer jets will boost demand. The two most vital factors that might drive demand are a recovery in the U.S. economy, which dominates roughly 60% of the global aviation market, and a shrinking pre-owned inventory.
Aviation analyst Richard Aboulafia expects growth in this category on the back of improved deliveries from Cessna. Scott Donnley, Textron's CEO, said, "Deliveries at Cessna Aircraft are expected to increase in 2014 due to the introduction of new products, such as the Citation M2, Sovereign and Citation X." According to Aboulafia, Cessna could deliver 160 units in 2014, up from 139 units last year, and also believes the company's growth will remain sustainable. He also thinks that Bombardier will deliver seven more of its light Learjets this year. In the first half of 2014, Bombardier delivered one more Learjet than the year-ago level.
Bombardier's light jets -- then and now
Bombardier stepped into the light jet market with the acquisition of Learjet Corporation in 1990. Learjet was one of the prime movers in the private business jet market, and Bombardier inherited three decades of experience. It launched a midsized light aircraft Learjet 60 into service in 1991, which very soon became a best-seller in the category.
Since then, Bombardier has rolled out models such as Learjet 60XR, 40, 40XR, 45, and 45XR that have now been replaced by the advanced Learjet 70 and 75. These two were introduced in the 2012 European Business Aviation Convention and Exhibition (EBACE) in Geneva and entered service in the latter half of 2013.
Priced at $11.5 million, a full-tank Learjet 70 can fly 2,060 nautical miles with six passengers and two crew members, climbing comfortably to an altitude of 45,000 feet. On the other hand, Learjet 75 has an offer price of $13 million and accommodates two more passengers than Learjet 70. Speed and altitude being almost similar, it covers slightly lesser range (2,040 nm) than Learjet 70. Both planes showcase roomier interiors, bigger luggage space, improved avionics, and advanced touch screen display. Wireless connectivity comes as an optional feature.
Deliveries could improve
As per aviation website Flightglobal, Bombardier has delivered eight Learjet 70s and 22 Learjet 75s so far since their first flight debuts. And there are indications that deliveries could improve going forward. Both jets have received certification from European Aviation Safety Agency (EASA) recently, paving the way for sale in the continent. Bombardier has already delivered its certified Learjet 75 to France-based Groupe Roullier.
Simon Burrows, who heads Bombardier's European operations, is optimistic on Learjet's entry into the vast European market, which is the second largest consumer of business jets. Though deliveries in the region are still under the pre-recession level, Bombardier believes that gradual economic recovery along with faster GDP growth expected in the U.K. and Germany would help push the number of deliveries.
Learjet 85 is on the way
Bombardier is trying to further ramp up the segment by launching new models, such as Learjet 85. Still under development, Learjet 85 is a midsized light jet with the longest range in the Learjet brand at 3,000 nm, accommodating eight passengers and two pilots. Priced at $21 million, the plane will be lighter than competing models and the existing Learjet family despite being the largest among them, as it's made of composite material. It will burn less fuel, travel at a cruise speed of 541 miles per hour, and be more durable.
Bombardier completed Learjet 85's first test flight in April after several delays. The jet was slated to enter service in 2013, but there is speculation that it might get further delayed.
The business jet market is coming back to life, and Bombardier is putting in all efforts to cement its presence in all the spheres. By the time the light jet market is up to full strength, the company will have an attractive offering that should see plenty of demand.