Bombardier flies into jet set turbulence

Canada's Bombardier on Thursday blamed a waning appetite for private jets from Chinese tycoons and Russia's oligarchs for forcing it to cut 1,750 jobs and slow down production of its high-end business jets.

The production cuts for the Global 5000 and 6000 - which whisk chief executives and plutocrats between continents - are the latest setback as Bombardier grapples with the high costs and lacklustre order book of its C Series commercial jet.

However, Bombardier's description of the market bemused its leading competitor and a senior analyst, who both predict continued strong demand from the rich to fly around in the ultimate in luxury.

Bombardier said that "current economic conditions and geopolitical issues" in Latin America, China and Russia had hit its new orders across the business jet market.

Yet Richard Aboulafia, an analyst at the Virginia-based Teal Group, insisted that the global corporate jet market continued to enjoy growth - "not great growth, but OK growth".

Demand for the very largest corporate jets has remained resolutely robust since the financial crisis, according to Teal figures. The aggregate value of annual deliveries of jets costing more than $26m grew 29 per cent between 2008 and last year. Annual deliveries of aircraft costing less than $26m fell 52 per cent over the same period.

Mr Aboulafia blamed Bombardier's rapid recent increases in production for its decision to cut back. Its two rivals in the large business jet market - France's Dassault Aviation and General Dynamics' Gulfstream - had increased production more slowly and reported no such need to slow down.

"This idea of shrinking in this market - that's so far a Bombardier problem and I think it will stay that way," Mr Aboulafia said.

Gulfstream confirmed it was standing by its forecast that in 2015 it would produce 115 large-cabin aircraft, about the same as last year, and 10 more medium-cabin aircraft than in 2014.

Bombardier declined to comment on how its strategy compared with competitors'. Teal predicts that Bombardier will produce 75 Global 5000 and 6000 aircraft this year and 69 in 2016. The company built 80 of the two models in 2014.

Up to 1,000 of the Bombardier job cuts will fall around Montreal, 480 around Toronto and 280 in Belfast, in Northern Ireland, the company said.

Bombardier announced in a profit warning in January that it was halting development work on a smaller business jet, the Learjet 85. It announced last week that it was planning an IPO of its train making business later this year.

Bombardier has been struggling to fund the $5.4bn development cost of the C Series - intended to compete with Boeing's 737 and Airbus's A320 family. The company has won only 243 firm orders for the aircraft, below its target of 300.

Bombardier's B Shares, which have fallen by a third since the start of the year, were up 3.1 per cent at lunchtime in Toronto, to C$2.63.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation