Adapting to change: Downturn a chance for Learjet to improve

The recession has whittled away Bombardier's order book for Learjet business jets to six months. That's down from 17-month backlog a year ago for the Wichita-built planes.

"We're aggressively right now improving the brand," Bombardier Aerospace president and chief operating officer Guy Hachey said during a conference call Thursday after the company reported year-end financial results. "There's been a lot of changes."

The company made interior and avionics improvements to its Learjet 60 and is working to improve the interiors and avionics on the Learjet 40 and 45, Hachey said.

It has realigned production to meet demand, he said.

Wichita employees will be furloughed for 19 days this year. The days will be staggered and scheduled around holidays, a Bombardier spokeswoman said.

For the fiscal year ending Jan. 31, Bombardier had 85 more cancellations for business jets — including Learjet, Challenger and Global models — than it did orders, the company reported. It took orders for 101 business jets, but had 186 cancellations.

Business jet orders, however, turned slightly positive in the second half of the fiscal year, bringing some "positive news on the order front for business aircraft," Hachey said.

During this fiscal year, Bombardier plans to deliver 15 percent fewer business jets.

Its backlog for Challengers totaled 13 months on Jan. 31 compared with 20 months a year ago. And its backlog for Global jets was 26 months, compared with 43 months.

The worst may be over, however, said Dundee Securities Corp. analyst Richard Stoneman.

"My bet is that it's probably bottomed out and goes back up," Stoneman said.

Smaller business jets, such as Learjets, are the first segment of the market to be hurt by a downturn, and they're the first to recover, he said.

"They're far more volatile than large business jets," Stoneman said.

Large business jets tend to be purchased by the "super-rich" and governments. Both tend to be insulated from the economy. Small business jets, however, are ordered by small entrepreneurs and small-business operators and are closely aligned to the economy.

"They're quicker to react on both sides," Stoneman said.

Bombardier took the necessary steps in its aerospace division to adapt to economic realities, said Bombardier president and CEO Pierre Beaudoin.

It monitored capital expenditures and reduced production rates, met target deliveries and increased market share, he said.

It also is continuing to invest in new products, such as the Learjet 85 business jet and the CSeries commercial aircraft.

Bombardier's aerospace division recorded $9.4 billion in revenue for the past fiscal year compared with $10 billion a year ago. Its backlog was $16.7 billion on Jan. 31 compared with $23.5 billion.

It took 88 more orders for commercial aircraft than it had cancellations.

Bombardier delivered 176 business aircraft during the year, compared with 235 in the previous year.

However, its revenue market share was 32 percent, up 1 percentage point from a year ago.

Bombardier also delivered 121 commercial aircraft units last year, compared with 110 in the previous year, and increased its market share from 37 percent to 44 percent. It plans to deliver 20 percent fewer commercial aircraft this year than in the previous year.

Bombardier recorded total revenue of $19.4 billion in the past fiscal year compared with $19.7 billion in the previous year. Net income was $707 million, down from $1 billion.

"Against a challenging economic backdrop, we delivered good financial results," Beaudoin said. "We took the downturn as an opportunity to fine-tune the way we operate in order to execute better and cut costs intelligently."