Business jet market stabilizes but Learjet faces challenges

The used business jet market is stabilizing, as are order cancellations, Bombardier officials said Wednesday, but challenges remain for the Canadian planemaker and its Learjet plant in Wichita.

Bombardier Aerospace revenue was down to $1.9 billion in the first quarter from $2.2 billion a year ago, the company reported.

Guy Hachey, Bombardier Aerospace president and chief operating officer, said during a conference call that Learjet's product backlog was for six months, and that's too low.

"If (gross orders) don't start picking up, something will have to happen with Learjet," Hachey said, responding to an analyst's question about low gross orders for Bombardier's business aircraft segment in the first quarter.

The company took 22 gross orders for business aircraft in the quarter but had 16 cancellations, resulting in a gain of only six orders for the quarter ending April 30. That compares with nine orders in the same period a year ago.

Hachey said in Bombardier's business aircraft segment, Learjet's lineup of aircraft, are in the entry to mid-level segment "and we're struggling more at that end than the high end," he said.

But the company is putting a "full-court press" on selling Learjets, he said.

"We've put a very significant effort and blitz on selling (Learjet) 40s, 45s and 60s" starting at the European Business Aviation Business Association's EBACE show in Geneva, Switzerland, last month, Hachey said.

He said the company has seen some initial success from that heightened effort.

Hachey said the company is trying to avoid further layoffs at Learjet by adding five weeks of plant shutdown that are tied to holidays. He said he sees no further adjustment in "line rates" or production for the time being.

" (Learjet has) done a great job in adjusting" to lower production, he said.

He said there are still between 30 and 50 workers at Learjet who are working in a temporary capacity but are part of the 820 layoffs the Montreal-based company announced last year.

He said their temporary work will end this summer "if we don't find any more work."

Hachey also said there were some bright spots for the business aircraft industry.

The first quarter was the fourth consecutive quarter in which Bombardier has seen business jet utilization increase.

And business jet order cancellations have stabilized, he said.

Pierre Beaudoin, Bombardier CEO, added during the conference call that the company's fractional aircraft ownership business, Flexjet, is profitable and that its usage by customers has increased. Sales of fractional shares has picked up, too.

"I think it's a good sign for business aircraft," Beaudoin said.