Aviation

Bombardier cancels Learjet 85 amidst $4.9 billion loss

A Learjet 85 sits at at the Orlando Executive Airport last year during the National Business Aviation Association Convention. Bombardier announced Thursday it was canceling the Learjet 85 program.
A Learjet 85 sits at at the Orlando Executive Airport last year during the National Business Aviation Association Convention. Bombardier announced Thursday it was canceling the Learjet 85 program. File photo

Bombardier’s Learjet 85 was to be the Canadian-based airplane maker’s biggest and longest-range Learjet in the brand’s 52-year history.

It also was to be the company’s first all-composite jet, helping it achieve a high-speed cruise of 540 mph and a transcontinental range of up to 3,000 nautical miles.

But on Thursday, new Bombardier CEO Alain Bellemare said the company was scrapping the Learjet 85 for good – a move that’s not expected to affect the company’s Wichita employment.

“Although this is a difficult decision … it is the right decision,” Bellemare said on a conference call with analysts to discuss Bombardier’s third-quarter 2015 results.

Canceling the Learjet 85 followed the January move by Bellemare’s predecessor, Pierre Beaudoin, to pause development of the $19.6 million midsize business jet, which led to a $1.4 billion pre-tax charge and the layoff of 1,000 employees – including 620 in Wichita.

A Bombardier Business Aircraft spokesman said Thursday that no additional layoffs in Wichita are expected from the Learjet 85 cancellation.

Bellemare, who joined troubled Bombardier in February, said on a conference call with analysts Thursday morning that market demand for light jets was still weak and the company had too many airplane development programs underway at the same time.

Between the Learjet 85, C Series airliner and the Global 7000 and Global 8000 large-cabin business jets, something had to go.

“That was a challenge for an organization our size,” he told analysts, “… too many initiatives or projects ongoing in parallel.”

The cancellation of the Learjet 85 was heaped into a number of announcements Thursday, including a $4.9 billion, third-quarter 2015 loss and the infusion of $1 billion from the government of Quebec into Bombardier’s struggling C Series program.

The company said revenue for the three-month period ended Sept. 30 was $4.1 billion.

Bombardier chief financial officer John Di Bert said the quarterly loss was largely related to a $3.2 billion charge on the C Series and $1.2 billion on the write-off of remaining Learjet 85 assets.

Bellemare said the market in the segment of business jets that the Learjet 85 would occupy “is very soft.”

“It’s a challenging segment,” he added.

Bellemare also said that to get the Learjet 85 to completion there was “still money that needed to be injected.”

“The market was not supporting further investment,” he said.

The official end of the Learjet 85 program was not a surprise to analysts such as Richard Aboulafia of the Teal Group.

Aboulafia said the use of the word “pause” on an aircraft development program was something he had never heard before. He said the January pause announcement was really a way of Bombardier unofficially saying it was ending the Learjet 85.

“They were just looking for a practical moment to kill it,” with Thursday’s announcement, Aboulafia said.

With the end of the Learjet 85, Bombardier’s Wichita operations are left largely with the manufacture of the Learjet 70/75, the servicing of all of the company’s business jets, including the addition of Global business jets earlier this year, and its flight test center. It has also begun this year offering to manufacture parts for other companies.

Bombardier spokesman Mark Masluch said the company remains “committed to the Wichita site,” which employs 1,800 people.

Aboulafia said he doesn’t know what the end of the Learjet 85 program means in the long term for Bombardier’s operations. He thinks the fate of the Wichita operation rests on the broader health of Bombardier and its C Series program, which has suffered from years of delays and billions of dollars of additional costs.

“I think the main issue here is the company’s ability to recover from the C Series disaster,” he said.

Bellemare told analysts with the $1 billion from Quebec into the C Series, “we now feel more confident than ever to bring this program to fruition,” adding that the airplane is 97 percent through its flight test program.

Sterne Agee analyst Peter Arment wrote in a note to investors before the conference call that even with the Quebec investment, Bombardier’s “liquidity remains a concern long term, with cash totaling $2.3 billion at the end of the 3Q15.”

The C Series program comprises the CS100 jet, which has seating for up to 133 passengers, and the CS300, which has maximum seating for 160 passengers.

The C Series is intended to compete with the Boeing 737 and Airbus’ A320 family of aircraft.

Bombardier said it has 603 booked orders and commitments for the C Series, including 243 firm orders. Swiss International Airlines is the launch customer for the plane.

Certification is expected yet this year.

Reach Jerry Siebenmark at 316-268-6576 or jsiebenmark@wichitaeagle.com. Follow him on Twitter: @jsiebenmark.

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