Bombardier analysts raise possibility of Learjet sale

Two financial analysts think Bombardier could sell Wichita-based Learjet – possibly to its cross-airport competitor.

Cowen & Co. analyst Cai von Rumohr said he thinks the sale of Learjet is a possibility and that Cessna Citation business jet maker Textron Aviation could be the likely buyer.

His comments came after a note he sent to investors earlier this week titled, “Increasing Potential For Lear Acquisition.” Von Rumohr said in the note that “divestiture is increasingly possible” as a means to lighten nearly $7 billion of Bombardier debt that matures between 2018 and 2023 and because Learjet has “no opportunity for growth” from sales of the Learjet 70/75, the only jets it makes.

Both planes entered service in late 2013, and its only other aircraft in development, the Learjet 85, was scrubbed by Bombardier last year.

“My first point is if you’re going to kill the Lear 85 you’re going to kill the future,” von Rumohr said in an interview this week.

Bombardier Business Aircraft spokesman Mark Masluch said the company doesn’t comment on rumors or speculation.

But, Masluch added, “We’re focused on aggressively marketing and selling the aircraft (Learjet 70/75). We’re convinced that with the flat floor (in the cabin), lowest-class-operating costs in its class, a five-year warranty on the aircraft and the pocket door … we feel we can be successful. This is all on top of the dedicated sales team we put in place this year.”

That aggressive marketing includes being willing to move on the Learjet 75’s $13.8 million price tag, he said.

“We’re taking steps to aggressively compete in this marketplace on everything,” Masluch said.

Bombardier executives voluntarily brought up Learjet on its second-quarter 2016 earnings call with analysts Friday, with comments focused on Learjet’s weak first-half 2016 deliveries – six jets compared with 14 in the first half of 2015 – and competition with other jets, including on pricing.

“They’re clearly suggesting they’re disappointed with how it’s going (at Learjet),” von Rumohr said.

Masluch wouldn’t say whether Bombardier has adjusted its rate of Learjet production given the lower deliveries this year, but says it’s a matter of course to continuously review them based on demand.

“We proactively review our rates to make adjustments with market dynamics,” he said.

While von Rumohr estimates Bombardier’s Learjet service business brings in about $400 million in sales, the worldwide fleet of more than 2,300 Learjets will continue to shrink over time unless Bombardier plans a new Learjet model, which doesn’t seem likely in the near term.

“It’s basically a business that, longer term, won’t go anywhere,” he said.

He thinks Textron Aviation would be the most likely buyer because of its proximity to Learjet — Textron’s west campus is on the east side of Wichita Eisenhower National Airport while Bombardier’s Learjet plant is on the airport’s west side. They make jets in the same product category, and Textron is the only likely buyer, he added.

Von Rumohr said Embraer executives told him they aren’t interested in a Learjet acquisition.

“You really have one buyer and one seller,” von Rumohr said. “… My guess is I would think it would be a good fit with Textron.”

A Textron Aviation spokeswoman said in an e-mail that the company doesn’t comment on rumors or speculation.

Von Rumohr isn’t the only analyst openly thinking of a Learjet sale with Textron Aviation as the suitor.

JPMorgan analyst Seth Seifman also raised both points in his final analysis of Bombardier’s earnings, announced Friday.

“The future of Lear has implications for TXT (Textron), where Cessna is a key competitor,” Seifman wrote this week. “Textron is often mentioned as a potential Lear buyer, and we don’t doubt there would be interest, though it is unclear Bombardier would strengthen its competitor this way.

“If Bombardier sold Lear to another buyer — including one from overseas — the new owner’s plans for investment and market share could affect Textron.”

This story was originally published August 10, 2016 at 6:38 AM with the headline "Bombardier analysts raise possibility of Learjet sale."