Bombardier Inc.'s blockbuster $3.1-billion (U.S.) order from charter operator VistaJet for 56 Global business jets solidifies the Montreal-based company's lead in the rarefied world of ultra-high-end luxury executive aircraft.
Coupled with last year's order for 50 Global aircraft from NetJets, VistaJet's order for 56 of the planes establishes the Global line as the world's predominant large-cabin, ultra-range business jet, RBC Dominion Securities Inc. analyst Walter Spracklin said in a research note Tuesday.
The order could swell to $7.8-billion if VistaJet Holding SA exercises all of its options on another 86 Globals.
It's a high-margin segment observers say is poised for robust growth over the next several years, particularly in emerging markets such as China, Russia, the Middle East and Africa, after the slump in the wake of the 2008 economic slowdown.
But even as Bombardier continues to rope in an impressive string of orders, it faces stiff competition from archrival Gulfstream Aerospace Corp., a unit of General Dynamics Corp., and France's Dassault Aviation SA, while at the same time dealing with sluggish sales and delays in its new C Series commercial aircraft program. Indeed, Bombardier's share price, despite an 8-per-cent jump Tuesday on the news, remains stuck in the doldrums.
Bombardier is spending more than $1-billion to develop two new ultra-luxurious, long-range business jets – the Global 7000 and 8000 – in order to take on Gulfstream's new G650.
But Bombardier is about five years behind the G650, which is now at the delivery stage. The Global 7000 and 8000s are not scheduled for delivery until 2016 and 2017, respectively.
"Gulfstream gets five years free and clear in the ultra-high-end category," said Richard Aboulafia, an aviation consultant with Teal Group.
Meanwhile, Bombardier Aerospace must deal with the distraction of a recently announced six-month delay on the first test flight of its transcontinental C Series airliner, which has so far booked only 138 firm and 214 optional orders.
There is a costly tradeoff here as Bombardier juggles with trying to solidify its winning business-jet strategy while at the same time coping with the C Series problems as well as a sluggish market for its regional jets, Mr. Aboulafia said.
National Bank Financial analyst Cameron Doerksen said in a research note Tuesday that the VistaJet order is "clearly positive for Bombardier and should give investors additional comfort around business jet delivery levels in the coming years."
At the same time, he cautioned that there remains "lingering uncertainty around the C Series development timeline" and that the company's weak cash flow could persist through 2013.
RBC's Mr. Spracklin said in a note that the VistaJet order will boost Bombardier's Global's backlog above the company's target range of 24 to 30 months.