Competition will be stepped up in business aviation as Gulfstream, Bombardier’s big rival, will add two business jet models to its portfolio. If the first (G800) should not threaten the Global 7500 – the spearhead of the Quebec aircraft manufacturer – the other (G400) risks giving the Challenger 650 serious headaches, some analysts believe.
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Introduced in 2014, the Challenger is the most recent version of this platform from the late 1970s which, according to many observers, is ripe for a major facelift.
If Bombardier still has a few years to react since the first deliveries of the G400 are not scheduled until 2025, Richard Aboulafia, of the Teal Group, is categorical.
“We cannot even speak of a confrontation,” launches the analyst at the end of the line. It’s something brand new versus something geriatric. It’s an instant knockout. ”
Bombardier and Gulfstream are the two major players in the business aircraft sector, ahead of Textron and Embraer. In the industry, from January to June, approximately 28% of deliveries were made by the Quebec aircraft manufacturer and 25% by its main rival.
On Tuesday, the Quebec aircraft manufacturer did not comment on the new products of its competitor, presented in a context where business aviation has gained altitude since the start of the pandemic. The ultra-rich and better-off opt for this mode of transportation to get around, which boosts sales.
Gulfstream made the unveiling late Monday evening, a week before the National Business Aviation Association show in Las Vegas, where Bombardier is to present the cabin of its Challenger 3500 – a new version of the Challenger 350 – unveiled on September 14.
Priced at US $ 34.5 million, Gulfstream’s G400, a super-midsize segment aircraft, can carry 9 to 12 passengers and travel up to 4,200 nautical miles. The aircraft will be powered by a PW800 engine from Pratt & Whitney. Its Canadian subsidiary, which has a strong presence in Quebec, will supply the powertrain.
For its part, the Challenger 650, whose list price is 32.5 million US, can accommodate 12 people and cover 4,000 nautical miles. Assembled in Montreal, the aircraft does not occupy a large place in Bombardier’s portfolio.
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–PHOTO FROM GULFSTREAM WEBSITE PHOTO
The G800 is the longest range business jet in the industry at 8,000 nautical miles.
–PHOTO FROM GULFSTREAM WEBSITE
The G400 will begin delivery in 2025 and will compete with Bombardier’s Challenger 650.
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Gulfstream did not offer an aircraft in this niche where the Challenger 650, the Falcon 2000XLS (Dassault) and the Praetor 600 (Embraer) currently compete.
What strategy?
Of the 114 business jets delivered by the multinational last year, 13 were Challenger 650s, according to Brian Foley of US firm Brian Foley Associates.
“It will be a test for Bombardier to see how much they want to stay in this segment,” he believes. They abandoned the Learjet because it was not profitable enough. The same fate could be reserved for the Challenger 650. ”
Bombardier was able to offer a new version of the Challenger 350 – its best seller – while respecting its research and development budget, which fluctuates between US $ 200 and US $ 250 million.
With debt still high, the two analysts wonder where the company will find several hundred million dollars to refresh the Challenger 650, equipped with old General Electric engines.
“Financially, I don’t believe the company is in a position to make this type of commitment,” says Foley, while acknowledging that Bombardier still has some time to prepare.
Less fears
In the large cabin aircraft niche, the G800, which is due for delivery in 2023, is less problematic for Quebec society, according to the two experts.
The 71.5 million aircraft can accommodate 19 people and offers the longest range in the industry at 8,000 nautical miles, or 300 more than the Global 7500. It is, however, less spacious than Bombardier’s flagship.
Mr. Foley pointed out that the Global 7500 was already in service and that several dozen aircraft had already been delivered, which gives Bombardier an advantage. From 2025, Dassault will also offer a competitor, the Falcon 10X.
“These are all good products,” says Foley. There should be room for everyone in the market, but it will be more competitive. ”
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Konark Gupta of Scotiabank believes Bombardier will not stand idly by and will continue to offer new products, which may force it to spend more.
For the analyst, this fiercer competition does not bode well.
“We continue to believe that Bombardier’s annual investment range may not be sustainable,” Gupta said in a note. Otherwise, the company would risk losing market share. ”
On the Toronto Stock Exchange on Tuesday, Bombardier shares retreated 8 cents, or 3.7%, to close at $ 2.10, as some analysts who follow the company’s activities reacted to the presentation of Gulfstream.
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