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Bragging rights aren’t all that’s at stake. Canada’s largest aerospace company is banking on the Global 7000 to drive sales in the coming years after ceding control of its marquee commercial jet to Airbus SE. Bombardier is playing catch-up to Gulfstream, a unit of General Dynamics Corp., which set the standard for speed and comfort with the first delivery of its G650 five years ago.
A crucial test is shaping up as Bombardier aims to get its new private plane to customers by the end of 2018. A wing redesign delayed its debut by two years. Brisk sales of the Global 7000, with a list price of $73 million, would boost Bombardier’s turnaround — and justify an investment of several billion dollars in a plane that can whiz passengers from Hong Kong to New York with the comfort of a bedroom and shower.
The aircraft “is the entire ball game for Bombardier,” Chris Murray, an AltaCorp Capital Corp. analyst in Toronto, said in a telephone interview. “One of the things that is super critical to the entire recovery plan is that the 7000 hits entry into service flawlessly.”
The Global 7000’s flexible wings, spanning 104 feet, will give passengers a smoother ride than competing aircraft, according to Bombardier. A top speed just under supersonic matches the fastest aircraft in the industry. The key selling point: a spacious cabin with four separate areas to hold meetings or take a nap.
“We already have people asking about the 7000,” said Pat Gallagher, sales chief for NetJets Inc., Warren Buffett’s private jet company, which has ordered an undisclosed number of the planes. “It’s bigger than anything else that’s out there. It will be the new flagship for Bombardier, for NetJets and for the industry in general.”
The success of the Global 7000 may depend in part on how Gulfstream reacts to its first competitor in the ultra-long-range market that it created with the G650. The planemaker isn’t likely to give up its premier spot without a fight.
“I certainly wouldn’t want to relinquish any control of the market that I believe we built,” Gulfstream Aerospace Corp. President Mark Burns said in an interview during the largest gathering of private-jet makers in Las Vegas in October. “That’s something we have to be mindful of.”
Gulfstream bet early that the wealthy were willing to pay for the kind of features offered by the G650. The wager has paid off with more than 260 deliveries of the $69 million plane since its December 2012 debut. The G650 continues to set speed records, clocking a Tokyo-New York trip in less than 11 hours.
The combination of speed and distance sells, said Burns, who calls his plane “unmatched.” The extended-range version of the G650 can fly 7,500 nautical miles, edging out the Global 7000 by 100 nautical miles.
Gulfstream delivers about 60 G650s a year, accounting for about half of segment sales, according to JPMorgan Chase & Co. estimates. The model has helped make Gulfstream the most profitable private jet maker, with operating profit margins of 21 percent.
Bombardier’s business aircraft unit, with profit margins of 8.5 percent, has a long way to go to catch Gulfstream. Chief Executive Officer Alain Bellemare will rely on the Global 7000 to help keep his promise to boost annual revenue to more than $20 billion by 2020. The planemaker said it has invested $1 billion this year alone in developing and producing the aircraft, with total cost of the project amounting to “a few billion dollars,” Bellemare said in an interview Thursday in New York.
Of the expected $3.5 billion increase in annual revenue at Bombardier’s Business Aircraft unit by 2020, the Global 7000 alone will probably contribute about $3 billion, Chief Financial Officer John Di Bert said Thursday in the same interview.
“This is going to be a very solid return program,’’ Di Bert said of the Global 7000. “It’s going to create significant value for shareholders. It’s going to be around for a long time.”
Bombardier’s plan to ramp up production of the Global 7000 to as many as 45 planes a year after it enters service could pose a threat to G650’s production levels and profit margin, JPMorgan analyst Seth Seifman said in a Dec. 12 note. The 7000 is already building a fan base.
NetJets, which operates a fleet of 725 private jets, is attracted to the Global 7000’s more efficient General Electric Co. engines, which promise to keep operating costs at the same level or better than Bombardier’s smaller plane, the Global 6000. Bombardier is expected to begin flights of its fifth 7000 test plane within weeks, complete with a fully furnished interior, said Gallagher, the NetJet sales chief, who has toured the aircraft’s assembly line.
VistaJet customers who fly long distances are eager for the aircraft to begin service, said Ron Silverman, U.S. president for the Malta-based private jet charter company. VistaJet’s founder Thomas Flohr has “multiple” Global 7000s on order and VistaJet has an option to incorporate those planes in its fleet, Silverman said.
“As the routes become longer, people are looking for more comfort in the cabin,” Silverman said. “The Global 7000 brings that level of comfort.”
©2017 Bloomberg L.P.
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