In the weeks building up to the 2016 NBAA show opening, speculation among industry observers continued to swirl as to whether the Learjet brand will remain as a Bombardier-owned property. Throughout the year, the Bombardier group has given off somewhat mixed signals on what it intended to do with Learjet.
The still iconic brand has been in the position of having but one model that was selling, albeit slowly--the Learjet 75. Sales of that aircraft hit a low point in the first quarter when only one was sold, but picked up to six by the end of June after Learjet unveiled a refined cabin, including a pocket door that separates the main cabin from the galley and drops cabin noise levels by eight decibels. At that time, Learjet also announced plans for “aggressive marketing and selling,” of the $13.8 million model.
A senior Bombardier executive recently indicated the company would be comfortable with Learjet moving 20-25 airplanes annually, a sharp decline from the 32 it sold last year. Bombardier Inc. chief financial officer John Di Bert told stock analysts mid-year that selling around two dozen airplanes per annum would keep Learjet “a decent-sized program.” Meanwhile, Bombardier CEO Alain Bellemare has appeared more than willing to shed underperforming assets from the company's portfolio, as seen by its offloading of the CL waterbomber program to Viking Aircraft. Publicly, Bellemare would only say that, “we are looking at how we best position the Lear 75 in this environment.” Bombardier maintains that the Learjet 75 offers “unmatched” performance against competitive aircraft.
Production of the Learjet 70 has been temporarily discontinued in the absence of orders. Up against newer competition from both Cessna and Embraer, Learjet has no new aircraft on the drawing board following the recent and very costly $1.2 billion writeoff of the composite Learjet 85 program.
The aftermarket support business for the worldwide fleet of some 2,300 aircraft, widely seen as the most valuable part of the company, is believed to generate revenues of $400 million annually with a profit margin of between 12 and 15 percent. Textron has long appeared to be the most logical suitor, and a spokesman for that company even said it was interested in Learjet, if it was priced right. Textron's potential play is obvious; a repeat of when it acquired Hawker Beechcraft. Shut down new Learjet manufacturing, roll Learjet owners into is growing product support network and convert as many as possible to new Cessna jets. But with Cessna increasingly taking aim at the super-midsize and large-cabin markets (where Bombardier already offers models such as the Challenger 350 and 650), Bombardier may be understandably reluctant to help Textron Aviation gain market share.
Bombardier posted a second quarter loss of $490 million, bringing its deficit for the first six months to $628 million on revenue of $8.2 billion. It has a substantial $2 billion bond debt coming due in 2019. Bombardier also has large ongoing capital requirements related to manufacturing its new C Series regional airliners and developing the Global 7000 ultra-long-range business jet.
Bombardier's strategy has appeared to be: remove as much excess cost out of the Learjet production line as possible. Earlier this year it “optimized” the production line for the Learjet 75 at Eisenhower Field in Wichita and also sent off a fresh round of layoff notices. Meanwhile, fans of the Learjet brand have been watching closely; and hoping for the best.
