Bombardier among hardest hit as business jets sitting longer in hangars

By Ross Marowits, The Canadian Press

MONTREAL - Canadian aircraft manufacturer Bombardier (TSX: BBD-B.TO) was among the hardest hit as business jet activity slowed in July under the weight of a slower global economy, one industry analyst says.

Total domestic and international business jet flight cycles fell by 11 per cent last month, pushing the total number of takeoffs and landings this year down seven per cent, said a report by UBS analyst David Strauss.

Short-range aircraft led the decline as this category of planes, with a range of less than 2,000 nautical miles, sustained a 10-per-cent reduction. That compared to a drop of five per cent for long range planes, and three per cent for medium range airplanes.

Montreal-based Bombardier and Dassault Aviation of France endured the largest declines as use of their business jets each fell by 10 per cent so far this year. Flights of Hawker Beechcraft planes were seven per cent lower, followed by Cessna at five per cent, and Gulfstream down two per cent.

Although the weakened economy may have influenced the use of these aircraft, strong orders suggest the business jet market is holding up, he said in a report.

"We believe the market has come off from its peak and is likely to fall further, although deliveries and earnings could continue to grow given unprecedented backlogs."

UBS said Cessna aircraft flew 39 per cent of all business jet flights in the past 12 months, followed by Bombardier at 23 per cent, Hawker Beechcraft at 16 per cent, Gulfstream at 11 per cent and Dassault at nine per cent.

Bombardier Aerospace spokeswoman Danielle Boudreau said senior executives of the Montreal-based company acknowledged earlier this year they expected a "softness" in the sale of business jets in the United States. However, demand remains very strong in the rest of the world, she added.

Another sign of slowing demand is a recent 10 per cent price decrease for co-ownership of business planes through Bombardier's Flexjet program. The price has decreased on several of the company's 25-hour flying cards, said web specialists HalogenGuides. A 25-hour card to fly on a Learjet 40 has decreased to US$107,900 from US$119.900.

Although order rates for these planes are expected to slow, analysts say a strong backlog will support higher deliveries this year and likely a similar level in 2010.

The General Aviation Manufacturers Association said manufacturers delivered 366 business jets in the second quarter, up 38 per cent from a year ago. And more jets were delivered in the first six months of 2008 than in all of 2004.

"We believe that these numbers and continued manufacturer optimism are evidence that despite concerns about slowing business jet orders in the U.S., the market still remains healthy," wrote Cameron Doerksen of Versant Partners.

In the face of an economic slowdown, Bombardier shares have soared, gaining nearly 25 per cent this year.

On Wednesday, they gained 11 cents to close at $7.62 in trading on the Toronto Stock Exchange.