’s Business Aircraft Division logged a slower second quarter, with softening deliveries and even softer orders.
But this is against a backdrop in which the Canadian conglomerate had been taking in record fleet orders for its Global and Challenger business lines in recent years.
The business aircraft sector logged a book-to-bill below one in the second quarter with net orders (total orders less cancellations) reaching 30 for the quarter. This is down from 47 a year ago, when the company had unveiled its Challenger 350 and taken in fleet orders for the model from both NetJets and VistaJet.
But on the year, Bombardier is still ahead of last year’s first-half order total. Through the first six months, Bombardier has 76 net orders, compared with 74 in the first half of 2013. Bombardier says the decrease in the second quarter primarily came from fewer medium and large business jets. Orders picked up for Bombardier’s70/75 series, which was certified in late 2013.
Deliveries for the unit, meanwhile, declined 16% in the second quarter as Bombardier transitioned to the Challenger 350, which entered service on June 27. Deliveries, which were down by seven aircraft to 38 business jets for the quarter, were also affected by an airworthiness directive related to engine fan blade issues for the Learjet 70/75.issued the AD in June, but Bombardier says, "The issue has since been resolved and our customers’ affected aircraft have returned to service."
Even with softer deliveries in the business jet unit, Bombardier’s recently restructured Aerospace group still reported increased revenues of $2.5 billion for the second quarter, compared with $2.3 billion in the same period a year ago. Earnings before income and taxes were also up to $141 million in the most recent quarter, compared with $107 million in second quarter 2013.
Bombardier President and CEO Pierre Beaudoin says the reorganization, which is including layoffs and a 15% reduction in overhead, will enable the company to "focus on growth" as it works to bring new products to market.
As it does this, the company is assessing its priorities. Bombardier has come under scrutiny for delays in itsprogram, in which it has invested heavily. But along with the CSeries, Bombardier must balance flight-test programs for the Global 7000 and 8000 as well as the Learjet 85.
The first Learjet 85 flight-test vehicle flew April 9, and Bombardier says "additional flights have since occurred" and "flights are proceeding as expected." But Bombardier is still reluctant to provide a timeline for the flight-test program, saying an update would be provided once its review of the program has been completed.
Beaudoin told analysts that the company was "evaluating our priorities" with the programs. Analyst J.P. Morgan notes that with an anticipated first flight of the Global 7000 in early 2015, "Three flight-test programs will be a lot to manage." The analyst believes that the Learjet 85 likely will become the lowest priority.
"Given the volume of testing, the Lear 85 seems most likely to us to be pushed out," J.P. Morgan says. "The CSeries is the highest profile program at Bombardier, while the Global 7000/8000 aircraft have higher margin opportunity and serve the company’s key high-end business jet customer base. Lear 85, meanwhile, is already well behind schedule."