, which operates its own fractional ownership program subsidiary, FlexJet, is poised to become a cornerstone of fractional rival NetJets’ future with historic orders valued at up to $10.1 billion.
In addition,joins as part of NetJets’ effort to rejuvenate its fleet over the next decade, and now has an anchor for its new Latitude program, which is scheduled to certification in 2017.
NetJets’ latest Bombardier order, announced late June 11, totals $2.6 billion firm and $7.3 billion including options for a mix of Challenger 300 series and 605 aircraft, which also are found in Flexjet’s fleet. NetJets also has a standing order worth up to $2.8 billion for a mix of the larger Bombardier Globals, a range and class of aircraft that Flexjet has opted against for the time being.
Jordan Hansell, NetJets’ chairman and CEO, says competitive issues were not a factor in the negotiations, which were based on a strategy developed some 2 1/2 years ago to buy the best available aircraft with the latest technologies.
Flexjet President Fred Reid told Aviation Week earlier this year that Bombardier has sought to make its fractional division a more independent operation and that “we’re here to make money with the hand that’s dealt us, and that’s what we’re doing.”
For Bombardier, the orders provide a nice boost for its Aerospace backlog, which stood at $23.3 billion at the end of March. Deliveries of the NetJets Globals begin this year and the Challengers in 2014, stretching out over 10 years. But analysts are cautious about the order, given NetJets’ reputation as a tough negotiator. In addition, the recent NetJets orders were widely believed to have accompanied substantial trade-in deals.
Hansell declined to provide details on the deals, basing the values of the orders on list prices.
If all options are exercised, the deal amounts to more than one full year of revenue for Bombardier Aerospace, and represents a long-term aftermarket stream that some analysts says could generate an additional $2.3 billion in revenue.
For Cessna, the deal continues its long-term relationship with NetJets that started with delivery of one of the fractional provider’s first aircraft–a Citation II–and has a working relationship going back more than 20 years. NetJets currently operates more than 250 Citations.
The Latitude is Cessna’s latest development program, and was just announced at last fall’s National Business Aviation Association convention in Las Vegas.
Industry observers view NetJets’ unprecedented order as evidence that of a strengthening of the business jet sector, which has been noticeably affected by the global economic downturn, and this sentiment is shared by Cessna President and CEO Scott Ernest, who says, “This order from NetJets shows confidence in the growing strength and long-term outlook of the global economy and the aviation industry.”
But there also are doubts that this order is simply a one-time event and not part of a broader revival. And NetJets’ Hansell concedes that while sales have improved, this is at a slow pace and from a very low base. But he adds that the market will return both, in the U.S. and globally.
NetJets also structured its orders in such a way that they could simply serve as fleet replacements, or, with options, position the Columbus, Ohio-based fractional ownership provider for expansion should the market return to its days of rapid growth.