Bombardier

  • Tracey Cheek posted an article
    Jet Transactions Releases Q1 2019 Bombardier Market Update see more

    NAFA member Brant Dahlfors, co-founder of Jet Transactions, shares the Q1 2019 Bombardier Market Update.

    Welcome to another year of uncertainty fueled by declining Global GDP, trade wars and geo- political concerns in major trading markets around the world. The drop in trading activity in the last month of Q4-18 certainly dribbled into early Q1-19. By late-January however activity clearly increased to Oct/Nov levels raising hopes that 2019 would actually show positive growth across new and used aircraft. By the end of Q1 market signals are mixed at best. Charter activity is showing signs of decline as we start the year. This is something to pay close attention to as charter activity is often a “canary in the coal mine” signal.

    New aircraft deliveries are down quarter over quarter which is consistent with the seasonality effect as OEMs pull as many aircraft into the fourth quarter as possible. The major OEMs all have new models starting with deliveries beginning from mid-2018 through mid-2020. With low starting production rates, the industry will not see the full effect for another year and a half to two years. On the positive side the OEMs crystal balls all indicate there is a solid market for new high tech models with more range, speed, cabin space and efficiency. In spite of the 8+ new models recently, or soon to be certified, we expect several new exciting airplanes to be introduced before year-end.

    How does this affect the Bombardier pre-owned market? After a strong end to 2018, Bombardier saw an about average seasonal slowdown of factory new sales, dropping to 9 new units delivered in the first quarter of the year. The total number of pre-owned units for sale rose 11%, and while the older Globals have all crossed above 10% of their respective fleets for sale, the Challenger markets have stayed strong across the board with less than 5% of their respective fleets for sale. With the first GL7500 now in service and many more gearing up to be delivered in the coming months, Bombardier should continue to see strong demand for both pre-owned and new inventory this year.

    Click here to view the full market update.

    This market update was originally published by Jet Transactions on April 30, 2019. 

  • Tracey Cheek posted an article
    David Coleal: A new Global era for Bombardier see more

    NAFA members Alasdair Whyte, Editor and Co-Founder, and Alud Davies, Asia Editor, with Corporate Jet Investor, share their article on David Coleal's return to Bombardier.

    David Coleal re-joined Bombardier in 2015 as part of its turnaround team.  Now thing are looking a lot brighter.  

    A lot of exciting things are happening at Bombardier Business Aircraft. New aircraft are being delivered, new models developed, upgrades made to existing aircraft and serious investment in services. You can sense the confidence in the division. So, it is perhaps surprising that one of the words that David Coleal, president of Bombardier Business Aircraft, uses a lot when he is talking about the future is the word “prudent.”

    This partly reflects the wider organization. Bombardier is midway through a company-wide turnaround plan after problems with the CSeries commercial aircraft and the key theme of its December 2018 New York Investor Day was that things are very much on track.

    But it also reflects how Coleal sees his role. Coleal and his colleagues are keen to be innovative and take risks, but they have to deliver on their plan.

    Since Coleal returned to the company in 2015 he has been delivering on his promises. In the past five years the OEM has: delivered more business jets in its class than any other manufacturer (although Gulfstream wins on dollar amount); grown its backlog to $14.3 billion, the biggest in the industry; certificated the newly delivered Global 7500 and; launched the Global 5500 and Global 6500. He has also reshaped the business, selling its training business to CAE, while investing heavily in its own service network.

    “You’ve seen the numbers that we have posted over the past three-and-a-half years,” says Coleal, “driving our earnings, doubling our earnings, continuing to improve and drive our service and support and delivering the best aircraft in the industry including the Global 7500.”

    Coleal is speaking at a time when he and his team are still on a high from the delivery of the first Global 7500 to Stonebriar, a leading business jet financier.

    With a range of 7,700 nautical miles the Global 7500 is the longest-range dedicated business jet available – capable of flying between New York and Hong Kong without stopping.

    But the Global 7500 is not just about flying far. It is fast, capable of flying at Mach 0.925, and it is big. The Global 7500 has a cabin 10 feet longer than other Global models. With four living spaces and the largest kitchen (an area where Bombardier knows passengers like to congregate) the aircraft is exciting loyal customers as well as new ones. “The 7500 has been an amazing journey,” says Coleal. “It is going to set the standard for the industry of what people expect for this size and class of aircraft. We just couldn’t be prouder. We are elated that we’re delivering.”

    Launched in 2010, the Global 7500 (then branded the Global 7000) was delayed in 2015 – just after Coleal joined – due to issues with the design of the wing. The manufacturer then told customers that it would be ready in 2018.

    There was a lot of pressure on Coleal and his colleagues to make this happen. In fact, delayed certification was identified in 2018 by Alain Bellemare, Bombardier’s CEO, as one of the two biggest risks facing the whole company. Coleal also did not want to let customers down.

    “We met our commitments to our customers,” says Coleal. “The customers that have been in the backlog for many years are incredibly excited. I stay close to them with regular updates, and we exceeded both range and field performance, so everything about the aircraft is going extremely well.”

    The delivery of the Global 7500 is also a significant boost to the whole company.

    “This marks the dawn of a new era,” says Coleal. “We're basically making history with the delivery of this first aircraft and its entry into service.”

    But he is being prudent about Global 7500 deliveries. Following the first delivery in 2018, Coleal says that Bombardier is planning to deliver between 15 and 20 Global 7500s in 2019 - around three to five aircraft in the first half of the year with most coming in the second six months. He says that this is to ensure that the first customers have a good experience and that the entry into service is as smooth as possible. In 2020 he plans to deliver between 35 and 40 Global 7500s.

    Bombardier is also focused on building the new aircraft efficiently. Fitting the interior into the first Global 7500 took less time than it normally takes to complete a Global. Coleal says that Bombardier has also taken delivery of all of the parts it needs for its 2019 deliveries, so is confident that there will be no supply chain issues.

    Click here to read the full article.

    This article was originally published in Corporate Jet Investor's CJIQuarterly Q1 2019, p. 19. 

  • Tracey Cheek posted an article
    Jet Transactions Q4 Bombardier Market Update see more

    NAFA member, Brant Dahlfors, Co-Founder of Jet Transactions, shares the Q4 Bombardier Market update.

    2018 continued its upward trend and ended the year with both new and used deliveries and orders up over 2017. However, the big-bang Q4, that so many projected, seemed to be over by mid-November aided by an increasingly caustic political environment, slowing GDP (worldwide), wild stock market gyrations and finally the threat of a Government shut down that materialized by the end of the Qtr. It wasn’t a bad quarter, it just wasn’t a great quarter as buyer caution outweighed the tax benefit fueled activity, which we began seeing in Q2 & Q3. The caution was also evident in aircraft activity which on a whole was down 0.5% Year over Year according to flight tracking data from Argus International.

    The future remains exciting nonetheless. We saw new certifications in 2018 of the G500 and Global 7500. 2019 will celebrate more exciting aircraft with the G600, Global 5500/6500 and Embraer Praetor 400/500 all due for certification. We expect 2019 to be a tougher growth year as new models will be in low ramp up production rates and the inventory of later model pre-owned aircraft remain low.

    How does this affect the Bombardier pre-owned market? Bombardier products ended the year on a high note, with overall inventory levels down nearly 11% year over year across all tracked models and pre-owned sales rose 30% over the previous quarter. Q4 saw substantial jumps in new units delivered as well compared to Q3-18, though up just 1 unit from last year’s close. Most of the market remains at healthy levels, with only the GL5000 Classic and Vision models inching above 10% of the fleet for sale, respectively. With the GL7500 now approved by both the American and Canadian aviation authorities, 2019 should prove to be a continual improving year for the OEM.

    Click here to see the full report.

    This report was originally published in Jet Transactions newsletter on 1/21/19.

     

  • Tracey Cheek posted an article
    NAFA member, Johnny Foster, CEO of OGARAJETS, talks to Business Aviation Magazine. see more

    NAFA member, Johnny Foster, CEO of OGARAJETS, talks to Business Aviation Magazine.

    Q: What do you think of the market at the moment? How are potential buyers and sellers reacting?

    JF: I am generally optimistic. This is particularly true in the heavy segment and the last 30-60 days has seen strong buying activity in all modern segments. There are some pockets of 
    weakness; however, we are very bullish right now with respect to overall market health. 

    We have been in a buyer’s market ever since the global financial crash, but it seems to me that we are now firmly transitioning into more of a neutral market. In fact, the market today seems to be edging towards favoring sellers, as quality supply is becoming thinner and thinner. 

    No one believes that we are going to see a return to the mid-2000s any time soon, where we saw asset values actually appreciating instead of depreciating. But what we are seeing is a very distinct leveling out of what had been very steep annualized market depreciations. We will still see depreciation as the norm, clearly, but I expect it to settle somewhere between 5-10% as the annualized depreciation on new aircraft for the first five years or so after purchase. The curve will begin to flatten in subsequent years and, on average, settle around 3% annually post year-10.

    Q: What kind of impact are the various new models and soon-to-be-released models having on the market? Are they stimulating demand?

    JF: In my view much of the impact of new models, particularly the G500 and G600, has already been priced into the market. You can see it today in the way that pre-owned G450s in the 10 to 15-year range are now selling at amazing bargain prices. The depreciation suffered by those aircraft is a direct response to the market anticipating the arrival of new platforms and expectations that demand will shift towards those new models. 

    Moreover, it is not just Gulfstream. Bombardier is experiencing the same thing with depreciation in Globals thanks to the new models they have in the pipeline. 

    Dassault is rather di  erent.    ey have always been more stable, price-wise. You don’t see the heavy  uctuation in asset values that are more common to Gulfstream, Bombardier, and Textron. Dassault’s business model has always been very di  erent from the other OEMs, with its focus on low volumes and high quality. Logic says that you should go for volume if you want a sustainable business, but Dassault has proved itself able to go against that model time a  er time. It will be interesting to see if the new leadership is as enthusiastic about bringing new models forward following the passing of Serge Dassault earlier this year. Is the passion still there? Will the new leadership be able to give the market enough con  dence 
    that a lower scale of production can still create very stable pricing?

    In today’s tight market what is very clear is that Falcons are holding up very well. The Falcon 2000EX is an excellent example. There is virtually no supply. We have been engaged to purchase one for a US client and we are competing with five other very experienced US corporate buyers, all with virtually the same acquisition requirements. 

    Q: What kind of pricing are you seeing on the Falcons?

    JF: As an example, a 2008 model EX, which was delivered new at roughly $28 million is still making every bit of $12 million and perhaps more. So you are looking at just over a 50% depreciation rate for a 10 year old aircraft. That compares very well against ten-year-old Gulfstreams and Bombardier Globals. In my view, although Dassault argues this is because 
    their aircraft is inherently better, it really comes down to supply and demand. Tight supply causes prices to stay stable. 

    Q: So how healthy is the overall market right now?

    JF: When we look at the health of the aviation sector in general and the pre-owned market in particular, we generally talk about the percentage of the overall   eet that is available for sale at any point in time. Typically, the industry has always embraced 7-10% as  the normalized,  ‘healthy’ zone for the size of the pre-owned   eet up for sale. However, we think that a better indication of the market’s  overall  health  is the pace of turnover of that supply. We use a ten-month period as the yardstick for this measure. If the for-sale fleet turns over in 10 months, we take it that the market is very healthy. If it takes 20 months we begin to get concerned. If we are a buyer, we know that there are going to be some great opportunities when the market slows like that. 

    So, right now, as I began by saying, the market is transitioning over to a seller’s market.    ere are still bargains to be had, but every bargain is relative to what is happening around it. Some 40% of our business involves serving as the buyer’s agent in transactions. With the market as tight as it is today, we have to make sure that the buyer is prepared to move rapidly when an opportunity comes up. We help them with our  data  and  analysis,  but  we impress on them that the very best opportunities will only be on the market for a matter of days or weeks.  Setting proper expectations from onset of the engagement remainsparamount to our success with clients.

    Q: Finding the best transaction opportunities doubtless needs deep market knowledge?

    JF: Absolutely. A good part of our analysis goes into understanding the nature of the supply available on the market. Many aircra   will not be priced reasonably, or they may have some  adverse  history  of  damage  or  corrosion.  Many  of  the aircra   listed on the market today have been on the market for two or three years, which is almost an immediate no-no.    ere is no reason why an aircra   in good condition takes that long to sell, unless  the owner simply has unreasonable price expectations. However, even aircra   with an adverse story or that need some modernization are sellable, if the seller has been properly guided about the pricing expectations of the market with respect to their aircra  .

    This article was originally published in the August 2018 issue of Business Aviation Magazine.

  • Tracey Cheek posted an article
    NAFA member, Brant Dahlfors, with Jet Transactions, shares the 2018 Q3 Bombardier Market Update. see more

    NAFA member, Brant Dahlfors, with Jet Transactions, shares the 2018 Q3 Bombardier Market Update.

    2018 continues to grow and show strong signs of stability. Q3 was exciting for new product certifications led by Gulfstream announcing the certification of the all new G500 and followed by Bombardier's certification of the Ultra-Long Range Global 7500. On top of new large aircraft product announcements at EBACE in May, confidence in future growth is apparent.

    Overall, in the segments we track, Q3 reflected the normal seasonal variations (vacation time) and new deliveries and pre-owned transactions were down 20+% over Q2. Shops are full with pre- buys and NextGen upgrades in addition to their normal maintenance customers. The pre-owned inventory continues to fall, down another 8.1% this quarter. In many cases, popular late model aircraft are below 5% of the fleet being available for sale. Gross numbers of pre-owned transactions will continue to decline for the foreseeable future as the market is seriously supply constrained.

    How does this affect the Bombardier pre-owned market? With a whirlwind of new options coming to market soon, factory new buyers should soon start the migration from the existing product line to the latest and greatest offerings. Bombardier is well positioned with three new models to discuss – all available for delivery in the next 1-2 years. Overall pre-owned transaction levels dropped significantly across the Bombardier tracked models, with a slight uptick in inventory for sale. New deliveries also edged downward, the largest drop across all three OEM’s, though not uncommon traditionally for the third quarter.

    Read the full report here.

    The original market update was published by Jet Transactions on October 15, 2018.