The second in a two part series examining the strategic landscape for the remaining Embraer and Bombardier business aircraft units.
The 2008 global financial crisis brought with it a fundamental realignment for business aviation. It was also a particularly formative year for Embraer and Bombardier.
The Brazilian manufacturer was forging a bespoke business unit from scratch. Embraer unveiled plans for the aircraft that became the Legacy 450 and 500 (and now the Praetor 500 and 600) and it only delivered its first clean sheet business jet, the featherweight Phenom 100, at the close of that year. Embraer’s arrival on the scene delivered on its promise of disruption and arguably hastened the bankruptcies of both ailing Eclipse and Hawker Beechcraft.
In less than 15 years, Embraer went from a single converted regional jet to a full corporate jet product line at full speed. And along the way it was inventing new technologies to cross-pollinate its E-Jets and defense products. Executive aviation accounted for just 14% of revenue in 2008; it’s more than double that today.
For Bombardier, 2008 brought the launch of its C Series. The jet was intended as a new commercial pillar to stand alongside its high-revenue Global line. As the small and midsize jet market limped out of the recession, production of Global 5000s and 6000s boomed, fueled by Russian and Middle Eastern demand. For the most expensive years of spending on the C Series, cash from sales of its biggest business jets helped finance the commercial unit’s multi-billion dollar development, the ill-fated Learjet 85 and the secret work on the M170, eventually the Global 7500 — its response to the Gulfstream G650.
According to one former senior Bombardier official, all the fixation on bolstering C Series sales paled in comparison to ensuring the Globals stayed strong (along with smaller Challenger 300s) to keep the lights on. And they did. From the overall industry peak in 2008, annual Global production grew another 57%, reaching 80 deliveries in 2014.
A decade later, the market needed around half as many airplanes as first anticipated and the value of those aircraft over the next decade has dropped from $280 billion in 2014 to $251 billion in 2018 with each successive 10 year estimate, according to Honeywell.
Fluctuating currencies and geopolitical headwinds remain in China and elsewhere, for example, but there are reasons to be optimistic. Corporate profits and stock market performance, bolstered by U.S. tax reform — key correlated indicators to business jet purchasing — are strong and a glut of used airplanes for sale is at record lows. Analysts see a market stabilizing in the U.S. and Europe, returning to regular growth.
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