Bloomberg Businessweek - USA (2020-11-02)

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68

BombardierInc.is thelittleaerospace

companythatcan’tseemtocatcha

break.Oncevaluedatmorethan$20bil-

lion,theCanadiancompanytodayis

wortha fractionofthatandwaskicked

outoftheS&P/TSXCompositeIndex

earlierthisyear.Itswoesstemlargely

fromtheC Seriescommercialjetpro-

gramit launchedin2008.Thateffort

wasscuttledbydelays,budgetover-

runs,andan(ultimatelyunsuccessful)

tradecomplaintfromBoeingCo.,forc-

ingBombardiertosella majoritystake

intheprogramtoAirbusSEfora singleCanadiandollar.

AirbusearlierthisyearagreedtobuyBombardierout

oftheprogram—nowcalledtheA220—entirelyforabout

$600million.ThehugedebtloadBombardiertookonto

fundtheplane’sdevelopmentremained,however.

Havingalreadyagreedtosellitsregionaljetlineto

MitsubishiHeavyIndustriesLtd.,Bombardierannounced

a dealearlierthisyeartodivestitstrainunittoAlstomSA

for$8.4billion,includingtransferredliabilities.Sowhen

Covid-19hit,Bombardierwasplanninga futurearound

justoneoperatingunit:businessjets.It’spredicteddeliv-

eriesofbusinessjetswillbedown30%industrywidethis

yearrelativeto 2019 andis eliminating2,500jobs.

Theironyisthatprivateaviationisoneoftherela-

tivebrightspotsinthebeleagueredaerospacemar-

ket.Thepandemichasmadeavoidingotherpeopleon

flightsmoreappealingthanever.Andtheswiftrebound

infinancialmarketshasmeantthatmoneyisn’tastight

forthewealthyandcorporationsasit

wasinpastd0ownturns.Honeywell

International Inc., which makes

enginesforbusinessjets,haspredicted

private-jetflightswillreturnto 2019 lev-

elsbynextyear.TheInternationalAir

TransportAssociationsaysit willtake

untilatleast 2024 forglobalcommer-

cialpassengertraffictorecover.

Butthemostpopularprivateplane

optionsthisyearhavebeensmaller

jets,noted RobStallard,ananalyst

atVerticalResearchPartners,inan

Octoberreport.Thatdoesn’tfavorBombardier,whose

salespitchforitsmarqueeGlobal 7500 modelis thatit’s

thelargestandlongest-rangebusinessjetavailable.

Newdesignstypicallyaccountformorethanhalfof

totalmarketdemand,saidCarterCopeland,ananalystat

MeliusResearch,inanAugustupdateonthesector.That

favorscompanies with the youngest portfolios of business

jets, such as General Dynamics Corp.’s Gulfstream divi-

sion and Textron Inc.’s Cessna unit. And Bombardier’s

stressed financial situation may turn off buyers worried

about whether they’ll be able to get their planes serviced

years into the future, Copeland said.

Bombardier’s great unraveling was about getting time

and money to rebuild around its business jet unit. The rel-

atively shallow downturn in this market during the pan-

demic means it still has a shot at making that happen. But

it won’t be easy.  <BW> �Sutherland writes about deals and

ILLUSTRATION BY GEORGE WYLESOL industrial companies for Bloomberg Opinion

By Brooke Sutherland

The Airplane Company

Facing the Steepest Climb

◼ LAST THING

With Bloomberg Opinion