Business Aviation Fair in Las Vegas | The absence of a large order hurts Bombardier

Bombardier’s harvest at the end of one of the major business aviation meetings this week seems to have left investors wanting more. Despite prospects that remain favorable, the Quebec aircraft manufacturer saw its shares drop more than 13% on the Toronto Stock Exchange.

It was with a firm order for three Challenger 3500s – which sell for US$27 million each, according to list prices – that the multinational returned from the National Business Aviation Association (NBAA) show, which took place in Las Vegas. .

Many observers expected the event to be the scene of a large order from Flexjet, a fleet operator that rents aircraft at hourly rates or offers seats on private jets. Bombardier would have been in the running.

“Activity was less vigorous than what investors expected,” underlines analyst Benoit Poirier, of Desjardins Securities, in a report which takes stock of the show.

On Bay Street, Bombardier’s Class B stock fell 5.9%, or $2.58, Friday to close at $40.82, in a session where the S&P/TSX Composite Index gave up 1.21%. Over five days, the decline in Bombardier’s shares is 13.1%, or $6.17.

According to Flexjet representatives quoted in Las Vegas by various media, investors’ patience could however be rewarded. According to the owner of the American operator, Kenn Ricci, “something should happen soon”, he suggested during the event.

When Bombardier sold Flexjet in 2013, the transaction was accompanied by an order of 5.2 billion for the sale of 245 private jets. Flexjet currently owns 269 Bombardier, Gulfstream and Embraer aircraft.

“We believe that a large Flexjet order is not necessary for Bombardier to achieve a ratio of new orders to deliveries of 1,” said Mr. Poirier. If she lands a big contract, that would obviously be positive. »

Still in demand

Despite fears of recession and rising interest rates, everything indicates that demand will remain there, at least in the short term, for manufacturers of luxury private jets. As part of the NBAA show, Honeywell revealed its annual forecasts. The American conglomerate notably anticipates a 10% increase in deliveries in 2024.

Activity has recently contracted in business aviation in the United States – the largest market in the world – but remains stronger than the levels observed in 2019, before the pandemic.

“WingX also highlights that fleet operator activity (a key niche for business jet orders) in North America was up 14.1% year-over-year and 53.7% YoY. 2019,” writes analyst Cameron Doerksen of National Bank Financial in a note sent to his clients.

Flexjet, NetJets and their competitors are increasingly popular with the ultra-rich. In the crosshairs of environmentalists due to greenhouse gas emissions emanating from private jets, the better off are turning to fleet operators, in particular to avoid being identified by software that allows aircraft to be tracked.

Even though it returned from Las Vegas with only three firm orders, Bombardier still had some interesting news for investors at the trade show curtain-raiser. Its president and CEO, Éric Martel, revealed that the aircraft manufacturer’s order book – which reaches around 15 billion US dollars – also included 200 options.

If they were converted into firm orders quickly, it would provide more than a year of work for the company’s employees, at the current rate of deliveries.