An order for business jets worth up to 5 billion US obtained by Embraer from a company owned by billionaire Warren Buffett is attracting attention in Quebec. It will provide work for Héroux-Devtek, but could serve as a warning to Bombardier in the mid-size business jet segment.
NetJets, owned by the Berkshire Hathaway conglomerate, could buy up to 250 Praetor 500s from the Brazilian manufacturer. Since these are options, it is impossible, for the moment, to have an idea of the number of devices that will be ordered. NetJets rents aircraft at hourly rates typically over US$1,000 or offers seats on private jets. This company is also a Bombardier customer.
The spin-offs promise to be positive for Héroux-Devtek, responsible for manufacturing and assembling the landing gear of the Praetor 500 and 600. The multinational based in Longueuil, in the southern suburbs of Montreal, supplies spare parts to Embraer.
“There is machining that is done in Laval […] and the integration is done here at our plant in Longueuil, underlines the president and CEO of the Quebec company, Martin Brassard, during a telephone interview. We are in this program [Praetor 500] from the beginning. We are delighted to have bet on a beautiful platform. »
PHOTO HUGO-SÉBASTIEN AUBERT, LA PRESSE ARCHIVES
Martin Brassard is President and Chief Executive Officer of Héroux-Devtek.
Even if deliveries will only begin in two years, Benoit Poirier, of Desjardins Securities, believes that this potential order from NetJets will help Héroux-Devtek, present in the civil and defense sectors, to add a string to its bow. .
“This will help diversify the workload, underlines the analyst, in a note. Business jets represent only about 6% of sales at Héroux-Devtek. This agreement will be added to those concluded for Dassault’s Falcon 6X and 10X. »
Similarities with Bombardier
This is the first time that Embraer has sold midsize aircraft to NetJets. The Brazilian multinational was not the only one in line for this potential contract. It was not possible to know if Bombardier coveted the agreement.
The Preator 500’s cabin is a little shorter (one foot, or about 30 centimeters) than that of Bombardier’s Challenger 3500. The Embraer aircraft can carry up to nine passengers, while that of the Quebec aircraft manufacturer can accommodate one more. There are similarities between the two planes.
PHOTO FROM EMBRAER WEBSITE
The Praetor 500 private jet built by Embraer
Mr. Poirier interprets NetJets’ decision as a message for Bombardier.
This means that Bombardier’s leadership position in the midsize aircraft segment could be in question and that a new Challenger will probably be needed within the next five years if the company is to maintain its position.
Benoit Poirier, analyst at Desjardins Securities
Bombardier sees things differently. In a statement, it says its Challenger 3500 is “in a larger aircraft category” than its competitor’s aircraft.
Brian Foley, of the American firm Brian Foley Associates, believes that NetJets approached several aircraft manufacturers as part of its efforts. If the deal is a big win for Embraer, the analyst believes the company has likely offered generous discounts to NetJets, which will reduce its profit margin.
“Profitability per aircraft will likely be lower compared to a private jet sold to a high net worth individual,” says Foley.
On the Toronto Stock Exchange on Friday, Héroux-Devtek shares rose 1.2%, or 15 cents, to close at $12.97. For its part, the title of Bombardier fell 0.5%, or 28 cents, to $55.01.
Learn more
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- 102
- Number of private jets delivered by Embraer in 2022. Fifteen Preator 500s were handed over to customers.
Source: Embraer
- 123
- Number of private jets delivered by Bombardier last year
Source: Bombardier