Bombardier business jet program costing more than expected

Bombardier has announced its two new luxury business jets will cost more than $1 billion, which is more than double what analysts had expected.

The aircraft and train maker said Saturday it will offer two Global aircraft with longer distances, improved fuel efficiency and greater comfort.

The new Global 7000 and 8000 will be available for delivery in 2016 and 2017 respectively.

Guy Hachey, president of the aerospace division, called the two new aircraft a major program.

The program will be ramping up just as the company’s CSeries and Learjet 85 programs are winding down.

Bombardier spokesperson Danielle Boudreau said the company is considering “all possibilities” for an assembly location, including Montreal.

She said the company is looking for the best manufacturing option and didn’t specify how many jobs the program could create.

Existing Global Express aircraft are assembled in Toronto using Rolls-Royce engines and parts from Mexico, Belfast, Montreal and Japan.

Richard Aboulafia of the Teal Group said Toronto and Montreal are the leading locations to assemble the planes, since both can leverage knowledge about the existing Global Express aircraft. He suggested Bombardier will try to attract government handouts, which the company has denied.

The aircraft will feature a newly designed wing and the new General Electric TechX engine. They’re expected to curb greenhouse gas emissions to 50 per cent below upcoming industry regulations and improve fuel efficiency by eight per cent compared with the Global XRS.

The fuselage design will be largely the same as the current Global family and feature a Global Vision flight deck, which is being developed for existing Global planes.

“Thus, while the cost to develop the new aircraft will be material, a portion of the design and development is already effectively completed,” wrote Cameron Doerksen of National Bank Financial.

Analysts welcomed Bombardier’s move to develop the longer-range planes, saying it will help the manufacturer protect its global leadership in the business aircraft market and fend off competition from Gulfstream’s new G650.

Benoit Poirier of Desjardins Securities said Bombardier won’t be as hurt competitively from the long development time frame for the new Globals because the next production slots for Gulfstream’s G650 are only available in 2016-17.

The new planes will cost around US$65 million, compared with just under $60 million for the G650 and $53 million for the Global Express XRS.