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Global 600 jet

Bombardier Slashes 1,000 Jobs, Suspends Business Jets

Jan. 15, 2015
The world's third largest aircraft manufacturer said it will continue making its slightly smaller Learjet 70 and 75 models.

MONTREAL - Canadian manufacturer Bombardier on Thursday suspended its Learjet 85 business jet program due to "weak market demand," laying off 1,000 employees in Mexico and the United States.

The company will also take a U.S. $1.4 billion special charge in sunk development costs related to the jet in its fiscal fourth quarter, and revised downward its financial guidance for the year.

The company's stock fell more than 25 percent to Can$3.03 in morning trading in Toronto following the announcement.

"The pause is due to weak demand for the Learjet 85 aircraft," the company said in a statement.

"This reflects the continued weakness of the light aircraft category since the economic downturn."

The new six- to eight-seat Learjet 85, built of composite materials in order to boost fuel efficiency, had been set to compete with Dassault's new Falcon 5x business jet and the U.S. luxury Gulfstream.

The world's third largest aircraft manufacturer said it will continue making its slightly smaller Learjet 70 and 75 models.

But its main focus going forward will be on medium-sized passenger aircraft -- the CSeries and the Global 7000/8000.

The 100 to 150 seat medium-range CSeries is Bombardier's entry into airspace dominated by Airbus and Boeing.

This reflects the continued weakness of the light aircraft category since the economic downturn." - Bombadier

The job cuts will hit Bombardier's plants in Queretaro, Mexico, and Wichita, United States. These follow previously announced cuts of 1,700 in December 2013 and more than 1,800 last July as the company struggles to restructure its aerospace division.

Drop in Orders

The latest action also comes after the company on Monday announced a 19 percent drop in orders last year.

Its cash flow is expected to be nearly halved to U.S.$800 million, and its profitability reduced, it said Thursday. It is scheduled to report its fourth quarter results mid-February.

Following a review of these preliminary results, the company said "it has become clear that certain financial guidance previously provided will not be met."


However, Bombardier said it exceeded its schedule for deliveries of 290 aircraft last year (204 business, 84 commercial and two amphibious aircraft) and remains optimistic.

Analysts were also upbeat.

"The guidance provided this morning (by Bombardier) appears to be more negative than our thesis, although it is backward-looking," Canaccord analyst David Tyerman said in a research note.

The decision to pause its Learjet85 program, however, will hurt management's credibility with investors and aircraft buyers, he added.

Both of Bombardier's new Learjet and CSeries programs experienced significant development delays in recent years.

The Learjet was to have had its first flight in late 2013 but it was pushed to April 2014 while the CSeries suffered engine test failures that forced its entry to be delayed until the end of this year.

Bombardier, which previously focused on building regional jets and trains, had spent 10 years developing the CS100 and its slightly larger sibling, the CS300, which seats up to 160 passengers.

It first announced the venture in 2004 but shelved its plans two years later when demand for medium-range aircrafts plummeted, and then revived them in 2007 when the market started to rebound and demand for transcontinental flights was forecast to skyrocket.

It was said then to be taking a huge gamble by going head-to-head with the European and American leaders in aerospace, in their most profitable space.

Copyright Agence France-Presse, 2015

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