Bombardier may be forced to cut more business jet jobs next year, says analyst

MONTREAL - Bombardier (TSX:BBD.B) said additional sales of its Learjet 60XR business jet over the coming months may be needed to prevent production cuts and layoffs next year, as an analyst suggested Thursday.

MONTREAL - Bombardier (TSX:BBD.B) said additional sales of its Learjet 60XR business jet over the coming months may be needed to prevent production cuts and layoffs next year, as an analyst suggested Thursday.

"There are no plans for any reductions until the end of the fiscal year for sure," spokeswoman Danielle Boudreau said from Orlando, where the company participated in an aircraft show.

But production rates next year may depend on sales, she added.

Overall, the Montreal-based manufacturer believes business jet deliveries will decrease by 25 per cent this year and remain at that level in 2010.

The market remains challenging but is starting to show some progress, Boudreau said.

"We're seeing less cancellations right now and there's definitely more activity. We can't say its back to levels we want but there's definitely more interest."

But UBS analyst Fadi Chamoun said Thursday that slow orders of business jets may force additional layoffs next year.

He pointed to comments from Bombardier management at the Florida aircraft conference that it's becoming increasingly more difficult to get orders to fill production gaps.

"Hence, we believe the risk of production cuts next year, remains," he wrote in a report.

He expects deliveries will drop by 30 per cent this year to 165, followed by another 14 per cent decline in 2010 to 142 planes, primarily in the small and mid-size Learjet and Challenger.

Bombardier is in the process of laying off 4,360 employees as it reduces production of business and commercial aircraft. Regional jets, which are sold to airlines, are estimated to account for 1,200 of the layoffs.

Manufacturers attending the conference said order cancellations and prices have stabilized.

But new orders remain weak and an industry-wide recovery will only gradually creep up in late 2011 or early 2012.

Europe and Asia are expected to be the first regions to recover. The North American market remains the weakest and will take longest to recover, Chamoun noted.

North America's share of future deliveries is expected to be below 50 per cent, compared to the historic level of 70 per cent.

Chamoun said he believes Bombardier is in advanced stages of developing a new large Global Express business aircraft that would challenge Gulfstream's G650.

Boudreau said the focus right now is on the Global Vision cockpit and composite Learjet 85.

"Obviously we want to maintain leadership in that market segment so we're not going to sit idly that's for sure, but right now we're not ready to go public with anything."

She added there are no immediate plans to introduce a corporate version of its CSeries 100-to 149-seat commercial airplane. The company first plans to deliver the new single-aisle plane in 2013.

"It would be a natural progression but there's no specific time set for that yet."

Bombardier's shares closed down six cents to $4.70 in trading Thursday on the Toronto Stock Exchange.

 
 
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