Bombardier expected to lower its business jet delivery forecasts, says analyst

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MONTREAL - The financial crisis and an oversupply of used aircraft should force Bombardier Inc. (TSX:BBD.B) to further reduce its deliveries of business jets over the next two years, an industry analyst said Tuesday.
Cameron Doerksen of Versant Partners said he expects deliveries will decline by 25 per cent this year, compared to Bombardier's earlier forecast of a 10 per cent drop.
He forecasts that total business jet deliveries will fall to 180 planes from 239 last year. Deliveries will decline further next year to 144, representing a 40 per cent drop from the peak deliveries in fiscal 2009.
The Montreal-based airplane and train manufacturer said last month that it plans to eliminate 1,360 jobs (excluding hires for its new CSeries aircraft) and expected to deliver 215 business aircraft this year.
Deliveries of large business jets had previously been thought to be steady despite the economic downturn.
But Gulfstream, which competes against Bombardier in mid-size and large business jets, sent up a ''major red flag for Bombardier'' when it recently reduced its forecast for large plane deliveries by 22 per cent.
''Given that Gulfstream has generally been fairly conservative in increasing production rates, and also has a strong backlog, it stands to reason that Bombardier will be affected by the same forces,'' Doerksen wrote in a report.
Among the models that could be affected are Bombardier's Global Express, a transcontinental aircraft in service since 1996.
Company spokeswoman Danielle Boudreau said it will provide a business update on April 2 when Bombardier releases its fourth-quarter results.
''We continue to closely monitor all key market indicators because it's a challenging period,'' she said in an interview.
UBS analysts David Strauss and Fadi Chamoun recently also lowered their industry forecast for deliveries amid surveys of increasing availability of used aircraft and plummeting business jet flight activity.
They said deliveries will fall in 2010 to lows not experienced since 2003. Overall deliveries will be down 44 per cent, with small and mid-sized planes decreasing by 52 per cent and large aircraft off 29 per cent.
Total deliveries will be between 550 and 600, well below 800 that would be considered normal.
''We believe the current market is characterized by too much supply, plummeting pricing and tight financing with our key indicators and contacts not yet signalling a bottom.''

Organizations: Bombardier Inc., TSX, Versant Partners Global Express UBS

Geographic location: MONTREAL

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