Bombardier stands to benefit as Cessna points to stability to market

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MONTREAL - Bombardier (TSX:BBD.B) may yet reduce its forecast for deliveries of business jets, but rival Cessna's belief that the recession-sensitive market has stabilized could be good news for the Canadian aircraft manufacturer, industry analysts said Tuesday.
"There are some signs, Cessna being one of them, that conditions are at least not getting worse, so that is potentially positive for Bombardier," Cameron Doerksen of Versant Partners said in an interview.
Cessna parent company Textron (NYSE:TXT) said order cancellations have stabilized and the number of new orders improved in June and continued into July. Cessna is predicting lower deliveries next year and is calling for the bottom of the cycle sometime in 2010.
Its second-quarter deliveries fell 28 per cent to 84 units, but that marked an improvement from 69 in the previous quarter. It recorded 243 order cancellations, including 74 resulting from the suspension of its Citation Columbus program.
The aircraft would have competed against Bombardier's Challenger 605. Set to delivery in 2014, it was to have a cabin about twice the size of the Citation X, Cessna's largest aircraft.
But Doerksen said stabilization is a long way from improving market conditions and a turnaround isn't yet around the corner.
He believes Bombardier will maintain its forecast for a 25 per cent decline in business jet deliveries this fiscal year, despite Cessna's decision.
Cessna says will ship 275 aircraft, down 41 per cent from the 467 units delivered in 2008. Cessna's previous guidance pointed to a 36 per cent to 38 per cent decrease. The new outlook may be understated since Cessna doesn't include in its order book large orders for which it doesn't have total confidence.
David Newman of National Bank Financial said Cessna's results reflect softness in the small-sized market. But, he noted its forecast reinforces his belief that Bombardier's deliveries will be down 36 per cent, compared with the 25 per cent drop forecast by the Montreal-based manufacturer on June 3.
"We are encouraged that our forecast on Bombardier for a decline in business jet deliveries of 36 per cent is in the same ballpark as that forecast by Cessna, especially considering Bombardier's skew to more-resilient larger business jets," he wrote in a report.
"At this juncture, the OEMs (original equipment manufacturers) appear to be tweaking revenues and production rates, and are citing greater visibility and early signs of stabilization."

Organizations: Cessna, Bombardier, TSX Versant Partners Textron NYSE National Bank Financial

Geographic location: MONTREAL

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