November 28, 2012
MONTREAL—Bombardier has made the biggest sale of business aircraft in its history by selling up to 142 Global aircraft to chartered jet company VistaJet in a transaction potentially worth up to US$7.8 billion if all options are exercised. VistaJet, a private European company that provides luxury charters in many parts of the world, placed firm orders for 56 of the large-cabin business jets and optioned a further 86 Global jets in a deal announced November 27.
The firm orders are valued at US$3.1 billion at current list prices, although large orders typically obtain significant discounts. The options would add as much as $4.7 billion to the total value of the deal. Cameron Doerksen of National Bank Financial estimates the firm order will add 15 cents per share to Bombardier’s bottom line and 35 cents per share if all options are exercised.
Doerksen said he remains “somewhat cautious” on Bombardier’s shares due to lingering uncertainty around the development of the CSeries jet for commercial airlines, the potential for weaker margin guidance from Bombardier, and the weak free cash flow generation that may persist through 2013.
“The VistaJet order is clearly positive for Bombardier and should give investors additional comfort around business jet delivery levels in the coming years,” Doerksen wrote in a report.
Benoit Poirier of Desjardins Capital Markets said the VistaJet announcement was a positive for Bombardier as it confirms its strong leadership in terms of market share in the high-end business jet segment. Bombardier’s shares took off in trading, rising 23 cents, or 7.37 percent, at $3.35 on the Toronto Stock Exchange.
Based in the United Kingdom, VistaJet currently operates a fleet of Bombardier aircraft based in Europe, the Middle East, Asia and West Africa. The new purchase is part of VisaJet’s goal of making business aviation more accessible to emerging markets, said VistaJet chairman Thomas Flehr, who founded the company in 2004.
“This order is the most significant milestone for VistaJet and is a testimony to our successful strategy that focuses on global coverage,” Flehr said in a joint statement by the companies. “Our customers need to fly point-to-point across the globe, and in many instances at short notice.”
The order follows a contract signed in June with NetJets for up to 275 Challenger mid-size jets and a deal in March 2011 also with NetJets for up to 120 Global series of jets. Steve Ridolfi, the president of Bombardier Business Aircraft, said it was also a historic order for Bombardier.
“It goes without saying that we are thrilled VistaJet has again chosen to grow their fleet with the industry-leading Global family,” Ridolfi said.
VistaJet has placed firm orders for 25 Global 5000s, 25 Global 6000s and six Global 8000 jets. Deliveries will begin in 2014. The large cabin Global aircraft are built in Toronto and completed in Montreal. Analysts said Bombardier will likely result in it boosting the production rate from the current estimated pace of five aircraft per month. Bombardier said it won’t disclose if the rate of production will increase.