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Canadian Investing / Bombardier Aerospace

URL:  http://boards.fool.com/jim-id-have-preferred-they-stick-with-the-30100461.aspx

Subject:  Re: New Learjet 70 and 75 Date:  6/16/2012  5:05 PM
Author:  rev2217 Number:  2865 of 2881

Jim,

I'd have preferred they stick with the Rockwell Collins avionics. Cessna is the real competitor to watch in the low-to-mid range BJs. It's under new management, and recently switched to the Garmin product.

I don't have the inside scoop on this, but the fact that two major manufacturers are switching to a new supplier would indicate either (1) some significant problem with Rockwell Collins or its products (there are many possibilities here -- poor quality, lack of availability, failure to provide timely delivery, bad field experience/poor support, or even some indication that the manufacturer is in trouble and likely to fail, rendering the product unavailable) or (2) significant new features, likely protected by patents, into the Garmin product.

Do you have any insight on the Netjets deal? Seems there could be a lot going on behind closed doors. It might be interesting to know why Netjets cancelled the Hawker, and Gulfstream orders. I was under the impression they also cancelled an order to Cessna, but it appears they've at least renewed that effort.

As you realize, Netjets is the big player in Fractional Jetshares, despite recent incremental gains in marketshare by Flexjet. One might expect it took something to change their preference for practically any-manufacturer-but-Bombardier.


There are three circumstances that are likely to have dictated this decision: (1) customer demand, (2) problems with the other manufacturers or their products of the same sort that might have driven the shift in suppliers of avionics, or (3) a change in interpersonal dynamics between the executives of the two companies.

This deal includes a 15-year agreement for maintenence on the aircraft.

That may well be the most significant detail. It is rather costly to maintain facilities to maintain a relatively small fleet of aircraft. In recent years, Delta Air Lines has developed a very significant sideline business doing major maintenance and repairs of aircraft for other airlines, some of which are pretty big, under its "Delta Tech Ops" brand. It may well be that the economics crossed the line where it's cheaper to contract out maintenance than to do it in house, and thus that ability of the manufacturer to provide maintenace services previously done "in house" entered the procurement picture.

In the end it, at least in terms of results, it should matter little whether Bombardier makes money selling CSeries, Regional Jets, Business Jets, Rail equipment, or some combination of each.

Rather, I want all aspects of the business to be healthy!

Norm.
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