Embraer, NetJets deal good news for Héroux-Devtek; what about Bombardier?

Avatar for Brian DunnBy Brian Dunn | May 26, 2023

Estimated reading time 5 minutes, 20 seconds.

The recent announcement that NetJets could buy up to 250 Praetor 500 jet options from Embraer, worth a potential US$5 billion, is good news for Quebec-based Héroux-Devtek, which is responsible for manufacturing and assembling the landing gear for the Praetor 500 and 600. The company also supplies spare parts to Embraer.

At the same time, the news isn’t necessarily a blow to aircraft manufacturer Bombardier — which is also a NetJets supplier — according to aviation analysts.

“Héroux-Devtek struck gold with that order,” said John Gradek, faculty lecturer and coordinator of the Aviation Management Program at McGill University. Business jets account for only about six percent of Héroux-Devtek’s revenue, but the NetJets order will boost that percentage, he added.

NetJets has signed a new deal with Embraer for up to 250 Praetor 500 jet options. Embraer Photo

“Like NetJets, Héroux is also trying to diversify its operations,” noted Gradek. “They’re already doing work for Boeing, Gulfstream, Dassault, and for helicopters.”

Even before the NetJets announcement, analyst Cameron Doerksen of National Bank Financial was bullish on Héroux-Devtek’s prospects. Demand for new business jets remains strong despite economic uncertainty, and companies are reporting solid backlogs. Héroux’s order backlog, for example, stood at a healthy $864 million at the end of its fiscal fourth quarter on March 31.

Based on delivery expectations from the world’s largest business jet manufacturers, business jet deliveries (excluding very light jets and jetliners) are expected to increase 16 percent year over year in 2023, recovering to 2019 levels.

As well, the percentage of used business jet fleets for sale is still well below the 10 percent level historically viewed as a balanced market, said Doerksen.

The partnership between Embraer and NetJets began in 2010 when NetJets first signed a purchase agreement for 50 six-passenger Phenom 300 aircraft, with up to 75 additional options. In 2021, after Embraer delivered over 100 aircraft, the companies signed a continuing deal for up to 100 additional Phenom 300/E jets, worth in excess of US$1.2 billion

But this is the first time Embraer has sold a midsize aircraft to NetJets. The Praetor 500’s cabin is one foot (about 30 centimeters) shorter than Bombardier’s new Challenger 3500. As a result, the Embraer aircraft can carry up to nine passengers, versus 10 for the Challenger.

However, Bombardier doesn’t seem too concerned about the new deal; the company said in a statement that its Challenger 3500 is “in a larger aircraft category” than its competitor’s aircraft.

Bombardier’s new Challenger 3500 aircraft. Bombardier Photo

Some analysts tend to agree.

“NetJets is already a big customer for Bombardier and Montreal already does very well by Héroux-Devtek,” noted Karl Moore, associate professor at McGill University.

Of the 604 aircraft in NetJets’ fleet as of last July (which has since grown to over 750), 111 were Embraer jets, 167 were Bombardier jets, and the rest were Cessna, Gulfstream, and Dassault aircraft.

“Most of the Bombardier aircraft in the NetJets fleet are large and long range,” noted McGill’s Gradek. “NetJets needs to expand its mid-size offerings to expand its market.”

The 500 is a little smaller than the 3500 and is not a comparable aircraft, noted Doerksen, and therefore not a negative for Bombardier. In fact, it could be positive as it could broaden the offerings of the business jet industry, he added.

Embraer sold 102 private jets in 2022, including 15 Praetor 500s, versus 123 aircraft sold by Bombardier.

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