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Michael Graff,
President, Bombardier Business Aircraft Division

"Fractional ownership offers
a creative, realistic
and affordable approach"

It's readily apparent that the business jet industry is growing very strongly. There is an underlying demand from traditional operators of business jets as the industry delivers new aircraft into the market. Frankly, this demand did not exist five years ago.

The order backlog is very strong for our two all-new jets, the light Learjet 45 and, at the other end of the spectrum, the ultra-long-range Bombardier Global Express, and I fully expect this to continue, likely even accelerate, as both aircraft demonstrate their superior performance and comfort against the competition, thanks to our decision to invest in nocompromise, clean-slate designs.

Plus, a new market is emerging. In fact, it represents our fastest growing segment, outstripping even demand for new aircraft types which, in itself, is very healthy. As a service-driven company, Bombardier Aerospace is leading the way in lowering the barriers to aircraft ownership and is changing a hardware acquisition into a service issue.

For thousands of businesses across America, as well as a growing number of companies in Europe and particularly in Germany, fractional ownership offers a creative, realistic and affordable approach to operating a business jet. This growing realization is helping to broaden Bombardier's business base through the FlexJet program we co-manage with AMR Corp., and promises excellent high yield potential as it becomes a key element of the "tailored solutions" we now offer as customized packages to customers.

Value is the single most significant issue, or benefit, at hand. Throughout all of Bombardiers Business Aircraft - Learjet in Wichita, Business JetSolutions in Dallas, or at Canadair in Montreal - we are determined to create superior value to the marketplace than that offered by the competition through:

• tailored transportation solutions,
• innovative product/service bundling,
• faster product development and enhancement,
• different approaches to different segments.

Our activities in the past year reflect this leadership position. On the support side, Bombardier Aviation Services continues to mature into a cohesive, integrated business unit as more operators discover the comprehensive nature of our factory services in the US In addition, we've strengthened our field service network by adding new representatives and establishing spare parts depots, and by ensuring a strategic support presence with a network of independently managed recognized service facilities.

We also enjoyed a strong year in sales, particularly with the mid-size Learjet 60, which captured 34 per cent of new sales in '95 and which, as of June 30th this year, had won 38 per cent, and also with the new-generation Challenger 604 which we successfully introduced from the previous model 601-3R. In 1995, we won 33 per cent of new large business jet sales and as of June had won 38 per cent of market for 1996.

Our sales presence in the Middle and Far East has grown dramatically with the opening of two Bombardier Business Aircraft offices, one in Dubai and, more recently, a new facility in Hong Kong.

Equally significant has been our recent activities in the People's republic of China where Bombardier Aerospace opened a Group-level office in Beijing this past July to help stimulate our newest co-operative venture, a western-style charter service operated by Global Aviation since last spring. Current PRC regulations do not permit private or corporate ownership of business aircraft, however, the Global Aviation fleet of Bombardier jets, including a new Learjet 60, is already generating tangible interest among US and European businessmen whose business affairs are away from the major southern cities and therefore require them to fly deep into China.

In terms of product development, significant progress continues to be made on our new aircraft currently in flight test - the Learjet 45 and the Bombardier Global Express - and both, I believe, are positioned to capture the majority of new sales in their respective segments.

Order-taking on both programs continues strongly, and the dramatic first flight of the Global Express in early October was the aerospace event of the year and, quite symbolically, introduced a new era of performance, comfort and reliability to corporate aviation.

Another recent major milestone for Bombardier was, of course, co-establishing Business JetSolutions with AMR Corp. in the spring of 1995 and subsequently introducing the FlexJet ownership program. We've now added our first Challenger 604 to the program, bringing to 22 the number of Bombardier aircraft in the fractional ownership fleet and we continue to see significant demand from first time, but we're also helping corporate flight departments when executive travel demands warrant the use of supplemental or larger aircraft.

We'd be hard-pressed to continue such a record of key milestones in the coming months, however, we'll be redoubling our efforts to find new ways to provide better value to all prospects and operators as we continue realigning our activities.

As an industry, it is clear that we must pay better attention to changing government views and regulations, particularly as the US Federal Aviation Administration begins to restructure and we start seeing how it will operate.

We must also continue, in as many proactive and productive ways as possible, to change the public perception of business aviation. We need to do a better job of publicly explaining what a great business tool a corporate jet is and how its efficient use results in a superior return on investment to shareholders.

In fact, shareholders should be among the first groups to understand the economic benefits of owning and operating this business tool, but they are often among the harshest critics of business aircraft. We must work smarter - not just harder - to convert this key group.