For three decades, Gulfstream Aerospace Corp. has dominated the market for that ne plus ultra of corporate high life: the large business jet. Gulfstream's customers for its current jet--the $27 million G-IV--include General Electric Co.'s John F. Welch, Walt Disney Co.'s Michael D. Eisner, and such stars as Bill Cosby. Appropriately, Gulfstream itself is owned by Wall Street's elite Forstmann Little & Co., which bought it from Chrysler Corp. for $825 million in 1990.
But suddenly, Gulfstream is flying into a dogfight. Bombardier Inc. is spending $800 million to develop a plane aimed at surpassing Gulfstream as the ultimate corporate jet. Bombardier's Global Express jet will be able to whisk a CEO nonstop from New York to Tokyo or Beijing. At a cost of up to $33.5 million--including several millions for plush cabins that include conference tables and full-size beds--it will offer comforts that first-class passengers on commercial carriers can barely imagine. "We will become the major player in this market," predicts Bryan Moss, president of Bombardier's Business Aircraft Div.
EARLY BIRD. In a closely guarded "war room" at Savannah (Ga.) headquarters, Gulfstream executives are tracking every detail of Bombardier's flight plan as part of a drive to get their own ultralong-range jet, the G-V, into the skies first. Like the Global Express, a fully equipped G-V will cost about $35 million and fly 6,500 nautical miles nonstop. But while the Global Express won't be delivered until 1998, the first G-Vs will be available in 1996. "We'll have 40 G-Vs operational before their first one taxies into a hangar," says Rainer Revitz, Gulfstream's marketing head.
Some observers wonder if either company will make money. "It will be a limited market," warns Roger N. McMullin, CEO of Aviation Methods Inc., provider of private-jet services to 25 corporations. Even Bombardier admits that no more than 950 multinationals, billionaires, and heads of state are apt to buy one of the two jets. Skepticism also reigns at rival Dassault Aviation, which dropped plans to enter the fray. "A lot of CEOs wonder if it is justifiable to spend this kind of money to fly nonstop [to Asia] five or six times a year," says a Dassault executive.
To reduce its own risk, Bombardier has assembled a team of partners. They include BMW, Rolls-Royce, Mitsubishi Heavy Industries, and Honeywell. Bombardier will shoulder just 40% of development costs, so Moss says it needs to sell only 100 planes to break even.
Since business jets are Gulfstream's only product, this is a battle it can't afford to lose. Gulfstream believes it can develop the G-V for just $300 million, largely because it's building on the proven G-IV and incorporating suggestions from some loyal customers. Certain industry observers predict that the actual bill will hit $400 million. Either way, it's a burden that Gulfstream--which canceled a 1992 stock offering for $100 million due to lack of investor interest--cannot easily bear.
So far, the contest is almost a dead heat. Gulfstream claims it has $2 billion in orders for the G-V. About 50 buyers, including Seagram Co., have put down a $2 million deposit. That's slightly ahead of the "over 40" orders that Bombardier says it has received. "I don't see a clear winner emerging," says John Zimmerman, president of Aviation Data Service Inc. in Wichita. Still, even a tie would be a big victory for upstart Bombardier.