'It falls short as a response:' Bombardier CEO shrugs off private jet rivals as it eyes defence expansion

Bombardier's (BBD-B.TO) chief executive says the company is well positioned to take on growing competition in the so-far resilient business jet market, as the plane maker looks to expand into the defence sector.

Speaking at an investor day this week, CEO Éric Martel said the company has ruled out plans to develop a new, clean-sheet aircraft in the next five years. He says Bombardier's current portfolio of aircraft remains competitive and that existing technology in the market would not justify such an investment.

"As of today, I don't see any new technology (that's a) game changer coming in that will justify me to go out there, talk to the board and justify a clean sheet. I don't see it, and the team doesn't see it," Martel said.

"You need something that will really be a revolution."

While a new aircraft will not be in the works over the near term, Martel says the company will be making improvements to its existing product offerings.

Bombardier has been steadily growing its market share in the business jet market over the last several years since it shifted its focus to private planes. Demand for private jets has remained resilient despite economic concerns, while at the same time competition among manufacturers has been heating up. Rival General Dynamics' Gulfstream G700, which competes with Bombardier's large Global 7500, received certification from the U.S. Federal Aviation Administration last month.

Martel shrugged off the competition, saying it fell short as a response to the Global 7500.

"It falls short as a response, because it actually doesn't achieve the type of performance we've been achieving for the last five years," Martel said.

"On top of that... we're going to come out with the Global 8000 next year, which is going to surpass our own performance and will remain a flagship of the industry... We have the right product line to compete and win in the medium and large segments."

The news that Bombardier is not considering developing a clean-sheet aircraft is "a significant de-risking event for its equity," CIBC analyst Kevin Chiang wrote in a research note this week. Chiang upgraded his rating on Bombardier's stock from "neutral" to "outperformer", and hiked his 12-18 month price target from $67 per share to $91 per share.

"The significant cumulative free cash flow potential over the next five to six years puts Bombardier in a position to pursue additional opportunities to grow, as well as return cash to shareholders while maintaining a solid balance sheet," Chiang wrote.

Going forward, Bombardier sees revenue growth potential in its services business, as well as in the defence sector. The company says its defence portfolio has the potential to reach between $1 billion and $1.5 billion in revenue by 2030. Last month, Bombardier executives travelled to Washington to speak to lawmakers and promote the company's defence business.

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

Download the Yahoo Finance app, available for Apple and Android.