Bombardier picks Honeywell engines for Challenger replacement

opinion

by Alasdair Whyte

December 6, 2024

Honeywell's Boeing 757-200 Testbed

One of the big advantages of settling a legal dispute outside court is confidentiality. Although this is a real shame for nosey observers. This week Honeywell and Bombardier reached a fascinating agreement. Sadly they chose to not disclose the terms.

Honeywell makes the HTF7000 that powers Bombardier’s best-selling Challenger 300/350/3500 aircraft family. In 2016, the Canadian manufacturer sued Honeywell claiming it was selling the engine to other manufacturers at a better price. Bombardier said this broke the terms of its contract with the engine company.

In January this year, the Superior Court of Quebec ruled in the aircraft manufacturer’s favour saying Honeywell should negotiate the price of its engines with Bombardier. It also asked Honeywell to disclose agreements with other manufacturers to an independent auditor. Honeywell appealed against this ruling in Canada’s Supreme Court.

This week the case was suddenly dropped. At the same time Honeywell announced the signing of a strategic agreement with Bombardier “to provide advanced technology for current and future Bombardier aircraft in avionics, propulsion and satellite communications technologies.”

Bombardier has agreed to use Honeywell avionics and the next-generation model of Honeywell’s HTF7K engine. The two companies will work together to certify and sell Honeywell’s JetWave X connectivity for Challenger and Global aircraft (both for new deliveries and upgrades to older aircraft). Bombardier will also offer Honeywell’s L-Band satellite communications products and antennas which are used for safety communications.

“We are committed to investing in these key technologies with Bombardier, which will not only drive substantial growth for Honeywell, but lead the industry further into the future of aviation,” said Jim Currier, president and CEO, Honeywell Aerospace Technologies.

Honeywell says that the agreement will be worth $17bn to the company over its lifetime. But in the short term it is hitting Honeywell’s 2024 sales guidance and free cash flow by $400m. Honeywell Aerospace’s margin will fall by 80 basis points to about 22.65%.

This agreement means we now know that the engine manufacturer for its new Challenger aircraft replacement. This is before the aircraft has been announced.

Honeywell would not have wanted to lose it place on the new Challenger. The engine maker’s HTF7000 has seen amazing success in the super-mid-size category. As well as the Challenger 3500, it is on the Cessna Longitude, Gulfstream G280 and the Praetor 500 and Praetor 600. In April the engine hit its 10,000 millionth flight hour and at the time Honeywell said it expected to build 8,000 HTF7000s.

The super-mid to mid-size aircraft segment are the most competitive new aircraft markets. GE has the CF34-3 on the Challenger 604/650 and Challenger 850s. Rolls-Royce’s AE3007 is on the Embraer Legacy 600 and Legacy 650. Pratt & Whitney Canada has the PW300 range on the Latitude, Falcon 7X, Falcon 8X and Falcon 2000 and the PW812 on the Falcon 6X and Gulfstream 400.

With demand for existing super-mid aircraft still strong (a big fleet order is coming soon) and supply chains still stretched, OEMs are not rushing to announce a brand-new aircraft. Although the engine agreement between Bombardier and Honeywell could push announcements forward slightly.

While it will be happy to have closed off its dispute with Bombardier, Honeywell still has another significant engine case to solve. In its court filing, fractional operator Flexjet argued that Honeywell failed to repair engines or provide loan engines under a Mechanical Service Agreement. Flexjet, the biggest operator of HTF7000s, has asked for liquidated damages. Honeywell disputes this. (This case may explain why Kenn Ricci, Flexjet’s chairman, was critical of engine programmes in this session at CJI Miami.)

Honeywell appears to have reached a fantastic (non-disclosed) agreement with Bombardier. It will be fascinating to see what will happen next with Flexjet.