Airbus takes majority of embattled Canadian jetliner program
Airbus (EADSY)on Monday announced it was acquiring a majority stake in rival Bombardier's embattled C Series airliner program, reshaping the landscape in the transatlantic battle against plane maker Boeing.
The C Series had come under attack this year from Boeing, (BA) which alleged that Canada'sBombardier had sold the 100 to 150-seat jet to Delta Air Lines at "absurdly low prices." The U.S. Department of Commerce has preliminarily levied a 300% tariff on the plane's imports, setting up a diplomatic row that has drawn in the Canadian and U.K. governments.
As part of the deal, Airbus will acquire 50.01% of the program and Bombardier and Investissement Québec will own approximately 31% and 19% respectively.
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The European aerospace firm will not make any upfront investment in Bombardier's jet as part of the arrangement, while the Canadian plane maker will gain access to Airbus's expansive marketing, sales operation, customer support network and its aerospace manufacturing supply chain.
Crucially, Airbus will establish a second final assembly line for the jetliner in Mobile, Alabama, where the European plane maker currently builds larger single-aisle jets for U.S. airlines. The facility will be expanded to make room for manufacturing the C Series.
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Boeing v. Bombardier: Tariff is now 300%
Airbus denied that its goal was to circumvent any possible tariffs the U.S. Government may levy on the advanced new jet's importation, but with the Airbus acquisition public and assembly line plans unveiled, the C Series will now be "made in the U.S.A."
Prior to Monday's announcement, the C Series was more than half built by U.S. firms. Airbus's backing gives a boost to employment in Quebec where the jet is assembled, as well as Northern Ireland, where the wings are made and China, where the jet's center section is made.
The arrangement potentially opens the door to U.S. carriers to sign up for the jet. JetBlue Airways and Spirit Airlines, both large Airbus operators, voiced support for Bombardier's position against the Department of Commerce.
Delta Air Lines chief executive Ed Bastian said last week the airline had no intention of paying the tariff. Bastian cautioned that there were other options for the airline, including delaying the jet's arrival while a resolution was reached. Delta declined to comment on the deal.
"We feel confident they'll be waiting for the right solution," said Bombardier's chief executive Alain Bellemare of Delta. Bellemare said they are discussing options with the airline including potentially taking the jets from the Mobile factory once it's ready, which is years away.
That move provides the European and Canadian plane makers significant political clout both in Washington D.C. as it expands operations in Alabama, just as the International Trade Commission is set make a final ruling on Boeing's claims of harm in February.
The pair has been in talks since August, said Airbus Group CEO Tom Enders, who said the arrangement wasn't motivated by Boeing's suit. Airbus and Bombardier attempted to link up in 2015, but those talks fell through once news of the negotiations became public.
Enders said the 2017 discussions were significantly different, because Bombardier has completed the C Series jets and they are now flying at airlines in Europe. The C Series has been flying with airlines since 2016.
While the deal at its outset is a three-way tie up, the legalese of the deal's announcement allows Bombardier and Quebec to exit the program in 2023, selling their stakes to Airbus in the years to come.
"At the end of the day, this is going to be an Airbus program," said Rainer Ohler, vice president of communications for Airbus Group in an interview. "It's going to be a threesome, we take the majority now and over time we take 100% of the program," Ohler said.
The deal is expected to close in the second half of 2018.
"This looks like a questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the U.S. government. Our position remains that everyone should play by the same rules for free and fair trade to work," a Boeing spokesman said in a statement.
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In a single move, Bombardier and Airbus have gone from rivals to partners. Airbus's retiring chief salesman John Leahy had long mocked the small airliner, and aggressively and repeatedly blocked the plane from winning deals at airlines around the world.
The move has broad implications for U.S. aerospace manufacturing and the global balance of power to build jetliners for the world's airlines. Melding the Airbus product line with Bombardier's C Series gives a broad range of airplanes -- from 100 seats all the way through Airbus's 555-seat A380 superjumbo -- as it seeks to craft deals and win business over Boeing.
Airbus appears content to let its smallest single-aisle jetliner, the A319neo, die. That aircraft hasn't sold since 2012, said Enders and will be supplanted by the CS300, the larger of Bombardier C Series models.
For Boeing, which has sought to kill the nascent jetliner before it gained signification commercial traction, it now faces a competitor with the resources and reach of its arch rival backing its future.
Bellemare said he is "highly confident we'll be able to secure more orders under the Airbus umbrella."
News Courtesy: www.cnn.com
