Bombardier will sell the majority of its C Series program to Airbus. Although talks have been ongoing for months, they took on a new urgency in light of the blistering 300% duty slapped on by U.S. regulators. The new agreement saves face for all sides, but at whose expense?
Under the agreement, which will face regulatory hurdles, Airbus will control 50.01% of the C Series program while Bombardier will own 31% and the Québec government 19%. Airbus is NOT PAYING CASH for its share of the pie and Bombardier will continue to fund the program.
Bombardier and Airbus summarize the deal in a press release:
- Airbus to acquire majority stake in the C Series Aircraft Limited Partnership
- Partnership brings together two complementary product lines, with 100-150 seat market segment expected to represent more than 6,000 new aircraft over the next 20 years
- Combination of Airbus’ global reach and scale with Bombardier’s newest aircraft family to create significant value for customers, suppliers, employees and shareholders
- Significant C Series production costs savings anticipated by leveraging Airbus’ supply chain expertise
- Commitment to Québec: C Series Aircraft Limited Partnership headquarters and primary assembly to remain in Québec, with the support of both companies’ global supply chains
- Airbus’ global industrial footprint expands with the C Series Final Assembly Line in Canada, resulting in a positive impact on operations in Québec and across the country
- Growing market for C Series results in second Final Assembly Line in Mobile, Alabama, serving U.S. customers
Note that key last line — final assembly in the USA will be the key to avoiding the 300% tariff.
> Read More: Defiant Delta CEO: We Will NOT Pay “Nonsensical” Bombardier Tariff
Without any cash outlay, Airbus picks up a tremendous new product in a market segment (100-150 seats) that it is weak in. The partnership will allow Airbus to control costs while leveraging its vast resources to better market the aircraft and supply its parts.
- Donald Trump
I am expecting a tweet today or tomorrow in which the U.S. President heralds his “tough on trade” policy is bringing high-paying manufacturing jobs back to the USA. The optics are perfect for Trump: the jobs are coming to Alabama, one of his stronghold states, and he’s “making America great again”. Forget that the negotiations have been going on for months, this sort of news will benefit the President.
Boeing whined about subsidies and now has a far stronger competitor right in its backyard. Even if Boeing hastily throws together a partnersnhip with Embraer, it will be from a reactionary position. Airbus is not necessarily the savior for the C Series, but I do believe it will enable Bombardier to market these aircrafts to more airlines and leasing companies around the world, including the USA.
You could argue Bombardier wins because their C Series program is given a strong financial lifeline from a company that can better supply and market it than it ever would be able to. But Bombardier will continue to exclusively fund the program for the next three years, is not receiving any upfront cash at time of closing, and loses majority control of its pet project.
When I saw the headlines my first thought was are Pepsi and Coca-Cola also going to join forces? But since Airbus also does not offer a C 100 equivalent, this actually may be an incredible partnership.
H/T View from the Wing // top image: AIRBUS
there’s one hidden aspect that most have missed – the hypothetical CS500.
The CS itself is a good product, and a hypothetical CS500 can directly challenge the A320, the single most important offering from Airbus that’s actually supporting all the jobs.
Airbus now managed to act as Bombardier’s white knight savior while killing the CS500 before it becomes a real threat.
Airbus won. Bombardier won. Canada won. Delta won. Alabama won. Trump won.
Only Boeing lost. BIGLY. SAD!
Really great point, Henry.
One more winner: Passengers
This deal lets Airbus drop its poorly-selling A318/9 line and focus of the larger A320neo/321 series while having virtual reign over the 100-150 seat range aircraft market in which Boeing has only a token presence with its smallest 737 (unless it goes after Embraer or one of the Chinese upstarts in this market segment). Airbus will ensure an even larger market for the C-series so Bombardier’s immediate loss should be made up in a stronger long term run.
As for Trump and Boeing, given the abrogation of the Iran nuclear deal it would not surprise me if Iran cancels its order for Boeing jets and goes for more Airbus planes! Guess we’ll soon see how “the Market” reacts to the deal with the pricing of Bombardier shares.
Good point DavidB.
Good article. You left out one of the biggest winners: The US manufacturing jobs market. You characterize this as a purely personal political victory for our President, but I am certain that it is a far more meaningful victory for those who will have new access to high paying manufacturing jobs.
Still, Airbus is the biggest winner of all. They just obtained a potential a320 series clean-sheet replacement, at least for the lower capacity offerings. Depending on how the C series can be stretched…
i’ve flown CS100 once on Swiss Air VCE-ZRH … it was a quick 1:10 hop but very comfortable layout. I’m really hoping more airlines can bring this to their passengers instead of buying cheapo 73Gs and 319s and calling it a day.
Wait a minute! How does Trump really win?
I’m NOT talking about optics, the inevitable “alternative facts” filled tweetstorm claiming a (false/illusory, etc.) “victory”, or the Moses on top of the mountain speech that “I alone did this” narcissitic personality disorder rant that’s yet to come…
…I’m talking about the I left one of my few, staunchest economic, political and international allies, Prime Minister Theresa May of Great Britain, in the lurch; strengthened the power and prestige of the other European countries where Airbus is based, and a prominent corporate citizen, such as France, Germany, Great Britain, Spain, etc.; and last in this brief list, but certainly NOT least, completely pissed off our neighbor, Canada, whom we already enjoy a large trade surplus with economically, but whom, like Theresa May’s fragile governing coalition, is one of our country’s (or at least was until recent epic fails by Trumpty Dumptie on this much larger to them (Canada & Great Britain) domestic economic and political matter regarding a prestige (again, to them) corporation, Bombardier, than it is to us in the USA.
In taking up Boeing’s effort to by any means necessary destroy Bombardier, Trumpty Dumptie NOT only accomplished nothing besides looking like Boeing’s “bitch”, he squandered what already little political capital and goodwill he has, not just on a fight Boeing, and by extension as Boeing’s agent/salesman/dirty tricks enforcer (take your pick, or my favorite, simply “bitch”) crashed and burned every bit as spectacularly bad as Boeing itself did in its ill-considered, half-baked, clearly poorly thought out, strategy to kill of Bombardier’s C-series to protect Boeing’s cheaper than cheap, life extension program to keep its vintage, some might even argue, obsolete, very, very, very, long in the tooth 737 alive far beyond the already well past prime 50 years it has already been in production.
So, if allowing oneself, or in this case, the office of the President, to be pimped out by Boeing in an epic fail, that will leave a bitter aftertaste in key allies’ mouths for some time to come, all while handing over a clean sheet design of a modern, technologically advanced, carbon composite airframe platform that itself can be enlarged to replace the least desirable, slowest selling model in Airbus’ single aisle catalog of products, AND adding a category of aircraft in one fell swoop already certified to fly, and in fact is ALREADY meeting, or even exceeding, the expectations of the two, soon three and four airlines that operate the C-series models, which only further enhances Airbus’ product portfolio is a “win” for Trumpty Dumptie, then spank my butt and call me darling, cuase I sure would hate to imagine what would actually constitue a loss.
Oh, and did I forget to mention, this “win” for Airbus that Trumpty Dumptie got for the other company, Airbus, NOT the one, Boeing, who helped uderwrite one of the worst attended, darkest presidential inauguration in US history, all came with zero money down…FOR AIRBUS.
Like I said, if that’s winning in Trumpty Dumptie (or fantasy) land, I sure as heck wonder what the crapshow looks like when he loses.
But hey, for Dotards, and those who love him, I guess this might be their version of “winning”.
Even though most people of sound minds know it’s anything but…
Howard Miller– optics are literally the only thing that matters in politics. Nobody is going to read all of that, my man… you’re on a travel/points blog.
Next time you are “triggered” by the mere suggestion that Trump may have had a success, step back, take a deep breath, and logically argue your points. Leave the ad hominem attacks, name calling and nonsensical ranting out.
Filtering out the fluff of your rant, you seem to argue: 1: This leaves May in a lurch and angers Canada 2. Trump is doing Boeing’s bidding, and 3. Airbus ends up with a great plane.
Responding in turn: 1. The wings are still going to be made in the UK, so May’s initial cause for concern is mooted by this deal. Canada’s plane and brand get to survive, which was far from assured even without the assessment of the tariffs due to BBD’s cash flow issues.
2. This isn’t a dictatorship. BBD could have pursued its case through the appellate process if it had a firm belief that there existed insufficient evidence to support either the dumping or illegal subsidy allegations. That BBD opted not to pursue anything after the issuance of the Department’s preliminary determination is perhaps telling.
3. They sure do.
Now that is a level-headed and well-conceived refutation. Beautiful.
1. If anything, my spidey senses say Lizzie May actually greased the skids for this deal, given how involved BE Aerospace is with Airbus. But then again there’s Brexit so WHO KNOWS?
2. Appealing the USITC decision would be a waste of time IMHO, look at who controls all three levels of government in the states and Robert Lighthizer’s grandstanding at the NAFTA talks. The only realistic avenue for BBD would be the WTO, and if memory serves, they’re not known for speedy resolutions.
Something tells me DL isn’t real keen on waiting this out.
Boeing’s greed and rough tactics finally Karmalyzed them.
Boeing also lost Canada’s deal for 18 F-18E/F Super Hornets.