Whoa: Bombardier Is Selling The C Series Program To Airbus

Well this just got really, really interesting. Earlier I wrote about the situation between Boeing and Bombardier. For those of you not familiar with the Bombardier C Series, it’s a popular new plane that has around 100 seats. However, it has been the subject of a controversy here in the US:

  • Boeing claimed that the C Series plane was heavily subsidized by the Canadian government, and filed a complaint with the US Commerce Department
  • The Trump administration sided with Boeing, and proposed a duty of ~300% on US airlines buying this plane, as a penalty
  • Delta has 75 C Series planes on order, calls this absurd, and says they won’t be paying the tariff but still expect they’ll get the plane

Well, it looks like Bombardier has come up with a very creative solution to this problem, which has far-reaching implications.

Bombardier plans to sell a majority stake in the C Series program to Airbus. If this deal goes through, Airbus would own 50.01% of the C Series project, Bombardier would own 31% of the project, and Investissement Québec would own 19% of the project. The parties hope to have this deal closed by the second half of 2018.

Here are the bullet points with which Airbus describes the deal in their 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

There are huge implications for all of this, but as it impacts Delta’s situation with the plane, that last bullet point is key, and is probably a large part of the motivation for this. For US customers, the final assembly line for the C Series will be in Mobile, Alabama, which they hope will allow them to avoid the current tariff issue.

On the surface this seems like a brilliant idea. This gives Airbus a huge competitive advantage over Boeing in the 100-150 seat airplane market, and also hopefully allows US airlines that buy the plane to avoid the tariffs.

This deal is a game changer in the constant Airbus vs. Boeing match.

Comments

  1. I am usually strongly opposed to deals like this in a market where anti-trust violations are becoming a huge concern, but in this case I am actually pleased as to the outcome: Canadian tax payers like me are on the hook for less of the bill, and those pricks at boeing get their balls frosted. Bombardier subsidies are still out off control, but unfortunately in my area the subsidy has broad support.

  2. Another win for the European Union!

    The EU just has to sit back and watch as Trump makes dumb decisions and destroys the United States — from foreign policy to trade and the economy.

    Go Airbus!

  3. Serves Boeing right!!! Instead of competing in an open market, they played the protectionist card via taxes….this was of course supported by the brainless orange thing on Pennsylvania Avenue, as he does not know better and believes that making America great again works only through stupid, brainless measures. Now, Boeing just blasted a huge market opportunity and lost, or very likely will lose this market segment to Airbus. Thats the price for greed, protectionism and avoiding competition. Btw: I prefer Boeing aircraft over Airbus, but here, Boeing dug its own grave!

  4. Brilliant move by Bombardier and Canada. And, I suspect Delta will never place a Boeing order again. So, the damage Boeing did to itself by its callous greediness is astonishing.

  5. @Lucky – I read earlier that Airbus won’t pay anything (money wise) to acquire the stake in the plane. Though might want to check that online again.

  6. “For those of you not familiar with the Bombardier C Series, it’s a popular new plane that has around 100 seats.”

    360 orders and 14 delivered.* “Popular” seems a premature judgement.

    *Wikipedia

  7. It’s very clever because Boeing have always complained about Airbus. Because the us is scared of getting into a trade war with the eu (and vise versa) they don’t put ridiculous taxes on Airbus.
    Now the us government will have to back down because the aircraft will be finished in the us Airbus plant so no import tax and they’d still have to argue with the Eu.
    Serves Boeing right because chances are this will encourage more customers to purchase the c series because of Airbus support.
    I still don’t get why Boeing would argue about an aircraft that doesn’t compete in the same market as them. Its like ford complaining about Ferrari stealing their customers (they both operate in different markets) a different type of customer and neither would purchase the others products.

  8. Boeing asked for an 80% duty. The US government imposed a 219.63% duty.

    Montreal Gazette headline would be; “Boeing fans the flames of Trump’s protectionist policies and gets burned.” 😉

  9. This subsidy accusations by American aviation companies are getting out of hand, first the ME3 being accused by the US3, and now Boeing? Looks like even Canada (America’s ‘best friend’) isn’t safe from the orange man’s bullshit.

  10. I don’t get it. If Bombardier wanted to skirt-around the tariff, why didn’t they just open the plant in Alabama without getting Airbus involved? It seems like they gave away 50.01% of their stake for a tax-scheme which has no guarantee of even working.

  11. Boeing hates the competition receiving government subsidies, but they enjoy they’re local tax break. Like billion of dollars in tax breaks.

  12. BOEING’s foulplays against Airbus ( A330MRTT) & lately Canada’s BOMBARDIER led their buddies in DC to impose a ludicrous 220% duty on the C-series. Well, guess what : these idiots just prompted BBD to jump into bed with AIRBUS who is taking a majority stake of the line AND probably producing the C-series in their Alabama factory for the US markek. Strategically, this is a master finger back to the skrewer, backfiring on Boeing in Dolby surround : 1. trounces Boeing’s greedy will to keep the C-series out, 2. totally saves the C-Series by placing it under Airbus’ protection & marketing bulldozer, 3. gives Airbus a new line ( for how much ? ) 4. thus making the C-series a bigger & credible threat to the 737-700, 5. makes of Airbus an even more formidable competitor by bracketing Boeing’s production better, 6. hands Airbus a new factory just across the border, 7. gives Airbus a wild trump card to grab a bigger chunk of the US ageing regional jet & narrow body markets, all while 8. ridiculing Washington in ways inimaginable internationally. Böse Böing…

  13. @ George. Nice call in your quiet corner and yes, I agree with you, next up is Boeing buying a majority stake in Embraer. And as @Potreflyer points out, Bombardier is In no place to be muscle flexing on this deal. The C Series is a disaster and now majority owned by Airbus.

  14. Boeing has received billions in subsidies both on the state and federal level so for them to even go after Bombardier was ridiculous! Also given the fact they didn’t even compete for the Delta order, I don’t know where they could claim a loss or damages.

    Well, karma has bit Boeing in the A$$!

  15. Well, at least Trump himself will come out of this as a winner: “Look, I am creating jobs in Alabama! Good, well paid jobs! MAGA!”

  16. So Alabama is benefitting from a Canadian and European middle finger to the Trump administration’s dumpster fire? You can’t make this stuff up! Either way, as an Alabamian I say Y’ALL COME ON DOWN to the land of cheap labor, no unions, and plenty of tax breaks for manufacturing!! Lord knows we need your money badly, and we promise we won’t tell anyone it’s a subsidy.

    Side note, what makes Airbus think they can put lipstick on a pig any better than Bombardier? Can a new, more complex supply chain really fix years of budget overruns and delays?

  17. The talks between Airbus and Bombardier started before the tax issue arose. The C-Series has been far from popular and Bombardier has been in financial trouble because of this. Now, Airbus will market the plane globally, assist with their supply chain and production, making it a more viable program! Airbus got a new, smaller product to sell without paying a penny for the development.
    Airbus and Bombardier win, Boeing and Embraer loose…

  18. So AIrbus sinks money (and will probably sink a lot more) into a struggling company in a very crowded small-jet market space, “Canada” loses majority control of a division of one of its marquee companies, and the US gets new manufacturing jobs.

    In the long-run, bad for Boeing and the US? Maybe, but maybe not…

  19. What breathtaking irony that in trying to deal a death blow to the C-Series program Boeing inadvertently took it off life support and thrust it back into play on the world aviation market thanks to a countermove by Airbus. You can hear the profanities coming from the Boeing boardroom in Chicago from here in Australia. Airbus is hardly a squeaky clean corporate player either but boy, what interesting aviation times we live in. Hope all these corporate games don’t distract Boeing from creating an amazing 797 that reflects its historical legacy as an innovator (a fading legacy admittedly given a product lineup that has evolved from very old designs in most cases).

  20. The CSeries isn’t a disaster. It’s an overreach. It’s a big difference. It’s an incredible plane. The best thing on the market anywhere close to its size and it trounces the e jets and the crj series for passenger comfort and cabin feel. It has an incredible range and great operating economics plus a low sticker price (however subsidised that is).

    It’s not unlike the 787, although that plane had a lot of technical disasters and continues to have them with new materials not holding up.

    The embraers simply aren’t as good as the cs100/300 and with airbus behind the project they’ll be able to scale up and down and compete heavily for orders in the regional jet market as well as the medium haul low load market.

    Have been following the story closely and am glad to see it broken on my favourite blog! Theresa May had a 40 minute conversation with Irish PM last night which surprisingly included bombardier but they didn’t release details so I’ve been waiting for the news.

  21. Hopefully now the Canadian government will finally stop giving the Bombardier family money…wait, they’re from Quebec, so probably not.

    And for those not that familiar with the family that owns Bombardier, every time they ask for money from the federal or provincial governments (because they can’t deliver anything on time – aircraft and trains) some how, they get huge dividends on a separate share class that is owned only by the family and bonuses. Go figure.

  22. The Boeing and Protectionism/Subsidy jeering/Airbus cheering is hilarious. A&B both play dirty, and Airbus won this round.

  23. So Bombardier gets a partner with the resources and backing to make their project succeed. The airlines get a cool new plane in a category that hasn’t been available up to now. Airbus gets to sell another type of plane.

    The US gets a manufacturing plant with the jobs that go with it (MAGA).

    Everyone wins except Boeing. Competition is the way Capitalism works, and while this obviously isn’t textbook free market, I’m afraid it’s about as close as things get lately.

  24. For those suggesting that the US is getting a new manufacturing plant and the jobs that go with it, I think you are mistaken. The plant is already there producing A320s, I believe. I think that they are likely going to just change over production to the C series and move the other production offshore. While the government is likely to claim credit for new production, I think there will be no new investment or jobs.

  25. Airbus had been in talks to invest heavily in the C-Series program fora long time (dating back to before the last bailout by the Quebec government, which was necessitated after talks with Airbus fell through). This new deal is a direct result of Boeing and the US DOC digging their own grave in their trade spat, as the UK and Canadian governments were certainly heavily involved in helping put this deal together, given their mutual interest in Bombardier’s future. It’s great news for Bombardier, which doesn’t have to abandon the plane, but gets help from Airbus to stop the bleeding, so they can go back to making trains and Q400s, which actually make them some money.

  26. Why is this called a sale? NO $ have changed hands yet and neither BBD NOR QC NOR Canadian taxpayers are getting a cent from this farce so not sure what your point is Sig.

    Reminds me of the time ATR was trying to buy the then de Havilland Canada so that they could kill the Dash 8. You think Bus’ sales force is going to sell the C over their 319 no matter how good its is? Those who choose to ignore the lessons of history are doomed etc. Anyone want to bet how long Bus will keep this program alive? Aviation history is littered with companies who built 100 seaters and went out of business and this airplane is no exception.
    I weep for the people of QC who now own 19% of the C series after paying $1.3B for 50% of it.
    @MarkM – you are so right. Maybe the employees in AL building it will pay QC taxes?
    @Rupert you are right except it is a NEW fleet type whereas the EMB E2 has significant commonality with the E jets and will easier to integrate into the fleet. The pilot rating alone is worth its weight in Gold.
    Also in the US AA have said they cant make a 100 seater work at mainline and UA has pretty much said the same thing.
    Think the C is now dead man walking: Bus will claim in a few years that because they couldnt sell it at a profit, they are terminating the program. BBD will exercise its option to reacquire the 50.1%, with REAL money, and GUESS who will be paying for that? All us Canadian taxpayers and to a greater extent the poor tax payers in “la belle province”.

  27. Hopefully this spells the end of Boeing. Arrogant trump-like American protectionist conservatives getting a taste of their own medicine.

    As the saying goes…

    If it’s a Boeing, I ain’t going…

  28. Although this outcome appeals in that the future of the C100 might be assured it means that Canadian aerospace technology will once again be given away to a foreign country.

    Other examples:

    – first 4 engine jet passenger aircraft (deHaviland Canada) cut up and destroyed so that the Comet (UK) could take the honours (and we know what happened to it).

    – forced cancellation and destruction of the Avro Arrow supersonic fighter so that it could not compete with US military aircraft (we got the Bomark missile instead)

    Hopefully Airbus will survive its current problems with bribery scandals and will actually enthusiastically promote the C100 so that Boeing and Embraer will not succeed in their nefarious plans.

  29. I love all the holier-than-thou commenters who mock the fact Alabama is getting some much needed manufacturing jobs.

    But I guess if your goal is to humiliate decent, hard-working Americans while tending to your Head of Inclusion & Anti-White Policies job, then this is a blow to you.

    As for the rest of us; we welcome the jobs created by the President.

  30. EU/Bombardier 1 – Trump/Boeing 0

    Note: I state Trump as opposed to the US because the US would never have behaved in such a way prior to the big orange fat berg getting elected.

    No doubt someone will now illustrate why I’m wrong.

    On the subject of state subsidies for aviation, if the Trump administration thinks Bombardier has benefitted unfairly what size penalty will they impose on Embraer???? Should be interesting either way.

  31. Boeing wanted to sell used jets made in Brazil instead of American made jets, and Boeing gets many airplane parts from other nations. How can they say made in America and mean it?

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