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.
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