Airbus has joined forces with Canada’s Bombardier on the CSeries jet program, altering the dynamics of the global aerospace sector.
Under the new deal, Airbus will acquire a 50.01% stake in the CSeries jetliner program, and own 100% within five years. In return Bombardier will receive just one dollar. However, the European group will provide procurement, sales and marketing support for the troubled CSeries, thus securing its future. Though critically acclaimed for its performance and fuel efficiency, the CSeries has been stalled by slow sales and development delays.
The deal strengthens the position of both firms in the $125 billion a year market for large jets. “It’s an unexpected move by Airbus but indicates they see good market potential for the CSeries. Neither they nor Boeing currently offer an aircraft in the regional jet market,” said aerospace consultant John Strickland of JLS Consulting.
Though statements from the aerospace executives involved differ, the move appears related to a trade dispute between Bombardier and Boeing. The American company filed a complaint against Bombardier earlier this year concerning an order for CSeries planes from Delta Air Lines, which was to be the US launch customer for the planes. In response, the US government proposed a nearly 300% tariff on CSeries jet imports. As part of the deal, Airbus will produce some of the jets in Alabama. “Assembly in the U.S. can resolve the (tariff) issue because it then becomes a domestic product,” said Bombardier CEO Alain Bellemare.
Bombardier said the Airbus deal should more than double the value of the CSeries program, with improved economies of scale and a wider sales network. For Airbus, the deal bolsters its narrow body portfolio, which was struck a blow by poor sales of its A319 model, and expands its global footprint in a key aerospace market. Airbus CEO Tom Enders called the tie-up a win-win. “The C Series, with its state-of-the-art design and great economics, is a great fit with our existing single-aisle aircraft family and rapidly extends our product offering into a fast-growing market sector,” Enders said.
Reuters reports that under the terms of the deal, Montréal-based Bombardier will retain about 31% of the CSeries Aircraft Limited Partnership, which manufactures and sells the jets. Investissement Québec, the investment arm of the province of Quebec, will hold 19%. Bellemare said the deal is expected to close in the second half of 2018.
