Airbus buys into CSeries

[internet]

More @CBCNews: Europe's Airbus to buy majority stake in Bombardier CSeries program. http://cbc.ca/1.4357572

 

Airbus will acquire a 50.01 per cent interest in the CSeries Aircraft Limited Partnership (CSALP), which manufactures and sells the plane.

Bombardier will own 31 per cent and the Quebec government's investment agency will hold 19 per cent.

[Guest]

49 minutes ago, internet said:

More @CBCNews: Europe's Airbus to buy majority stake in Bombardier CSeries program. http://cbc.ca/1.4357572

 

Airbus will acquire a 50.01 per cent interest in the CSeries Aircraft Limited Partnership (CSALP), which manufactures and sells the plane.

Bombardier will own 31 per cent and the Quebec government's investment agency will hold 19 per cent.

AND THE CAT IS NOW AMONG THE PIGEONS.  

[dagger]

There is no other way to put it; a huge blunder by Boeing. And now it's product line is exposed in the 100-150 seat range

 

Airbus-Bombardier CSeries deal means no tariffs on US-assembled aircraft, says CEO

Oct. 16, 2017, © Leeham Co.: The stunning Airbus-Bombardier partnership for the CSeries program guarantees the future of the new airplane, kills off the A319 and thrusts a big stick up Boeing’s tailpipe.

Boeing won big victories in its trade complaint filed with the US government, winning 300% tariffs on every CSeries imported into the US, throwing into doubt a big deal with Delta Air Lines for up to 125 aircraft.

US assembly line

The Airbus-Bombardier deal includes establishing a second CSeries assembly line at Airbus’ Mobile (AL) plant. Bombardier CEO Alain Bellemare is confident CSeries assembled there for delivery in the US will be duty-free.

This means Delta will have to reschedule its deliveries, if the US government doesn’t reverse preliminary findings on the duties or the US Court of International Trade or another venue doesn’t overturn the findings.

The news probably stunned Mobile officials, too. LNC was in Mobile last week; officials didn’t say anything about it then, and Airbus today told LNC that since this was a “material” announcement, they could not tell Mobile officials until the transaction was announced.

The transaction is scheduled to close in the second half of next year, after regulatory approvals.

Filling a gap

The deal fills a major gap in the Airbus product line: below 150 seats. Airbus CEO Tom Enders said there hasn’t been a sale of the A319, the 126-seat model, since 2012. The CS100 seats 100-110 passengers and the CS300 135-145 (and 160 in high density).

Enders declared that the CSeries presented no competition to Airbus because of the lack of sales for the A319.

Boeing, on the other hand, offers the 737-700, which will be phased out with the 737-7 MAX. Poor sales of the 7 MAX prompted a redesign, adding 12 seats. But the move hasn’t spurred sales.

The trade complaint Boeing filed with the US government asserted the CS100/300 will kill the 7 MAX and threaten the 737-8 MAX. The US government agreed, and levied the tariffs.

Alain Bellemare, CEO of Bombardier, firmly declared that any CSeries assembled at Mobile and delivered to a US airline or lessor will not be subject to tariffs.

With sales of the 7 MAX non-existent, and a duty-free CSeries available to US customers, Boeing has a huge product gap at the bottom end of its product line.

Boeing did not respond to an email seeking comment.

Boeing and Embraer have had several commercial agreements, though none for the E-Jets. It remains to be seen whether the Airbus-Bombardier deal will prompt something new between Boeing and Embraer.

 

[blues deville]

Amazing. What a business!

[Super 80]

I sincerely hope Donald Trump is invited to the first delivery out of Mobile, red hats for everyone just to remind Boeing that they did this by hitching their wagon to Trump.

[rudder]

Boeing got greedy and banked on the 'nationalist' President and his administration jumping on the bandwagon and sabotage the c-series. Instead, the c-series now has an unlimited financial lifeline through Airbus and will be a poster child for the now requisite 'made-in-America' label.

Only change will be that Airbus will not be giving the plane away for free (or close to it) as was the case with BBD.

This is a great outcome for Bombardier Aerospace. Will be interesting to see if BBD pursues divestiture of the CRJ900/1000 line or the Q400 line.

[Zan Vetter]

Will the long-term effect of this partnership be to replace the EA32 series with the C-series stretches?

[Fido]

Canadian governments pour billions into Bombardier and the jobs fly south?

[Maverick]

4 hours ago, Fido said:

Canadian governments pour billions into Bombardier and the jobs fly south?

There was a reasonably good chance there would have been no jobs in a year if Airbus hadn't stepped in. I think it's a brilliant move that will force out the Beaudoin family once and for all. 

It will also be political suicide to put anymore taxpayer money into Bombardier as well. 

A good day for this nation. 

[boestar]

a SECOND C-Series production line in Mobile.  More Jobs created south of the border.  The C-Series line will remain in Montreal to service other non US customers.

 

[DEFCON]

And I had thought Boeing would be the one to move and take advantage of Bombardier's weak position.

Without a viable nb aircraft to market, there might be a need for government subsidies in Boeing's not so distant future. 

[boestar]

Boeing has already been there.  They bailed on DeHavilland years ago when Bombardier bought them.  All Boeing did was steal some of DeHavillands Technology then sold the rest off.  I am sure they do not want back into this market.

Expect Boeing to object to the deal though.

 

[rudder]

Boeing's objection is likely that they should have thought of partnering with BBD on the c-series first. Too late now.

Boeing made a critical strategic error when it abandoned its drawing board replacement to the 737 (AKA the 797).

[Bobcaygeon]

2 hours ago, rudder said:

Boeing's objection is likely that they should have thought of partnering with BBD on the c-series first. Too late now.

Boeing made a critical strategic error when it abandoned its drawing board replacement to the 737 (AKA the 797).

Boeing had to remodel the 737 because Airbus created the NEO family and no one would wait for a new Boeing design that seems to take almost a decade to get online nowadays.

Airbus seems to be calling the shots lately with Boeing just reacting.

[dagger]

3 hours ago, boestar said:

a SECOND C-Series production line in Mobile.  More Jobs created south of the border.  The C-Series line will remain in Montreal to service other non US customers.

 

Let's understand this: The US market for the CSeries is way over-hyped. American and United have made their peace with Boeing on narrowbodies. American recently expressly declined interest in CSeries. Southwest is all Boeing all the way, and not interested in the CSeries size class. Aside from JetBlue, there really aren't any large customers out there to be had in volume. The non-US market, on the other hand, appears to be huge. A number of Asian and African airlines have strong interest in the CSeries, so for Bombardier-Montreal, I would rather have the primary mandate for non-US sales than a primary mandate for US sales. The Airbus plant in Mobile will be there for US orders and overflow.

What concerns me is Bombardier's ability to keep funding updates on the Q400 (the stretch with new PW engines in particular) and the CRJ lineup. Airbus has no involvement there.

What intrigues me - and which the press hasn't picked up on - is that once Airbus owns or leases the CSeries facilities in Montreal, will it assign other projects to it, especially if Canada is a good customer. The feds already awarded Airbus a contract for a new patrol aircraft fleet. Airbus is part of the Eurofighter consortium, so imagine if Canada were to buy Eurofighters (not likely, but still...) they could be assembled in Montreal.

Lots to digest in this deal, and I suspect i will make a lot of news in a lot of ways before it matures.

[conehead]

Our CF-104’s were assembled in Montreal, by Canadair under licence from Lockheed.

[rudder]

JetBlue is VERY interested in the C-series as a E190 replacement. However, they wanted the AC/DL pricing. That particular window was and is now forever closed.

If Airbus decides to develop the CS500, the market in the US could be reasonably large. However, they will have to decide if a 150 seat C-series variant complements or competes with its own product offering.

Airbus may in fact just be getting involved to simply control and ultimately extinguish a competitor. But I think it is more likely that Airbus will see opportunity in selling the best product available in the 110-150 seat market as a positive.

 

[boestar]

I would hazard a guess that Bombardier approached Airbus and not the other way around. Airbus already has a facility in the US.  Bombardier needed the boost that Airbus could provide as well as the service and support structure that Bombardier sorely lacks.  Airbus will make out well if this is a success but they are now a risk sharing partner so if it goes bad they could lose.

The Eurofighter scenario of building them here would be great for our aerospace industry.  Perhaps we could claw our way back to the top.

[Zan Vetter]

On 2017-10-16 at 10:52 PM, Zan Vetter said:

Will the long-term effect of this partnership be to replace the EA32 series with the C-series stretches?

Like I said (sort of...)

https://www.bloomberg.com/news/articles/2017-10-18/airbus-pledges-to-put-c-series-ahead-of-own-a319-in-sales-push

[Super 80]

On 10/17/2017 at 7:28 AM, boestar said:

Boeing has already been there.  They bailed on DeHavilland years ago when Bombardier bought them.  All Boeing did was steal some of DeHavillands Technology then sold the rest off.  I am sure they do not want back into this market.

Expect Boeing to object to the deal though.

 

Boeing originally wanted to use a stretched DHC-8 as the basis for a P-3 Orion replacement but in a moment of unprecedented tone-deafness (even by Boeing standards) proposed the 757 instead. The contract was awarded to Lockheed because the Boeing's and McDonnell Douglas proposals were ridiculous but the new-build contract was cancelled soon after and it became a modernization and rebuild (and re-engine that never happened) of the existing P-3 fleet. 

[Super 80]

7 hours ago, Zan Vetter said:

Like I said (sort of...)

https://www.bloomberg.com/news/articles/2017-10-18/airbus-pledges-to-put-c-series-ahead-of-own-a319-in-sales-push

I understand the message delivered to Delta, which was negotiating for the launch of the CS500 is that the further development of the C Series will defer to the market.

[Guest]

Another look at the deal:

http://nationalpost.com/opinion/andrew-coyne-cseries-planes-controlled-in-europe-built-in-alabama-subsidized-in-canada?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NP_Top_Stories+(National+Post+-+Top+Stories)

Andrew Coyne: CSeries planes — controlled in Europe, built in Alabama, subsidized in Canada
‎Yesterday, ‎October ‎18, ‎2017, ‏‎6:26:05 PM | Andrew CoyneGo to full article
The usual claque of critics could be heard jeering at Bombardier’s “sale” of 50.01 per cent of its CSeries passenger jet project to Airbus, its European aerospace rival.

Some found fault with the sale price — zero — for a majority interest in a plane that has cost US$6 billion (so far) to develop, a third of it public money. Others grumbled at the resulting dilution of the government of Quebec’s stake in the CSeries Aircraft Limited Partnership (CSALP), from 49.5 per cent when purchased for US$1 billion two years ago, to just 19 per cent today. (Bombardier holds the remaining 31 per cent.)
Still others pointed out the deal means a shift of final assembly of the planes, at least for the U.S. market, to Airbus’s new plant in Alabama. Perhaps this will allow the planes to escape the 300 per cent duties the U.S. Commerce Department was otherwise prepared to impose on them; perhaps not. Perhaps Airbus will continue making planes for other buyers at Bombardier’s plant in Mirabel, Que.; perhaps over time it will prefer to centralize production in non-union Alabama. Assuming there are other buyers.

What these naysayers overlook is how neatly the deal fits with the business strategy the company has been pursuing all along. It is, after all, a fairly straightforward step from selling planes for less than they cost to make — in effect, giving away half of every plane — to giving away half of the equity in the planes. And whatever else may have changed as a result of the deal, the basic elements of the Bombardier business model — sucking subsidies from the government — have not. The CSeries will be controlled in Europe, it will be built in Alabama, but it will still be subsidized in Canada.

Indeed, it’s not quite right to say that Airbus is getting its stake for free. In fact Bombardier is paying it to take it (much as Bombardier was effectively paid to buy De Havilland and Canadair, decades ago). Not only is Airbus paying no cash and assuming no debt, but Bombardier will remain on the hook for any future losses on the project, up to US$700 million. In addition, Airbus receives warrants to buy 100 million subordinate voting shares in Bombardier at the price they were trading at last week; those shares are already worth almost 20 per cent more than that.

Still, if the point of bailing out Bombardier so often, at so great expense, was supposed to be to save jobs in Quebec, it’s a little galling to see Canadian public dollars now being used to create jobs in Alabama. (Which raises a question: what happens if Airbus sells the planes made there to Air Canada? Would we be obliged to levy a duty on it, as a countervail to our own subsidies?) Supposedly the federal government is going to attach conditions to the transaction requiring Airbus to maintain current levels of employment in Canada, but how binding can these be, really? What leverage does it have? If the deal doesn’t go ahead, Bombardier goes under: that much is clear, weighed down as it is not only by the U.S. tariffs but its own uncertain prospects, so far as these feed perceptions it will not be able to deliver the CSeries. In which case no jobs are saved.

Even if the constraint were binding — that is, if Airbus could be cajoled into employing more Canadians than it would have done otherwise — that takes care of this year. What happens if, a year from now, Airbus decides it cannot afford to live up to its commitment? How will the government punish it then, the deal having already gone through? In reality, its only option would be to offer still more subsidy. As with the auto industry, the company’s Canadian workforce would essentially become hostages, to be ransomed in periodic installments.

Not only is Airbus paying no cash and assuming no debt for its share in the CSeries program, but Bombardier will remain on the hook for any future losses on the project, up to US$700 million.

None of which is to say the deal should not go through, or is not the best the company could have arranged under the circumstances. It is the circumstances that are outrageous. Bombardier was built with subsidy, and is vastly larger than it would have been without it. If much of the world’s aerospace industry was as well, all the more reason to stay out of a game we can’t possibly win, even if we were allowed to play it. Yet it bet the company on the CSeries, and governments in Ottawa and Quebec City bet billions it could be bailed out without inviting some form of retaliation abroad, whether countervailing duties or offsetting subsidies.

All the Airbus deal has done is crystallize past folly. It’s obviously a great deal for Airbus. And it’s better than nothing, for Bombardier. But is it for the taxpayer, or the Canadian economy? It’s true that 50 per cent of some sales is better than 100 per cent of no sales (or as Quebec Premier Philippe Couillard put it, “selling planes makes money, not selling planes makes no money”). But so far as the planes sell for less than they cost to make, the least-cost option is not to make them at all.

[boestar]

I suppose the outcome of this deal is an unknown.  No one but Airbus knows what they are going to do.  Airbus could make this deal great for all parties..or not.  we can just speculate.

 

[Super 80]

Talking to some Airbus people today, they're of the belief that Airbus is theoretically interested in everything except for Learjet and the Trudeau and Quebec government are very eager to facilitate the sale of Bombardier Aerospace to Airbus.

[Guest]

1 hour ago, Super 80 said:

Talking to some Airbus people today, they're of the belief that Airbus is theoretically interested in everything except for Learjet and the Trudeau and Quebec government are very eager to facilitate the sale of Bombardier Aerospace to Airbus.

Airbus has no plans to buy out Bombardier after CSeries partnership, CEO says

Airbus says it expects Boeing to do everything it can to block Bombardier’s CSeries planes from the U.S. market, making the coming months difficult.

Airbus CEO Tom Enders says the company has no plans to buy out the rest of Bombardier’s CSeries program despite reaching a deal to take a majority stake on Monday.  (Graham Hughes / THE CANADIAN PRESS)  

By The Canadian Press

Fri., Oct. 20, 2017

MONTREAL—Airbus has no plans to buy out minority CSeries partners Bombardier and the Quebec government, Airbus chief executive Tom Enders said Friday.

According to terms of the deal announced Monday, Airbus had the option to buy out Bombardier in about seven years, and the Quebec government in 2023.

Following a joint appearance with Bombardier CEO Alain Bellemare at the Montreal Board of Trade, Enders said that's not the European giant's plan.

“We have no intention to buy out the others because we know they are great partners and if they want to stay on the journey going forward they are very welcome to that,” he told reporters.

He said the priority is to close the deal next year that gives Airbus majority control, build a second assembly line in Alabama, sell more aircraft and make the program a huge success.

Earlier, Enders told business leaders that he expects Boeing won't give up easily after launching a trade action with the U.S. government against the CSeries that has resulted in 300 per cent preliminary duties on imports.

“The B guys will certainly throw everything into our way they can figure so the coming months might be a little bit rough and tough but we've seen that before,” he said.

Ultimately he said the CSeries will weather the challenge and prevail.

Enders added that Canadians have nothing to fear from Airbus, saying the company will add to Montreal’s large aerospace cluster and provide more opportunities for local suppliers, universities and aerospace training schools.

“We're not taking anything away here,” he said, adding that he knows there are concerns by some members of the public.

“If anything we will add, we will add to Canada, we will add to the success of the Canadian aerospace industry, Bombardier and suppliers and certainly we will add to the world-wide success of Airbus.”

Airbus has already sent lobbyists to Washington to show how the partnership will create U.S. jobs that President Donald Trump has advocated.

Bombardier CEO Alain Bellemare added that Airbus’ support will assuage customers who were worried about the future of the CSeries.

He says the result will be many more sales that will benefit Bombardier's Mirabel production facility even though a second assembly line will be built in Alabama.

Bellemare reacted forcefully to questions about Airbus not paying any cash for the transaction.

“The point is it's not coming from dollars, it's coming from the value that they bring to the program and that is the reason why the value of this program will more than double,” he told reporters.