Airbus buys into CSeries

[DEFCON]

It feels like Canada will be left with nothing once again after the dust settles. And to think it was only a few short months ago that the world's worst executive team was planning to redistribute a large chunk of the taxpayers money in an executive bonus scheme. 

[rudder]

Beaudoins approved the deal because the accumulated c-series debt and a lack of sales revenue to service the debt repayment schedule would have bankrupted BBD. I would not be surprised to see the sale of aerospace assets continue, but I cannot imagine who would be interested in what is left.

[Guest]

Another viewpoint re the deal:

Bombardier’s future anything but clear

Despite Airbus deal for CSeries, Bombardier’s future uncertain

• Calgary Herald
• 21 Oct 2017
• Financial Post With files from The Canadian Press ALICJA SIEKIERSKA

GRAHAM HUGHES/ THE CANADIAN PRESS Airbus CEO Tom Enders hailed the company’s blockbuster deal, with its stake in Bombardier’s CSeries, as a win for all in Montreal on Friday.

The CSeries was supposed to be Bombardier Inc.’s ticket to the big leagues in the aerospace world.

But the strategic partnership announced this week that will see Airbus SE acquire a 50.01-per-cent stake in the signature commercial jet program, without putting up any cash, has changed all that.

On Friday, Bombardier’s chief executive Alain Bellemare and his Airbus counterpart Tom Enders addressed the Chamber of Commerce of Metropolitan Montreal, touting the blockbuster partnership as a win for all involved.

“This strategic partnership is going to fully unleash the value of the major investment we’ve done in this new aircraft,” Bellemare said.

“We’ve invested a lot of money, with very smart people, over many years and what we’re doing with Airbus here is combining the strength of the best commercial aircraft company in the world with a very great product.”

Analysts have also, for the most part, hailed the agreement as a positive and perhaps the best available move for Bombardier, which was facing sluggish demand for the CSeries and had been slapped with massive duties by the United States, putting its largest existing orders in jeopardy.

But the deal also raises questions about where the iconic Quebecbased firm — which now has more than $8 billion in debt and whose profitable transportation division is facing increased competition — is heading and what kind of company it will be going forward.

A large part of that could depend on how the Airbus partnership plays out in the coming years.

According to the news release detailing aspects of the partnership, Airbus has a call option allowing it to buy out Bombardier’s stake — which now stands at 31 per cent — for “fair market value” seven-and-a-half years after the deal is finalized. Bombardier has a corresponding put option, which allows it to sell its stake to Airbus in the same time frame.

On Friday, Enders told reporters in Montreal that the company has no plans to buy out Bombardier’s share, and that “we know they are great partners and if they want to stay on the journey going forward they are very welcome to that.”

That message contradicts a statement from Airbus’s vice-president of communications Rainer Ohler who, according to the Seattle Times, said earlier this week that “at the end of the day, this will be an Airbus program.”

“It’s not forever a threesome. Over time, we take 100 per cent of the program. That’s the end game,” Ohler reportedly said.

While Airbus’s leadership is expected to boost the success of the CSeries — Enders said he expects to sell “thousands” of the planes — and may provide Bombardier the ability to recover some of the billions sunk into the program, the chances of Bombardier taking another run at the world’s commercial aviation duopoly seem slim.

“At the end of the day, the more successful this thing gets, the less likely it is to stay in Bombardier’s hands,” said Richard Aboulafia, an aviation analyst and vice-president with the Teal Group.

Chris Murray, an analyst with AltaCorp Capital, said the deal also raises questions about Bombardier’s other divisions.

“Now Bombardier has four different business, and they each have different paths ... Down the road, do they become a holding company of companies, where they own industrial conglomerates where other people run or manage it? It’s a good question, and one I don’t have an answer for, because there are a lot of different ways it could go.”

Some analysts say that the Airbus deal will allow the company to shift its focus from trying to make the CSeries viable to its more profitable business jet and transportation divisions.

Bombardier’s business jet division had $5.7 billion in revenue last year, more than double its commercial aviation program, which recorded $2.6 billion in revenues.

“Business jets were No. 1, but they were sacrificed on the altar of the CSeries. Maybe if they shift their focus to that, with very hard work, in several years they can get back to No. 1,” Aboulafia said, adding that the company could also revive its commercial Q400 turboprop aircraft while potentially reaping the rewards of CSeries sales.

But Scott Hamilton, an aviation analyst with Leeham Co., believes the sale of the CSeries may be “the first step in Bombardier exiting commercial aviation.”

“I think if you’re going to give up the CSeries, and the Q400 and CRJ are aging programs that may or may not be making the company money, then you get out of that business and go back to business jet,” Hamilton said.

“There’s certainly prestige in producing commercial aircraft, but over time if it’s going to take down the company, you get rid of the business.”

Simon Letendre, a spokesperson for Bombardier, said the plan is to continue to improve all of Bombardier’s programs, including its business jet, transportation and commercial aviation divisions.

“After the closing of the transaction, if all goes well, we’ll still have our share of the CSeries, we’ll have the CRJ and Q- Series program, so I think we’ll continue to try to continuously improve all of those programs. That’s the way we look at it,” he said.

The Airbus deal also comes as Bombardier Transportation faces increased competition on several fronts. Last month, Germany’s Siemens AG opted to partner with French rival Alstom instead of Bombardier for a multi-billion dollar rail merger to help compete with a large Chinese conglomerate.

French Finance Minister Bruno Le Maire told reporters at a press conference in Paris in September that it is open to expanding the tieup to include Bombardier.

But Laurent Troger, the head of Bombardier Inc.’s railway division, told The Canadian Press this week that the company has the scale and reach to go it alone.

“I’m not seeing this as a priority for Bombardier,” Troger said.

The Airbus partnership is expected to be finalized in the second half of 2018, 10 years after Bombardier’s board of directors first granted approval for the launch of the CSeries program.

Analysts had warned more than a decade ago that the plan to launch the CSeries was risky, and that it could raise the ire of Airbus and Boeing.

Aboulafia said Bombardier should not have pushed ahead with the CSeries program in the first place as it put the company at risk of failing, but that in the end, giving it away was the best possible outcome.

“They had always bitten off more than they could chew by a wide, ohmy-dear-god margin,” he said.

“I think Bellemare woke up and said, ‘ Wouldn’t it be great to live in a world where we can actually focus on our core business and not have to worry every morning about whether we’re going to be alive the following week?’”

[Maverick]

I can see a scenario that they do launch the CS500. They know that on a straight up basis the CS300 utterly dominates both the 737-7 and the A319 NEO. The numbers are out there.

If they launch the CS500 up to a 190-200 seat size they kill the A320 NEO but more importantly they kill the whole Boeing narrow-body line because the only real seller is the 737-8 which (I think?) is outselling A320 NEO.

 The A321 NEO is outselling the 737-9 and 737-10 at about a 3-1 ratio or something like that.

Game, set, match Airbus.

 

Edit: Did a bit more research.

The 737-8 has 2258 orders.

The 737-9 and -10 have a backlog of 388 total. (121 of the -9's and 267 of the -10's)

The A320 NEO has a backlog of 3529.

The A321 NEO has a backlog of 1453.

 

They probably won't kill the A320 NEO then...

[rudder]

THe CS500 would complement CS100/300 fleet operators.

320NEO works for standalone Airbus NB operators.

The CS500 would not significantly harm Airbus but would be very bad news for Boeing.

Watch for CS technology to start to make its way in to the next gen Airbus product line.

 

[Super 80]

12 hours ago, DEFCON said:

It feels like Canada will be left with nothing once again after the dust settles.

I don't think the Quebec aerospace industry being absorbed into Airbus is being left with nothing. There was probably no better outcome possible from a stability and employment perspective.

[Maverick]

 

 

(My bolding in the 1st paragraph)

 

Boeing Thinks Airbus Is Making A Big Mistake With Bombardier Partnership

Loren Thompson, CONTRIBUTOR

Oct 24, 2017 12:38 PM 11,096 

When Airbus and Bombardier announced last week that they would partner in building the latter company’s CSeries line of single-aisle twinjets, much of the media coverage made the deal sound like a setback for Boeing. Coming only days after the Commerce Department sided with Boeing in a trade complaint against Bombardier, it seemed that America’s biggest exporter had suffered a sudden reversal of fortunes. “Boeing’s Fight With Bombardier Blows Up in Its Face,” proclaimed the Wall Street Journal. “Boeing Trade Action Misfires as Airbus Backs C Series,” said Aviation Week.

The coverage has become more muted since then as reporters have thought through the implications of an Airbus-Bombardier tie-up. However, many observers still don’t grasp how unconcerned Boeing is about the pending partnership. Because Boeing is a longtime contributor to my think tank, I have been able to develop a fairly precise picture of how senior management views the proposed transaction. In brief, here’s why Boeing isn’t worried at all.

The first thing to understand about Boeing’s reaction is that it could have had the same deal. When Bombardier was skirting insolvency in 2015 due to bad management and soft demand for its products, the company invited a number of suitors to look over the business, including Boeing. Boeing didn’t like what it saw. Neither did Airbus, nor did prospective Chinese investors. That’s why Quebec’s provincial government had to spend a billion dollars bailing out the company to keep the troubled CSeries program going.

That capital infusion, combined with additional aid from Ottawa, enabled Bombardier to avoid bankruptcy. But it also led to Boeing’s 2017 trade complaint, and a series of Commerce Department decisions to impose duties on U.S. imports of the CSeries that would effectively quadruple its price. As Bombardier’s own market projections show, the CSeries cannot survive unless it generates big sales in the U.S. But now its prospective lead customer in the U.S., Delta, says it will delay taking delivery since it doesn’t want to pay the pending duties.

Boeing execs don’t think this situation will change with or without Airbus, because President Trump’s Commerce Department is determined to prevent Bombardier from repeating the Airbus strategy of leveraging illegal subsidies to destroy U.S. aerospace jobs. They also cite the timeline for the proposed partnership. The deal won’t close until the second half of 2018, and then additional time (probably over a year) will be chewed up building a satellite production site for the CSeries at the Airbus plant in Alabama.

Alex Frangos of the Wall Street Journal called that U.S. site “a neat workaround to Bombardier’s tariff problem,” but in fact duties are likely to be in place during the entire time CSeries “production” is being set up in the Cotton State. Some Boeing execs don’t believe the Alabama site can ever be a real production facility, because that would drain hundreds of jobs out of Canada — the concern that led Ottawa and Quebec to bail out the company in the first place. CSeries wings will continue to be built in Northern Ireland no matter where the planes are assembled.

If much of the work on the planes continues to be performed in Canada and Northern Ireland, then the moment the Alabama site starts operating, Boeing execs say it will be hit with a complaint alleging illegal circumvention of trade duties. The longstanding legal doctrine of circumvention prevents companies from moving final assembly sites across borders as a way of dodging tariffs. So even with Airbus on board, the CSeries is fatally impaired: it can’t move a lot of jobs out of Canada without generating a political firestorm, but if it doesn’t then tariffs remain in place.

So Delta isn’t going to be getting the cut-rate jetliners it thought it was when it signed a deal with Bombardier last year. The company has said it will wait two years to escape the duties Commerce intends to impose, but it would probably have to wait a lot longer. Other U.S. carriers won’t find the price of CSeries planes attractive when they add in the multiplier imposed by countervailing and antidumping duties.

Meanwhile, Airbus will be facing its own problems with illegal subsidies. Early next year, the World Trade Organization will issue a final ruling that European governments have not complied with an order to cease illegal launch aid. The trade body long ago ruled that every Airbus plane has been illegally subsidized to the detriment of U.S. workers, but European governments have stubbornly refused to abandon their violation of trade treaties. So next year, the U.S. government will ask the WTO to start imposing costly countermeasures on Europe.

Thus Airbus and Bombardier will both be dealing with major challenges imposed by regulators as they move forward. Even if the impending demise of the Airbus A380 superjumbo was not impairing its balance sheet, the European plane maker is facing heavy headwinds. The way Boeing execs see it, Airbus is buying itself further headaches by taking on the CSeries as part of its portfolio. Boeing and Airbus in the past have avoided offering planes with seating capacity barely above that of regional jets.

However, saying Airbus is ”buying” trouble may be the wrong term, since it is paying nothing to acquire a majority stake in the CSeries. The fact that Bombardier was willing to give away ownership of its premier product line underscores why Boeing wasn’t interested in doing a deal when it kicked the tires at Bombardier two years ago. There just isn’t much there worth having. And that’s before you get to all the political controversy that will surround Quebec seeing its billion-dollar stake in CSeries shrink from 49% ownership to 19%.

No government would accept such a deal unless it had received assurances that local jobs will not go away. CSeries production will continue to occur mainly in Canada, and given all the subsidies, CSeries duties will remain in place in the U.S. — by far the plane’s most important market. So of course Boeing isn’t worried about arch-rival Airbus tying itself to Bombardier. Quite the opposite: some Boeing executives are delighted, believing it has made yet another strategic misstep.

https://www.forbes.com/sites/lorenthompson/2017/10/24/why-boeing-isnt-worried-about-an-airbus-bombardier-partnership-on-cseries/amp/

[DEFCON]

With an empty product cupboard and mountains of 747 / 787 related debt, Boeing ought to be very concerned.

[rudder]

Institutional arrogance. Just like the current tenant of the Oval Office.

[DEFCON]

A undeserved comment in respect of the Oval Office from the cheap seats.

  

[Maverick]

https://www.captiongenerator.com/745852/Boeing-Reacts-to-BombardierAirbus-partnership-

[rudder]

Priceless!

[Zan Vetter]

I told them to build the Sonic Cruiser! Lol

[Maverick]

Airbus/Bombardier C Series Deal Has Broad Implications

Airbus’s decision to take control of the Bombardier C Series bodes deep consequences across the civil aerospace industry

Oct 27, 2017 Jens Flottau, Graham Warwick and Guy Norris | Aviation Week & Space Technology

 

When John Leahy was given a tour of the C Series at the 2015 Paris Air Show, even the brash Airbus sales chief was fairly complimentary of his competition. “It is a nice little airplane,” Leahy said at the time. Nice and little, as in: “Not bad, but I really could not care less.”

Fast forward two years, and the “nice little airplane” is now the catalyst transforming the market for commercial aircraft, both mainline and regional. For years, four manufacturers—Boeing, Airbus, Bombardier and Embraer—have dominated. But following Airbus’s acquisition of a majority stake in the C Series program—for the bargain price of zero—the four have, in effect, become three. 

Playing out simultaneously, the aircraft has become the subject of a giant trade dispute between the U.S. and Canada that, as a side effect, will lead to the opening of another commercial jet final assembly line in the U.S.

Impacts of the Airbus Takeover of C Series

Production cost reduction is key for program turnaround

Airbus/Bombardier deal keeps China out, slowing down its rise in aerospace

C Series has long-term consequences for Boeing, Airbus product strategies

U.S. versus Canada trade dispute continues

But overlooked by many since the Oct. 16 deal stunned the global aerospace community is the crucial fact that the C Series was not sold to China. This helps to maintain Western aircraft manufacturing dominance for now and to slow China’s rapid ascent in the arena. 

According to several industry sources with inside information, negotiations between the Chinese aerospace industry and Bombardier were so far advanced that Comac, manufacturer of the C919 and ARJ-21, could have soon taken control of the C Series. One source says China mainly wanted access to engineering know-how and help with certifying aircraft in the West. 

That some portion of Bombardier was up for sale was one of the worst-kept secrets in the industry, in part because several candidates were approached. In the end, Airbus was able to act swiftly because it had established a path two years earlier, when it first considered buying the program.

Suppliers with knowledge of the situation say Boeing was “in shock” when the news broke. Belying the surface calm, there is reportedly serious concern within Boeing that the Airbus-Bombardier link will enable those manufacturers to compete with packaged fleet deals that the U.S. aircraft maker simply cannot match.

Senior industry sources say the tie-up is a big problem for Boeing, as the transatlantic alliance will be able to provide “stepping-stone” deals covering everything from regional and single-aisle aircraft up to the A350 and A380. The benefit of a common A320-like sidestick and display flight deck architecture in the C Series—useful for easing pilot training transition between fleets—is huge.

“It is hard to imagine Boeing expected it to go this way,” says Ronald Epstein of Bank of America Merrill Lynch, but he urges caution. Bernstein Research describes the deal as “win, win, win, lose?”—with Embraer’s E195-E2 as the possible loser in a tougher competition against an Airbus-backed CS100. 

Epstein says one potential Boeing response could be a tie-up with Embraer, as the companies already cooperate on the Brazilian manufacturer’s KC-390 military airlifter. But there are distinct differences: Embraer is not in crisis mode, and its largest aircraft is significantly smaller than the CS300, hence it does not compete with any Boeing or Airbus design. It therefore does not aid Boeing’s existing portfolio. 

 

Airbus CEO Tom Enders waves to Bombardier employees after touring a C Series test aircraft at Bombardier’s plant in Mirabel, Quebec, on Oct. 20. Credit: Reuters/Christinne Muschi

 

Pundits underscore that the situation could have been a lot worse for Boeing, at least in the long run, if Comac were to have used the C Series as its catalyst and accelerator toward world standards. There is an argument among China aerospace experts that the threat feared by Western players is exaggerated, and the benefits of obtaining the C Series may be overblown. But it certainly was a strong motivator for Airbus.

Another fascinating aspect of the deal is that Airbus is moving into a part of the market it had declared to be too small to be significant any longer—100-150 seaters. Its own orderbook would have been an argument for not investing in the segment. Almost half of the narrowbody orders (and soon production) are for the A321, while there are almost no orders for the A319neo; Boeing witnessed a similar trend with few sales for the 737-7. Bombardier has long argued that the A319neo and 737-7 have low orders because they are not optimized for their size. Embraer positioned its E2 in that size segment, but below that of the C Series, and with no expectation of the same volumes.

Bombardier’s lack of C Series sales did not support confidence in that market niche’s potential, either. Now that the program’s competitive disadvantages in terms of sales, product support and credibility are history, the aerospace world will soon find out which school of thought prevails.

Airbus will bring its sales and marketing muscle to the C Series orderbook and its supplier management clout and negotiating power to procurement and production, while its global product support is expected to boost the confidence of customers wary of committing to the Bombardier aircraft. The deal can also have substantial implications for Airbus’s own future product strategy as it ponders the positioning of an all-new A320neo-family replacement aircraft.

Airbus’s ability to cut supplier costs in the C Series program is key to making the takeover a success, one senior industry source says. Enormous sums of money—30-40% of total supplier costs—can be saved, the executive with inside knowledge of the C Series cost base says. JP Morgan believes that decreasing procurement costs by 10% would add six points to the program margin.

Why? Because Bombardier had no market power vis-a-vis its industrial partners, and there was no confidence in the program’s success; suppliers wanted the manufacturer to pay for their risk. And it did: “We did not reduce our price by one cent,” says one senior supply chain source, “and Bombardier had to accept it.” Component by component, partners realized enormous profit margins as they maximized their negotiating position. One example is the wing-to-body fairing, an insider notes. He says Bombardier pays four times the amount Airbus does for that piece on the A320neo. The excessive rates Bombardier was forced to pay are a major factor behind its taking of a loss on every aircraft it delivers—with or without launch pricing.

“The only risk Airbus has in the deal is execution,” says one executive. He deems the risk manageable but notes it could take three years to turn around the cost structure of the C Series program. Many suppliers have locked in a high number of shipsets at pre-Airbus prices, in some cases as many as 200, and are unlikely to voluntarily give up their nicely profitable business—unless Airbus subtly forewarns of retaliation in other areas.

But not every supplier is the same. While the aerostructures sector generally suffers from overcapacity and would therefore be more likely to be willing to accept margin cuts, systems suppliers such as United Technologies Aerospace Systems, Honeywell or Rockwell Collins are in a much stronger position. They either enjoy monopolies for particular systems, or their products could not realistically be replaced by a competing product because it would mean expensive, complex changes to the aircraft.

One area of cost concern remains composite wing production at Shorts in Belfast, Northern Ireland, one executive remarks.

Airbus Commercial Aircraft President Fabrice Bregier confirms the supply chain is already on notice as far as the C Series turnaround is concerned. He says the expectation is that supply chain costs will be consistent with what Airbus is charged.

In some sense, Airbus’s risk goes beyond execution. Although it paid nothing for the program share, this is just a temporary balm. Airbus is stuck with no exit strategy if the deal proves unsuccessful. It is hard to imagine who would buy the C Series if Airbus fails to turn it around. And it is unlikely that Airbus could shut the program down if it falters, given the guarantees it had to make to the Canadian government and the political pressure sure to emerge should that event happen. Epstein offers a sobering reminder, recalling Boeing’s acquisition of McDonnell Douglas and its rebranding of the MD-95 as the 717, only to shut down production barely 10 years after the merger.

 

The Airbus A319neo is the most obvious victim of the C Series arrangement. Already beset by slow demand, the Bombardier-Airbus deal may hasten its demise. Credit: Airbus

 

Bregier expects the deal to close in late 2018, following regulatory approvals. Until then, no structural changes can be implemented or decided.

“We bring credibility to the program,” Bregier says. “We bring in confidence that this is a really good aircraft that will be supported and improved in the long run.” 

The C Series will become a new family of aircraft for Airbus that complements its existing portfolio and allows Airbus to offer aircraft “from 100-600 seats,” Bregier says. He adds that the deal allows us “to increase our international footprint; we started in China and the U.S., now we also have Canada.”

And though there are strategic risks, there are potentially huge rewards. “The C Series deal buys Airbus more time for its own NMA,” says one industry source, referring to Boeing’s proposed new midmarket airplane and Airbus’s potential competitive response. With the CS100 and in particular the CS300 now part of its own portfolio, Airbus can afford to ignore the slow death of the A319neo.

The option to stretch the C Series further and, at some point, build a CS500 that could move into the A320neo field would allow Airbus to position the A320-family replacement at a higher basic design capacity without risking losing what could be at that point the bottom end of the market. Those customers could then buy CS aircraft.

But more important, Airbus plans to assemble aircraft for U.S. customers alongside its A320 family in Mobile, Alabama, circumventing the almost 300% in duties the U.S. government proposes imposing on C Series aircraft imported from Canada in response to Boeing’s anti-dumping charges. Airbus CEO Tom Enders and Bombardier CEO Alain Bellemare stress that the partnership is not driven by the U.S. trade dispute. “This was not motivated by anything the competition was doing,” says Enders. Bellemare agrees, saying: “This is not related to the trade issue; it is a strategic issue.”

Boeing Chairman, President and CEO Dennis Muilenburg publicly plays down the importance of the tie-up. He says it does not “change our game plan. Our fundamental strategy is strong. We expect heavy competition in that marketplace, and competition makes us better. But it is important that everyone plays by the same rules.”

He adds: “Some of these recent developments are not surprising to us. It is an attractive market with a lot of global competitors.”

As for the Airbus-Bombardier plans to circumvent excess import tariffs by completing final assembly of the C Series in Alabama, Muilenburg believes the U.S. Department of Commerce will derail this. Boeing filed its anti-dumping and countervailing duty petitions with the U.S. Commerce Department and International Trade Commission (ITC) in April; the ITC decided in June to proceed with an investigation. Commerce announced its preliminary finding in late September/early October.

Boeing’s decision to wage war on Bombardier “has arguably had some unintended negative outcomes,” says Robert Stallard of Vertical Research Partners, including damaging relations with the Canadian and UK governments and driving Bombardier “into the arms of its arch competitor.”

Bombardier continues to pin its hopes of resolving the trade dispute on the ITC finding that C Series pricing to win a key 75-aircraft order from Delta Air Lines in 2016 has done no damage to U.S. industry because Boeing did not offer a competing aircraft. The ITC is due to rule in February; if it determines that no damage was done, duties will not be imposed.

But if the ITC does find that material damage occurred, and the import duties are imposed, Bellemare believes Delta will be willing to wait until U.S.-assembled aircraft are available, likely in 2019. “Clearly, the Mobile option is on the table,” he says. “We will now engage with them in depth.”

“We think aircraft produced at this U.S. site will not be subject to [tariff] duty. But it’s more strategic than that: It is a very good move to bring this aircraft to the U.S. because the U.S. is the single largest market for this segment,” says Enders. Assembly of the first U.S.-made A320 began at Mobile in mid-2015, less than three years after Airbus announced the $600 million development. But given that the Mobile site is now well established, it may be possible to add the C Series in significantly less time.

Under the deal, Airbus will acquire a 50.01% interest in the C Series Aircraft Limited Partnership (CSALP), formed in 2015 when the Quebec government invested $1 billion in the program. Bombardier now holds 62% of CSALP, and Quebec 38%. After the deal closes, Bombardier will own 31%, Quebec 19%.

No money will change hands on completion of the deal, and no debt will be assumed by CSALP. The joint venture is already investing $2 billion in the C Series from 2015 to 2020, and Airbus’s involvement is expected to at least double the program’s value to $4 billion or more, Bombardier Chief Financial Officer John Di Bert says.

The size of Airbus’s stake is based on the expected value to the program of its sales and marketing, procurement management and customer support. In addition to its existing investment plan, Bombardier has agreed to provide up to $350 million in the first year and a combined $350 million over the next two years to cover any shortfall in funding. But Di Bert does not expect this to be required.

Although Airbus will pay nothing for its majority stake in the C Series, Bombardier expects to profit from handing over control through the program’s increased strategic value. 

That value is expected to come from increased orders for the aircraft, supporting a higher combined production rate in both Quebec and Mobile.

The $5.4 billion spent developing the C Series—$2 billion more than planned—pushed Bombardier close to a liquidity crisis, from which it was rescued in 2015 by Quebec’s investment in the C Series and another $1.5 billion from the province to buy a stake in Bombardier’s rail business. Bombardier is ramping up C Series production to a planned 120 aircraft per year by 2020, when the program is expected to reach break-even cashflow. While the partnership could accelerate that, Di Bert expects to see “powerful cashflow generation” from the Airbus tie-up starting in 2021-22. 

 

http://aviationweek.com/commercial-aviation/airbusbombardier-c-series-deal-has-broad-implications?NL=AW-05&Issue=AW-05_20171030_AW-05_939&sfvc4enews=42&cl=article_1&utm_rid=CPEN1000000441429&utm_campaign=12324&utm_medium=email&elq2=d969e09db4344676b67a95fc7d1da36a

[YYZSaabGuy]

Thanks for posting that. Probably the most balanced and insightful analysis I've seen yet.

[Guest]

Airline to buy 31 C-Series Bombardier planes

By John Campbell BBC News NI Economics & Business Editor

• 42 minutes ago
• From the section Northern Ireland a new window

• http://www.bbc.com/news/uk-northern-ireland-41843910

   

  Parts of Bombardier's C-Series planes are made in Belfast

A European airline intends to buy at least 31 of Bombardier's C-Series planes, the aerospace firm has said.

The unnamed airline has signed a letter of intent for 31 orders, with options for 30 more. It expects the deal to be agreed by the year's end.

C-Series wings are made at Bombardier's Belfast operation, providing employment for about 1,000 people.

For the third quarter of 2017, Bombardier posted a net loss of $117m on turnover of $3.8bn.

• Q&A: Bombardier-Airbus deal
• A neat solution to a thorny trade dispute
• Why is Bombardier important to Northern Ireland?

Alain Bellemare, Bombardier's chief executive, said: "This significant new order confirms the increasing confidence customers have in the C Series."

Based on the list price, a firm order would be valued at approximately $2.4bn (£1.81m), rising to nearly $4.8bn should all 30 options be exercised.

Last month, Airbus agreed to take a majority stake in the C-Series project.

Bombardier has faced a series of problems over the plane, most recently a trade dispute in the US that imposed a 300% import tariff.

Bombardier was accused of anti-competitive practices by rival Boeing, which complained to the US authorities.

Boeing accused the Canadian firm of selling the jets below cost price after taking state subsidies from Canada and the UK.

Bombardier said it would fight the "absurd" import tariff ruling.

[Kip Powick]

Bombardier cuts C Series delivery guidance, posts bigger loss

The company says it lost $117 million or five cents per share for the quarter ended Sept. 30 compared with a loss of $94 million or four cents per share a year ago.

 

Bombardier Inc. says it expects to deliver 20 to 22 C Series jets for 2017 compared with its earlier guidance for about 30.  (GRAHAM HUGHES / THE CANADIAN PRESS)  

By Canadian Press

Thu., Nov. 2, 2017

• MONTREAL—Bombardier Inc. says it expects to deliver fewer C Series aircraft this year than it expected due to engine delivery delays.

The company says it now expects to deliver 20 to 22 C Series jets for 2017 compared with its earlier guidance for about 30.

United Technologies Inc., the maker of the Pratt & Whitney geared turbofan engines, has held back some engine shipments to Bombardier and Airbus so it could offer spare engines to airlines that have had problems with the engines used on aircraft in service.

The new guidance came as Bombardier also announced it has signed a letter of intent with an unidentified European customer for a firm order of 31 C Series aircraft and options for an additional 30 jets. Based on the list price, the firm order portion would be worth $2.4 billion.

Bombardier says it lost $117 million or five cents per share for the quarter ended Sept. 30 compared with a loss of $94 million or four cents per share a year ago.

Revenue totaled $3.84 billion, up from $3.74 billion.

[dagger]

WTI Crude rose about $57 today. I wonder if United in particular regrets not buying the CSeries. Those 737-700s are cheap, for sure, but if crude goes even a little higher, they will be expensive to operate.

 

Also good news for the oil sands producers - a nice combination of rising oil prices and declining CAD/US exchange rate, likely reflecting trade uncertainty. 

 

[Guest]

Who knows, maybe the new Mayor of Montreal will be more friendly towards a pipline to the east coast. 

[dagger]

8 minutes ago, Malcolm said:

Who knows, maybe the new Mayor of Montreal will be more friendly towards a pipline to the east coast. 

I doubt it. It's not in her politics that I can see.

[Kip Powick]

16 minutes ago, dagger said:

I doubt it. It's not in her politics that I can see.

I have seen her a lot on TV..Her platform seems to be more about down town traffic problems than anything else.

.My impression is that she borders on being a "Trumpette" ......but I do wish her well.

[Super 80]

57 minutes ago, dagger said:

WTI Crude rose about $57 today. I wonder if United in particular regrets not buying the CSeries. Those 737-700s are cheap, for sure, but if crude goes even a little higher, they will be expensive to operate.

That order is dead aside from four conversions to 800s.

United wants forty off-lease EasyJet A319s with the double over-wing exit for this role.

[mrlupin]

A video on the little plane war...

 

 

[mrlupin]

I don't know if this has been posted before...

Bombardier Commercial Aircraft announced on Tuesday that it has signed a letter of intent with EgyptAir Holding Company to purchase up to 24 CS300 aircraft

http://montrealgazette.com/news/while-you-were-sleeping-bombardier-signs-another-c-series-deal-donair-cam-goes-live

[Maverick]

Looks good on them, IMO.

 

The global reach and impact of Boeing’s campaign against Bombardier

Author Addison Schonland Posted on November 22, 2017

5430 views

6

It would seem that the spat Boeing set off by claiming it’s 737 MAX is threatened and even damaged by the Bombardier C Series has set off several waves across the globe.  This is an excellent example of just how global commercial aerospace has become.

USA
Within the US, thousands of jobs depend on the C Series program.  Not as many as on the 737 MAX program, but if you were going to lose your job you’d be worried and rightly so.   Of course, if you live in Alabama you are thrilled that Bombardier will invest $300m in adding a new final assembly line next to the Airbus factory.

Elsewhere in the supply chain, the Commerce Department ruling will continue to cause waves and nobody knows quite how the impact (read economic damage) will play out.  Boeing’s anti-dumping claim has set off a series of outcomes that it has no control over.  One of these outcomes has to be Delta Air Lines, which is in the midst of a single aisle fleet refresh decision. Bets are that Boeing will lose this deal and, may be, frozen out at the airline for a long time.  Delta is one of the world’s largest airlines and is financially the strongest in the US.  This is not the customer you want to annoy and lose over the relatively small C Series deal. But that’s the reality for Boeing today.

Belfast
At the Shorts plant that makes the wings for the C Series, there is a reasonable sense of panic.  It is clear the politicians in Belfast were not paying enough attention. They are still not doing this.  Given the downstream political and economic impact of the current tariffs being enforced, who knows what could happen?  The careful balance needed to keep previously warring parties apart could break down if an economic downturn occurs.

EU
If the UK continues down the path of Brexit, there is the possibility that Airbus’ wing plant in Wales will exist outside the EU.  This brings in another global impact from China.  However, there is good news from this because if Airbus does wind down any business with Wales, there is interest in the Shorts plant’s capabilities.  Some good news for Belfast at least.  No role here is linked to Boeing, but we can see how the industry’s players need to shift to accommodate political changes.

UK
Belfast is part of the UK.  The UK Prime Minister needs Belfast support in Parliament to keep her job.  Mrs. May wants that job and is unlikely to allow Boeing and the US Commerce Department to threaten it. Mrs. May has enough trouble with Brexit.  Mrs. May has told President Trump about her concerns, and the President has not responded publicly (as unusual as that is). The UK Parliament is now fully engaged in this matter.

Canada
The initial reaction was dismay at the Commerce Department’s decision.  Unlike the Irish, the Canadians were paying attention.  The government immediately started to cut ties with Boeing and there were several deals in the hopper.  Canada was not always happy to back Bombardier, as we have seen with the reluctance in Ottawa to fund the companies programs.  But Boeing achieved something Bombardier management struggled to accomplish – immediate across-the-board Canadian support for Bombardier.  And with this support, any Boeing related Canadian business went into a deep freeze.  Losing billions in defense-related deals is surely not what Boeing expected from Canada.  This is a real, rather than imagined loss, since Boeing no longer manufactures 100-seat aircraft that Delta wanted to buy, and would never have gained that business, which would otherwise have gone to Embraer. Boeing has a tough job proving that they had something for Delta.

China
One of the reasons, remaining unstated, that Boeing sought to destroy Bombardier was the fear that Bombardier would be acquired by the Chinese, who could utilize the excellent C Series design to build advanced aircraft in China.

But Boeing miscalculated that Airbus, which reviewed and rejected the C Series program in the past, would remain uninterested.  Airbus became interested, as they also didn’t want to see Bombardier’s technology jump-start a new competitor in China with a newer technology aircraft than their own current offerings.  The intent to keep Bombardier technology from China was successful but may have occurred in a different way than anticipated.

The Bottom Line
These initial impacts will evolve as this case moves forward, and we expect additional ramifications as time goes on.

 

https://www.airinsight.com/global-reach-impact-boeings-campaign-bombardier/