In a completely unexpected move, Canadian manufacturer Bombardier has handed Europe’s Airbus control of the CSeries aircraft programme. Airbus expect regulatory approval in the second half of 2018 to acquire the 50.1% stake.
There are two versions of the aircraft, the CS100 which seats 103-133 passengers and is in service with Swiss. A stretched version, the CS300, seats 130-160 passengers and is currently flying for airBaltic. In service are 14 aircraft in total and there are 346 on firm order.
Tariff Problems
Delta Air Lines in the USA ordered 75 of the CSeries and Boeing essentially threw its toys out of the pram, filing a petition accusing Bombardier of price dumping and selling the aircraft below the cost of manufacture.
The US Department of Commerce handed down a preliminary ruling in Boeing’s favour imposing a 220% import tariff on the CSeries. This later increased to 300%, with the final ruling expected in December.
Additionally, over half of the aircraft components are manufactured by US suppliers. This means any tariff will directly impact American companies who produce items for the CSeries. This ranges from avionics suppliers to Pratt & Whitney who supply the engines, so this makes the Boeing stance all the more strange.
Airbus CSeries Swoop
Bombardier attempted to get Airbus to purchase the majority of the programme back in 2015 but Airbus declined at the time. Press reports today state this was due to the fact Airbus were busy with the A350 and other issues of its own.
Now it appears Airbus will have a 50.1% share of the programme, Bombardier 31% and the Quebec Government’s investment arm with 19%. Airbus also obtained the share for nothing at all. They will provide sales and marketing support for the aircraft and open a new assembly line in Mobile, Alabama.
What Does This Mean?
I imagine it is quite unlikely that any tariff can be levied on an aircraft assembled in the United States as there is no importing of the aircraft per se. It will actually create jobs in America so in one fell swoop the Boeing petition appears to be neutered.
Also, using the Airbus sales and marketing might should lead to additional sales and remove once and for all any airline hesitation about the programme viability. There appears to be no downside except for Bombardier who will cede control of an aircraft they designed.
Overall Thoughts
This news certainly came out of left field and it will interesting to see how it will play out. The parties involved must believe regulatory approval will be given considering the announcements made.
Either way, it would be interesting to be a fly on the wall at Boeing in Chicago right now. Thank you for reading and if you have any comments or questions, please leave them below.
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Featured image by tjdarmstadt and airBaltic by Alf van Beem with both via Wikimedia Commons.
With thanks to FlightGlobal and BBC News.
Lots of people have been trumpeting this development as a huge and totally unexpected loss for Boeing, but it seems highly unlikely to me that Boeing would not have accounted for the possibility of this scenario, especially with BBD having already made a go at it in 2015.
Airbus gets a great plane, but there’s a lot of baggage that comes with BBD, which has been hemorrhaging cash for a long time, and will continue to do so until deliveries resume. Airbus has the ironically unenviable role as saviour to BBD now, which may make things difficult when it comes to attempting to maximize efficiencies by leveraging its own non-Canadian resources. Also let’s not forget that Airbus will only profit from c series sales in proportion to its ownership of the program.
Managed properly, this certainly could be a win for Airbus, but the ultimate financial outcome of this for Airbus is far from certain. The reason Airbus was handed ownership for “free” is because Airbus is going to have to eat huge costs just to keep BBD afloat long enough to begin making deliveries in meaningful numbers.
A great quote to remember, “Nothing is more expensive than ‘free.'”
Well, one of the articles I read specifically stated that no additional cash is being input by Airbus at all as Bombardier is appropriately financed to cover the CSeries production as things stand. It looks to me like it’s more a case of getting Airbus on board for scale and the support network. That being said, clearly opening a production line in the US is going to cost some money but Airbus already have a facility there so presumably the new line will be on the existing site which minimises the cost.
Hopefully it will be managed properly and will become a win for all concerned, but the plane makers – almost all of them in fact – have a track record in the past 10 or so years of being hopeless at managing big programmes. Thanks for the thoughtful reply, enjoyed reading your point of view!
Live by the sword die by the sword. I continually preach this to my sales staff. AB just beat Boeing bad on this one and it will cost Boeing dearly, financially and politically. The only good thing is that American workers will be paid to assemble the planes and some tax revenue will be achieved. Sans whatever tax incentives Alabama gave up to get the plant.
It’s definitely an interesting one, that’s for sure. Boeing are saying now in a Tweet I saw earlier that none of this makes a difference and that the 300% tariff will stand. It’s definitely a case of get the popcorn out and watch what happens!