Airbus has struck a deal with Bombardier to acquire a majority stake in the struggling C Series airliner program, in a move that redefines the competitive landscape between Bombardier and rival Boeing. The announcement comes on the heels of attacks earlier this year from Boeing who accused Montreal, Quebec-based Bombardier of selling the C-Series jets to Delta Airlines at suspiciously low prices.
A hefty 300% tariff imposed on C-Series imports into the U.S. by the Department of Commerce has been creating friction between Canadian and U.S. plane manufacturers. Is Bombardier trying to circumvent high tariffs by striking up a deal with Airbus? Publicly, the answer to that question is no. However the fact remains that the C-Series jets will now technically be American-made and, therefore, not be subject to any tariff at all.
Airbus has offered to shift final assembly of the C-Series jets to Mobile, Alabama. Currently, Airbus is already using the Alabama facility to manufacture single-aisle jets for U.S.-based airlines and has plans for expansion to accommodate the C-Series assembly lines.
Meantime, the International Trade Commission is about to announce a final ruling on claims of harm made by Boeing in February. Airbus Group CEO Tom Enders denies that the new partnership has anything to do with Boeing’s pending lawsuit, stating that the pair have been in the negotiation phase since August. But a Boeing spokesperson stated to Reuters that “this looks like a questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the U.S. government. Our position remains that everyone should play by the same rules for free and fair trade to work.”
CEO Ed Bastian said in a statement last week that Delta had no intention of paying the 300% tariff and has tended to side with Bombardier on the matter. Speaking about Delta, Bombardier CEO Alain Bellemare said, “We feel confident they’ll be waiting for the right solution” and has discussed various options with the carrier, including waiting until the Alabama factory is up and running to take jets, which could be years from now. Today Delta declined to comment on the matter.
Under the terms of the new deal, Airbus will own a 50.01% majority stake in the airliner program; Bombadier will retain 31%, with the remaining 19% minority share being held by Investissement Québec. Airbus is not expected to make any additional investment in the C-Series jet program but Bombadier still gains plenty, including access to Airbus’ manufacturing, sales, customer service, and marketing networks. The deal is slated to close sometime during the second half of 2018.