Aeromexico May Get Some Of Delta’s CSeries Planes Due To Trade Dispute

This has the potential to get interesting. The Bombardier CSeries is one of the hottest new single-aisle jets, and Delta is the launch customer for the plane in the US. Or at least they were supposed to be. In mid-October we learned that due to a trade dispute between Boeing and Bombardier over subsidies, US airlines will have to pay up to a 300% tariff on these planes.

Not surprisingly, here’s what Delta’s CEO, Ed Bastian, said at the time:

We will not pay those tariffs. That is very clear. We intend to take the aircraft. I can’t tell you how this is going to eventually work out. There may be a delay in us taking the aircraft, as we work through the issues with Bombardier, who is being a great partner in this.

Following the news of the potential tariffs (though presumably this is something that was being discussed before), Bombardier quickly took action, and it was announced that Bombardier would sell a majority stake in the CSeries program to Airbus. Airbus would own 50.01% of the CSeries project, Bombardier would own 31%, and Investissement Québec would own 19% of the project.

The deal is expected to close in the second half of 2018, and the plan is for some of the CSeries production to move to the US.

The problem is that Delta’s first CSeries aircraft is supposed to be delivered to Delta in early 2018, and there’s no immediate resolution with the tariff dispute. So, it looks like Delta is considering a creative solution.

Reuters is reporting that Aeromexico is considering taking over at least part of Delta’s CSeries order, as a way to avoid the US trade dispute going on at the moment. Delta ordered 75 CSeries aircraft, and Delta owns a 49% stake in Aeromexico, so this would be a way for them to keep the planes in their “family” without having to pay the duties directly.

According to the article:

Under the proposed Aeromexico deal, the single-aisle jets would be sold to Aeromexico and fly under the banner of the Mexican carrier which would not have to pay a U.S. duty, one of the sources added.

“It’s not a way for Aeromexico to fly for Delta,” the same source said. “But it keeps the planes within the Delta family.”

Aeromexico is now reviewing its fleet, a third source said, which is composed of Boeing and Brazil’s Embraer SA jets. The carrier received a presentation about the 110-to-130 seat CSeries last week, and is expected to receive another from Bombardier’s Brazilian rival, the source said.

So it sounds like if this deal were to happen, they’d take over the CSeries aircraft that were initially supposed to go to Delta, and presumably once the dispute is resolved, Delta would take over many of the remaining CSeries aircraft they had ordered.

I wouldn’t necessarily assume this is a sure bet at this point, though it’s certainly a creative solution. One thing is for sure — Delta won’t be paying the tariffs, so whether they decide to delay delivery of the planes, or instead send the planes elsewhere, remains to be seen. The one tricky thing about Aeromexico is that they’re about to start taking delivery of an order of 60 Boeing 737 MAX aircraft, so this might just be too much capacity for the airline.