Well this just got really, really interesting. Earlier I wrote about the situation between Boeing and Bombardier. For those of you not familiar with the Bombardier C Series, it’s a popular new plane that has around 100 seats. However, it has been the subject of a controversy here in the US:
- Boeing claimed that the C Series plane was heavily subsidized by the Canadian government, and filed a complaint with the US Commerce Department
- The Trump administration sided with Boeing, and proposed a duty of ~300% on US airlines buying this plane, as a penalty
- Delta has 75 C Series planes on order, calls this absurd, and says they won’t be paying the tariff but still expect they’ll get the plane
Well, it looks like Bombardier has come up with a very creative solution to this problem, which has far-reaching implications.
Bombardier plans to sell a majority stake in the C Series program to Airbus. If this deal goes through, Airbus would own 50.01% of the C Series project, Bombardier would own 31% of the project, and Investissement Québec would own 19% of the project. The parties hope to have this deal closed by the second half of 2018.
Here are the bullet points with which Airbus describes the deal in their press release:
- Airbus to acquire majority stake in the C Series Aircraft Limited Partnership
- Partnership brings together two complementary product lines, with 100-150 seat market segment expected to represent more than 6,000 new aircraft over the next 20 years
- Combination of Airbus’ global reach and scale with Bombardier’s newest aircraft family to create significant value for customers, suppliers, employees and shareholders
- Significant C Series production costs savings anticipated by leveraging Airbus’ supply chain expertise
- Commitment to Québec: C Series Aircraft Limited Partnership headquarters and primary assembly to remain in Québec, with the support of both companies’ global supply chains
- Airbus’ global industrial footprint expands with the C Series Final Assembly Line in Canada, resulting in a positive impact on operations in Québec and across the country
- Growing market for C Series results in second Final Assembly Line in Mobile, Alabama, serving U.S. customers
There are huge implications for all of this, but as it impacts Delta’s situation with the plane, that last bullet point is key, and is probably a large part of the motivation for this. For US customers, the final assembly line for the C Series will be in Mobile, Alabama, which they hope will allow them to avoid the current tariff issue.
On the surface this seems like a brilliant idea. This gives Airbus a huge competitive advantage over Boeing in the 100-150 seat airplane market, and also hopefully allows US airlines that buy the plane to avoid the tariffs.
This deal is a game changer in the constant Airbus vs. Boeing match.