How do you solve a 300% tariff problem? Move the final assembly line into the United States. Bombardier is poised to do precisely that with its CSeries jets thanks to a new (and somewhat unlikely) investor in the program: Airbus. As of this evening the European aircraft manufacturer owns 50.01% of the Bombardier CSeries program. And it didn’t cost them a penny.
The deal sees Airbus take a controlling stake in the program and will keep headquarters in Quebec. But the major short-term impact is that a second final assembly line for the CSeries will open in Mobile, Alabama where Airbus already has an A320 family line operating. By 2023 Bombardier and the Quebec government (now 31% and 19% owners, respectively) will be potentially fully bought out by Airbus based on the deal’s fine print.
Boeing statement. 🔥 https://t.co/t4h1iFn1nK pic.twitter.com/mm3nC5aaVr
— Jon Ostrower (@jonostrower) October 17, 2017
Boeing is unfazed by the deal, at least publicly, calling it a “questionable deal” and claiming both Airbus and Bombardier are heavily subsidized. They do manage to overlook the tax holidays granted by various states in recent years. But there is no doubt that a successful completion of this deal and the operation of a FAL in Mobile changes the competition dynamics significantly.
For one thing, Delta Air Lines is now more likely than ever to take delivery, and without the 300% penalty. Plus, the CSeries now suddenly has a huge marketing and sales support team behind the product. Rather than trying to convince airlines that a 160ish seat plane is the right way to go Airbus has the smaller option to offer. The A319 line may suffer, but so few sit in the Airbus backlog that the shift there may not matter much.
Airbus now believes the 100-150 seat market for the next couple decades is around 6,000 aircraft. That number seems high to me but even at half that the CSeries stands a pretty good chance of winning the majority of the near-term business, mostly because it is the primary player.
Read More: Bombardier, Delta lose in Boeing subsidy claims case
I’ve flown on the CS100 once on a media demo flight and will fly again in a couple weeks in commercial service. I’m a big fan of the type and have been concerned about its potential future from a passenger perspective. It really is that much nicer on board. And now it appears to have support to realize that future. Then again, everyone said that when Quebec pumped cash in last time around.
Read More: Friday Flyday: Taking the CS100 for a spin
Still, the CSeries needs more orders. JetBlue hasn’t been shy about its review of long-term fleet plans vis a vis the Embraer E190 platform. And there are other niche markets where it could be very successful. Especially now with the added backing of the larger manufacturer. Though Airbus is not immune from questions about its business operations these days. A long-running bribery scandal continues to dog the company and, on the eve of the A330neo first flight (scheduled for Thursday of this week) the company faces challenges in that product’s order book.
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smart
Minimal risk to Airbus it would seem. And not many other options for Bombardier. Still no guarantee it works for either.
Airbus got majority equity for providing a way around the tariff? Very interesting.
Maybe Boeing will buy %50.01 of Embraer and move and E190 assembly line to Wichita to compete in small jets 🙂
IIRC Boeing doesn’t have a Wichita plant any more. They sold it to Spirit (not the airline) long ago, though most of that company’s output is destined to various Boeing series at assembly plants in Everett, Renton and South Carolina.
Would you say that it’s Bombardier throwing in the towels?
Boeing really messed this one up. Made the C series so unviable with the dumping tariffs that bombardier basically gave 50% to Airbus in order to salvage what they could. Now Airbus has a new small jet with no development costs that they can manufacturer in the USA to get around any tariffs for future American customers.
Did Bombardier really have a lot of choice but to get creative? Brilliant move if you ask me.
Bastian clearly knew all along why he wasn’t going to pay tariffs and would consider a delay in deliveries. This backfired on BOEING big time.