Will Bombardier's Airbus deal resolve Boeing trade issue?
- October 17, 2017
In a somewhat of a surprise but bold move, Bombardier has partnered with Airbus on its CSeries aircraft program to help resolve the current trade issue with competitor Boeing.
In the deal announced late Monday, Airbus will acquire a 50.01 per cent stake in the C Series division for no cash and incorporate the plane into its product lineup.
The move by Bombardier could circumvent duties being imposed on the CSeries. The CSeries headquarters will remain in the Montreal area, but a second assembly line for the 100 to 150-seat plane will be set up at Airbus's facility in Mobile, AL, so the plane can be sold in the US.
In press reports in The Globe and Mail and CBC, Bombardier CEO Alain Bellemare said having Airbus as a strategic partner "increases confidence that the aircraft is here to stay."
He said Bombardier will secure more orders and double the value of the program. "By securing the US market you end up securing the program."
According to a Financial Post online story by Chris Byrant, says it's a great move, especially for Airbus. "For the European aerospace giant, this deal feels like a slam dunk. Unlike two years ago, when it first toyed with making a CSeries investment, the aircraft is now a much less risky proposition. It’s been certified by regulators and the first customers seem very pleased with it. True, the program’s still consuming cash, but Bombardier is promising to absorb another US$700 million in losses after closing.
"Airbus can’t really lose here. Indeed, by acquiring warrants over 5 per cent of Bombardier’s stock at the current price, there’s potential for considerable upside. Bombardier has lost two-thirds of its value since 2011 amid fears over the future of the CSeries."