Bombardier Inc. to partner with Airbus on C Series program
By ROB GILLIES
Oct. 17, 2017
TORONTO (AP) — Canadian plane maker Bombardier announced Monday it has sold a majority stake in its C Series passenger jet business to European aerospace giant Airbus for no cost.
U.S. rival Boeing called it a questionable deal by two state-subsidized competitors.
The move comes after lackluster sales and after the U.S. Commerce Department imposed harsh duties on Bombardier, charging the Canadian company is selling the C Series planes in America below cost and receiving government subsidies.
The Commerce Department recently announced it would impose an 80 percent duty on top of duties of nearly 220 percent. The case has been a win for Boeing, which brought the complaint.
Boeing has said it didn't move early enough against Airbus subsidies in the 1970s. Airbus is now is a global giant.
"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," Boeing spokeman Dan Curran said in a statement.
The move by Bombardier could possibly circumvent duties being imposed on the C Series. The C Series 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' facility in Mobil, Alabama, so the plane can be sold in the United States.
Airbus Chief Executive Office Tom Enders said an aircraft produced at an U.S. Airbus facility would not be subject to duties under the pending U.S. investigation.
Enders said the acquisition extends the company's product offering into the fast-growing 100-150 seat market sector. The current Airbus A320, a rival for the C Series, is for 180 passengers or more and Airbus hasn't sold an A320 in three years.
Enders said some airlines have been reluctant to purchase Bombardier's plane because of doubts the program would continue. It has been bailed out by governments in Quebec and Canada.
"Some customers will be convinced it will be a great product and it is here to stay," Enders said.
The Airbus acquisition will be subject to Canadian government review but a federal official said the administration is aware of the challenges facing the C Series without a partner of the scale of Airbus. The official noted the plane has stalled at 300 orders but with Airbus they could get up to 6,000 orders over the next 20 to 30 years. The official, who was not authorized to speak publicly about the deal, said the federal government has received a guarantee from Airbus that no jobs will be replaced or lost in Quebec because of the deal.
Enders said the talks started in August and were not motivated by what competitors are doing. He rejected a deal to acquire the C Series three years ago but said circumstances have changed, saying the plane is now certified and receiving rave reviews.
Airbus is not assuming any debt as part of the deal and it has an option to buy out Bombardier after 7 1/2 years and the Quebec government in 2023.
The C Series program drove Bombardier to the brink of bankruptcy two years ago before it was bailed out by the Quebec government.
Bombardier chief Alain Bellemare said having Airbus as a strategic partner "increases confidence that the aircraft is here to stay."
He predicted they will secure more orders and double the value of the program. "By securing the U.S. market you end up securing the program," he said.
Airbus will acquire a 50.01 percent interest in C Series Aircraft Limited Partnership, which manufactures and sells the plane. Bombardier will own 31 percent and the Quebec government's investment agency will hold 19 percent.
Montreal-based Bombardier had dreamed of capturing half the global market for 100-to 149-seat planes. It has marketed the plane as being 20 percent more fuel-efficient than the comparable Airbus A320 and Boeing 737.
Chicago-based Boeing's complaint claims Bombardier's new C Series passenger aircraft receives Canadian government subsidies that give it an advantage internationally. The Quebec government invested US$1 billion in exchange for a 49.5 percent stake in the C Series last year. Canada's federal government also recently provided a US$275 million loan to Bombardier, which struggled to win orders.
Bombardier won a 75-plane order for the C Series from U.S.-based Delta Air Lines in 2016. Bombardier said its planes never competed with Boeing in the sale to Delta.
Canadian Prime Minister Justin Trudeau has said his government could stop doing business with Boeing if the U.S. company doesn't drop its trade complaint against Bombardier. Canada had been in talks to purchase 18 Super Hornet fighter jets from Boeing, but those have been on hold because of the Bombardier dispute.
"The attempt to weaken Bombardier has pushed it to join with one of its competitors, which should not have had needed to happen," said Jerry Dias, national president of Unifor, Canada's largest private sector union. "Ultimately, the U.S. actions have created a stronger Bombardier."