Bombardier has agreed to sell control of its C series jetliner programme to Airbus in a deal which could allow the Canadian aircraft maker to circumvent tough US trade penalties and will give the European group a new ally in its battle with rival Boeing over global aircraft sales.
Under the terms of the deal Airbus will take a 50.01 per cent interest in Bombardier’s C Series Aircraft Limited Partnership (CSALP). Bombardier and Investissement Québec (IQ) will own about 31 per cent and 19 per cent, respectively. Airbus will contribute no cash for its majority stake.
Airbus will use its strength in procurement, sales and marketing, and customer support to bolster demand for Bombardier’s aircraft, the newest in the industry and highly regarded for its fuel efficiency, but which has struggled to secure orders in recent months. Airbus will also add production of the jets at its factory in Alabama, a move that both sides said could help prevent the imposition of tariffs on planes sold to US buyers.
“This partnership should more than double the value of the C Series programme and ensures our remarkable game-changing aircraft realises its full potential,” said Alain Bellemare, chief executive of Bombardier.
Airbus chief executive Tom Enders said of the deal: “I have no doubt that our partnership with Bombardier will boost sales and the value of this programme tremendously . . . quite a few potential C series customers held back because they were not entirely sure of the future of this programme going forward.”
Mr Enders said the two sides began discussing the deal in August, before the US announced two preliminary decisions to levy a total of 300 per cent duties against the C series for importation to the US, dramatically increasing its potential cost for US buyers. Both chief executives said producing planes in Alabama for the US market would allow Bombardier to avoid the imposition of duties, though they denied the dispute was the main impetus for the deal. “We are doing this deal not because of this Boeing petition,” said Mr Bellemare.
50.01 per cent
Airbus interest in Bombardier’s C Series Aircraft Limited Partnership
“Aircraft produced at the US facility would not be subject to duty under the pending US investigation,” Mr Enders said in a teleconference.
However, Boeing said: “This looks like a questionable deal between two heavily state-subsidised competitors to skirt the recent findings of the US government. Our position remains that everyone should play by the same rules for free and fair trade to work.”
The venture brings to fruition a transaction first proposed by Bombardier in October 2015, when the Canadian company offered Airbus a stake in the struggling C Series programme. Bombardier at that point offered Airbus a stake in the narrow-body jet project because it was facing the real prospect of running out of cash.
The decision could place Airbus at loggerheads with Boeing, which brought the US trade dispute challenging Bombardier’s sale last year of 75 C Series jets to Delta Air Lines on the grounds that they were unfairly subsidised by the Canadian and UK governments.
The two sides said the deal would also preserve jobs: “Not only will this partnership secure the C Series and its industrial operations in Canada, the UK and China, but we also bring new jobs to the US,” Mr Enders said.
Michael Ryan, president of Bombardier Aerostructures and Engineering Services, in Northern Ireland, said: “This is great news for our Belfast site, and indeed all of Bombardier Aerostructures and Engineering Services . . . Today’s announcement serves to strengthen the position of the C Series aircraft programme on the international market, and the resulting momentum will be felt positively in our business and throughout the Northern Ireland and UK supply chain.”
The deal will bring relief for the UK government. Boeing’s competition complaint against Bombardier has become a significant issue in the UK because Bombardier’s plant in Belfast, Northern Ireland, is the province’s largest industrial employer, with 4,500 employees, 1,000 of whom make wings for the C Series.
Arlene Foster, leader of the Democratic Unionist Party, on which Theresa May’s Conservative party relies for its majority in the UK House of Commons, said the news was “incredibly significant” for Bombardier.
“Airbus clearly recognise the value of the C Series,” she said. “I welcome their interest and investment. I hope this will safeguard the C Series programme.”
Many industry observers had expected Airbus and Boeing to stand by amid the C Series’ problems because the project challenged their duopoly in the market for single-aisle commercial jets. While the aircraft is smaller than Boeing’s 737 and Airbus’s A320, Bombardier developed the aircraft in the belief there was a market niche for an aircraft larger than regional jets but smaller than the Airbus and Boeing products.
Additional reporting by James Fontanella-Khan in New York