Airbus Takes On Boeing By Striking Deal For Bombardier Ownership Stake

Tyler Durden's picture

Boeing's battle to crush Bombardier has encountered an unexpected obstacle.

Bloomberg reports that Airbus SE has agreed to acquire a majority stake in Bombardier Inc.’s C Series program, which the Commerce Department slapped with a 300% tariff it ruled in Boeing’s favor in a complaint alleging Bombardier had benefited from anti-competitive government subsidies.

Under the terms of the deal, Airbus won’t pay a dime up front for the C-Series, but will begin assembling the technologically advanced by poor-selling jetliner in the US in what Bloomberg said could be an effort to circumvent the tariffs.  Airbus is adding another final assembly line for the C-Series at its factory in Mobile, Alabama, which will serve US customers and complement production in Canada, according to a company statement late Monday. However, Bloomberg says it’s unclear if the deal will allow the C-Series to avoid the tariffs.

It’s too soon to say if the new Alabama production line would enable the C Series to avoid U.S. tariffs. The duties were applied to C Series planes “regardless of whether they enter the United States fully or partially assembled,” according to a U.S. government fact sheet on the matter. Boeing said Airbus and Bombardier were just trying to get around the restrictions.

As part of the deal, Airbus will assume just over half of the interest in a partnership controlling the C-Series. Bloomberg says the European planemaker’s marketing muscle and production expertise boosts the viability of the all-new aircraft after more than $6 billion in development costs forced Bombardier to rely on government assistance.

The deal also thrusts Airbus into the middle of a trade spat between the two North American aerospace firms. In response to the Commerce Department’s ruling, Canadian Prime Minister Justin Trudeau canceled military equipment orders with Boeing, adding that they wouldn’t be reinstated until Boeing drops its complaint against Bombardier.

Boeing filed its complaint in April after Delta Air Lines agreed to buy 75 of the C-Series in a deal worth some $5 billion. Boeing alleged that the planes had been sold for “absurdly low prices.”

The dispute had crossed the Atlantic even before Airbus's involvement. UK Prime Minister Theresa May said she personally lobbied President Trump to cancel the tariffs. Bombardier has a large factory in Belfast, a constituency that’s important to the conservatives, which employs 4,000 locals.

The Airbus deal is an embarrassing setback for Boeing, one analyst said.

“This is a program that has been waiting for a deus ex machina, and wow, it really got one,” Richard Aboulafia, an aerospace analyst at Teal Group, said in an interview. The deal casts Airbus as a global player while Boeing comes off as “a bit shortsighted and protectionist. It makes Boeing look like they’ve been playing tic tac toe against a chess master.”

Bombardier shares traded in Toronto climbed 15.7% on Tuesday after the deal was announced.

Trump and Canadian Prime Minister Justin Trudeau discussed the deal Monday evening in a phone call, according to a statement from Trudeau’s office that provided no details of the conversation.

Canadian Innovation Minister Navdeep Bains said the deal will face a review under the Investment Canada Act. But one unnamed government source told Bloomberg that it’s likely to be approved.

Assuming it is approved, the transaction would be expected to close in the second half of next year, at which point Airbus will own 50.01% of the C Series partnership. Bombardier will hold about 31% and the province of Quebec, which controversially invested $1 billion in the C Series after the cost overruns and delays, will own approximately 19%. Quebec will remain an investor in the C Series until at least 2023, said the province’s economy minister, Dominique Anglade.

Bombardier has rejected Boeing’s complaint, saying Boeing doesn’t have grounds to accuse Bombardier of unfair trade practices because Boeing doesn’t make a mid-sized jet comparable to the C-Series.

Unsurprisingly, Boeing criticized the deal, hinting that it could try to expand its complaint to include Airbus if the company tries to avoid the C-Series sanctions.

“This looks like a questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the U.S. government,” Boeing, the world’s largest aerospace company, said in an emailed statement. “Our position remains that everyone should play by the same rules for free and fair trade to work.”

Of course, Airbus and Boeing are each other's primary rival. By acquiring the ownership stake in the C-Series, Airbus is killing two birds with one stone. Embarassing and threatening Boeing, while acquiring new technology for cheap that could allow it to cater to a new kind of customer: Chinese airlines looking for more fuel-efficient planes.

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serotonindumptruck's picture

The economic isolation of the USA continues.

sushi's picture

Bizarre aspect of this story is that much of the C-Series consists of parts produced in the USA and exported into Canada for final assembly at MIrable Airport north of Montreal.

 

If this story is correct then final assembly for US customer's will shiift to an Airbus facility within the US and apart from the design and enginnering work performed in Montreal, the final product will consist of US parts and labour.

 

No sure how the Trump administration or any trade organization can penalize that. This outcome fits with Trumps basic campaign plank.

 

Real issue is the quality of the plane beyond issues of fit and finish. During the summer 2017 there was a problem with fights departing Phoenix AZ. It was too hot to fly so the planes were grounded. Turned out the grounded planes were all Bombardier product as each aircaraft is certified to a specific set of operating conditions and is not permited to fly when those conditions are exceeded. Temperature and air density in Phoenix exceeded the parameters established for the Bombardier aircraft. Everybody elese's product was flying. If you ran a Bombardier product your flights were all cancelled and your revenure dissappeared due to heat.

 

The question potential customers will no have is this reveal a defect in Bombardier's engineering and test? And if it does what other probs may be lurking in the plane?

 

 

Craven Moorehead's picture

The grounded aircraft you are referring were Q400 turboprops, not the C series jets

Utopia Planitia's picture

I have gone through Phoenix  (several times) on a hot summer day, flying a Boeing 737.  The airline had to offload both luggage and passengers before the plane was in a condition to safely take off.  So this limitation has nothing to do with the plane being made by a specific manufcturer.  Any aircraft will run out of load capacity if the density alitude goes beyond a specified point.  It is simply a fact that large turbofan powered aircraft have more reserve power available for hot and high conditions than does a turboprop.  It is a smple engineering equation.  It is not an indication that something is "wrong" with the Q400.  Your Gulfstream 650 et al also has performance limitations at high density altitudes.  (many business jets are remarkably incapable in terms of load capacity at high density altitude)

King of Ruperts Land's picture

That is the plan.

Lets review:

1. Build wall around country.
2. No more foreigners coming in.
3. No Globalism! Rip up Paris Treaty, NAFTA, etc.
4. Jobs. making stuff here. No more imports.
5. Drain the swamp.
6. Lock her up!
7. MAGA!
8. Winning!

giovanni_f's picture

9. Dissolve 1000+ military bases all over the planet
10. Stop supporting Israels wars

SoDamnMad's picture

How dare they sell aircraft to an American airline for absurbly low prices? To think Delta is concerned with making a profit and not blindly buying American.

Hey Boeing. Where are those Air Force tankers you took away from low bidder Airbus in 2004?  I still haven't seen one. Are you using slow drying paint or what?

Falconsixone's picture

HaHaHa....

Is Boeing still an American Company?

Herdee's picture

http://www.cbc.ca/news/politics/boeing-trump-bombardier-trudeau-1.4359467 ,  Add in the fact that Canada has signed a Free-Trade Deal with The European Union.

Déjà view's picture

Canadian 'subsidies'...

• Corp tax rate nearly 10% lower...
• Heathcare 'taxes' economy nearly 10% less...
• Tort case costs are not eating 2.5%/GDP...

Plebs...back to flipping and clipping...burgers and toenails...

LIFE IS SO UNFAIR !

giovanni_f's picture

if something is not compatible with the US corporatist world order - regardless of how successful and beneficial this something is to the citizens - it is denounced as "socialism".

djsmps's picture

Things are seriously fucked up.

Cardinal Fang's picture

Bombardier has definitely been dumping aircraft and not just in the US.

Ah, Airbus and Bombardier and Quebec.

What could go wrong...

Honestly, I have lost track because Bombardier aircraft and support suck, (with some exceptions, yes) but I wonder how labor actually feels about this?

east of eden's picture

THat's not what I've been hearing or reading. THey had a 98% no fault rate in the first round delivered to Delta. Matter of fact, Bombardier partly saved Delta's ass while they were in bankruptcy re-orrg.They got the best equipment avialalbe at cost. Apparently Delta was stunned with the quaity.

But let's not talk about that, eh?

It's called 'willlful ignorance'.

TalkToLind's picture

Dumping aircraft?  Is that Yiddish for producing a high quality product that Murica can't possibly compete with?

FrankDrakman's picture

Never flown on the C-series, but have flown on a bunch of Q-series turboprops. Comfortable, not too noisy, and in Toronto on Porter, they take your carryon bag at the gate, and have it waiting for you when you deplane - no lifting to put into the bin or trying to cram it under your seat. 

For short haul flights, they are a very pleasant plane for the passengers. 

SoDamnMad's picture

Bombardier 415 do dump a lot of water and I'll bet if there were 50 more in Northern California the fire losses would be a tad less.

Cardinal Fang's picture

Any of you fuckers spent time on the flight line working on a Bombardier product?

Lol...

Why are they going bankrupt for the umpteenth time if they are such marvels of engineering?

And yes, they are dumping aircraft.

Falconsixone's picture

Rich MF'ers like Bombardier. Maybe the name?

 

Boeing should change their name to Flying Pigs Co. (people like pigs) 

Atomizer's picture

We are broke, the investors are crawling up on us. We are broke. Will sell you all technology. There is a snag, we will show the weather device. The laser one. 

serotonindumptruck's picture

You work for Boeing?

My apologies.

bidaskspread's picture

One more company to add to the corporate welfare whore list. 

Davidduke2000's picture

The Avro Arrow again, for some reason, the us cannot see Canada in the aerospace business or simply it won't let it. shame, we had the top fighter jet in the world the us stole the technology from us. 

taoJones's picture

Canada went into the toilet after the Arrow fiasco .. Forever beholden to the US MIC

King of Ruperts Land's picture

Canada should build a fighter jet and missile air defense technology. The country is just too damn big for a few Eskimos with rifles on snow machines to defend.

India is working on an agreement to jointly develop a fifth generation fighter with Russia. A deal like that might be something Canada should look to.

JohninMK's picture

The SU-35 with its long range would be perfect for Canada.

Russia has the same long distance problems, unlike the US which uses short range fighters plus tankers.

BlindMonkey's picture

Real "Cones sons of an economic hitman".  Wonder why America crushed Canada''s aircraft industry?  That doesn't fit with the allowable things a vassal state is permitted to do. 

Utopia Planitia's picture

Boeing owned the Q400 product line for awhile (around 2000) and could have owned the entire product line of Bombardier Aerospace.  But for some reason they divested of the whole thing after a short time.  Probably an unwise decision.  Though the 737 has been a very successful product (lots of copies) it desperately needs to be replaced.  The C series is precisely what is needed at the low capacity end of the 737 spectrum, and it is a "modern" design (unlike the 737).

bonin006's picture

I don't recall hearing about any countries putting 300% tariffs on GM vehicles after Bush and Obama bailed out GM, but I probably just wasn't paying attention.

Zer0head's picture

fucking Bombardier - fucking Quebec and the french connection. should have seen it. been whipsawed on that fucking stock so many times, but yes Boeing was outplayed and as for Trump, well NAFTA we hear ain't going too good and now he really has something  to prove after being outsmarted by Justin.

King of Ruperts Land's picture

Outsmarted? Trump is killing NAFTA. NAFTA is dead. He is ripping it up. NAFTA is a boilerplate Globalist deal. Trump is Anti-globalist. Those are dead, like Paris Treaty. That is a Trump campaign plank. Trump is not being "outsmarted" by the rainbows and unicorns, closet Muslim, Globalist cock sucking, retarded liberal, Incapable of reason, Political correct shit for brains, pedophile enabling, pretty boy, fag in chief to the north. Sometimes "the art of the deal" is deciding to do no deal at all.

fulliautomatix's picture

Europe's reply - surely someone saw this coming? Look for trouble with implementation of the last lot of Sanctions, then. hoots

johnnycanuck's picture

Poor little Boeing and all it's taxpayer subsidies. All it's fat miilary contracts too.  Just another victim of big bad Canucks and their mean ole aerospace subsidies to Bombardier.

Why can't those Canadians understand only Americans get to participate in the race to the bottom?

Joe A's picture

If the US now continues with the increases in tariffs then Airbus might move their assembly line out of the US and into Canada or somewhere else.

Fireman's picture

The USSAN empire is running on empty. The free lunch is all gone as the EUSSR gives Chump's Iran "strategy" the big stinky.

Now watch Canada and Mexico play the NAFTA game.

TrueNorth0691's picture

Boeing is subsidized as part of the military industrial complex. They are locked into the biggest spending machine on earth, the US military. Break that company into two completely separate entities and that would be fair to competitors outside the US, though even then it might be hard to separate technological development cost paid for by the US government and US taxpayers from the commercial plane manufacturing, in effect a subsidy to the commercial side.

In any event the statements about fairness from Boeing are either completely disingenuous or show a shocking ignorance of the unfair advantages they have. It is probably both as executives from companies like this trend to have an outsized faith in their own competence.

Shibumi2's picture

Boeing looks like a stupid bully...essentially picking on a Canadian company and country with little else going for it.

Not like Boeing isn't front and center at the USA government slop bucket.

Is Boeing really maintaining here that their civil line of aircraft doesn't receive government subsidies? Hell, the whole company is one huge government subsidy.