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article imageBlue skies ahead for Airbus, Bombardier CSeries partnership

By Jacques LEMIEUX (AFP)     Oct 17, 2017 in Business

Bombardier has ceded control of its new CSeries to Airbus, abandoning hope of ascending into the top echelons of passenger aircraft manufacturing alongside rivals Airbus and Boeing but securing US market access for its new jetliners.

"I am saddened but at the same time reassured," by Bombardier's partnership with Airbus on the CSeries, aeronautics professor Mehran Ebrahimi at the University of Quebec in Montreal told AFP. "Everyone wins in this agreement."

The European aircraft manufacturer took a 50.1 percent stake in the CSeries program in exchange for using its sales and marketing heft to lift CSeries sales.

The CSeries is the first new design in the 100- to 150-seat category in more than 25 years, and only just started to roll off assembly lines.

But development cost overruns and Boeing's complaint that Bombardier unfairly benefited from state subsidies that allowed it to sell 75 CSeries aircraft at below cost to Delta Airlines had put a strain on its bottom line and put the lucrative US market potentially out of reach.

With Airbus now onboard, CSeries sales are expected to take off, Ebrahimi said.

Only 360 have been ordered so far, but Airbus says it can boost those numbers to 3,000 over 20 years, grabbing a 50 percent marketshare.

Furthermore, the partnership provides a way to dodge hefty duties imposed by the US Commerce Department as a result of the Boeing complaint, by building CSeries aircraft for the US market at Airbus's Mobile, Alabama plant.

The 220 percent countervailing duties and 80 percent anti-dumping duties, if confirmed, would have effectively "closed access for Bombardier to the US market," said Quebec Economy Minister Dominique Anglade.

But Airbus announced plans to open a second final assembly line at its facility in Alabama for the CSeries.

"The CSeries will be assembled in the US and so will not be subject to those duties, which is fantastic for Bombardier and Canada," said Walid Hejazi, a professor of aeronautical management at the University of Toronto.

The tie-up also allows Canadian Prime Minister Justin Trudeau's administration to reconsider its threat not to buy new fighter jets from Boeing over the company's alleged manipulation of the US trade remedy system to try to crush an emerging rival.

- 'Boeing not happy' -

"Boeing is not happy as this new development undermines its strategic position," Hejazi told AFP.

He said Boeing never anticipated a move that "gives it's number one rival, Airbus, a new line of single aisle planes in its portfolio."

In a roundabout way, the deal also benefits US President Donald Trump "in the sense that aircraft production is being taken out of Canada and is being sent to the US," Hejazi added.

Headquarters for the CSeries program and the main assembly line will remain at Bombardier's Montreal facility, which employs 2,000 people.

Quebec's aeronautics sector, which employes 40,000 people and supplies parts for the CSeries, is also expected to get a boost from an overall sales spike.

"Airbus has just acquired an extraordinary technology (in the CSeries), which will complement its range of products," said Ebrahimi. "Bombardier will certainly increase its number of orders and thus the viability of its project over the long term."

"Now all of the other US airlines and others around the world will be looking more seriously at the CSeries," echoed Hejazi.

Going forward, Airbus may also decide to nix its rejigged A320neo jetliner and instead go with Bombardier's plans for a larger aircraft with more than 150 seats that would be called the CS500.

"Producing the CS500 would be cheaper for Airbus than developing its own based on the A320 family, but again, it's not as clear as Airbus has more than 3,000 orders for the A320neo," said Ebrahimi.

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