Airbus buys majority stake in Bombardier’s CSeries program
Aerospace giants see strategic value in partnership to save money, boost sales
Bombardier Inc. announced late Monday that rival aerospace giant Airbus SE will acquire a majority stake of its CSeries program, a big strategic move that comes as the company faces the prospect of permanent massive duties in the U.S.
Under the agreement, which was signed Monday, Airbus will acquire a 50.01-per-cent stake in the CSeries program and provide the division with procurement, sales and marketing and customer support expertise. Bombardier will now own approximately 31 per cent, while Investissement Quebec will own 19 per cent.
“Airbus is the perfect partner for us, Quebec and Canada,” Bombardier chief executive Alain Bellemare said in a statement. “Their global scale, strong customer relationship and operational expertise are key ingredients for unleashing the full value of the CSeries.”
The partnership comes as Bombardier grapples with 300-percent preliminary duties on U.S. imports of its CSeries jet, thanks to a petition filed with the U.S. Department of Commerce and U.S. International Trade Commission by its U.S. rival, the Boeing Co.
The Commerce Department imposed hefty duties against Bombardier, issuing a 220-per-cent countervailing duty and 80-percent anti-dumping duty, largely over the sale of 75 CSeries jets to Delta Air Lines Inc.
On a conference call with reporters Monday, Bellemare and Airbus chief executive Tom Enders said the partnership was not motivated by the ongoing trade dispute with Boeing. “This is win-win for everybody,” Enders said in a statement. “I have no doubt that our partnership with Bombardier will boost sales and the value of this program tremendously. Not only will this partnership secure the CSeries and its industrial operations in Canada, the U.K. and China, but we also bring new jobs to the U.S.”
Bellemare added that the company will continue to fight the trade case against Boeing, but stressed that the strategic value of the partnership was the primary motivation behind the decision to join forces with Airbus. “Let me be very clear, this is exactly the right thing for the CSeries program,” he said at a news conference late Monday. “It creates a clear path for fully unlocking the value of the aircraft. With Airbus, we will grow volume faster and we will be producing more CSeries to be delivered to customers around the world.”
According to the news release, there will be no cash contribution by any of the partners and the CSeries program will not assume any financial debt. The firms expect “significant C Series production costs savings” as a result of leveraging Airbus’s supply chain expertise.
The joint venture’s headquarters and “primary assembly line” will remain in Quebec, but Airbus will add CSeries production at its factory in Alabama to serve U.S. customers. Bombardier said the main assembly line for the CSeries will remain in the Mirabel, Que., facility.
“In the current context, the partnership with Airbus is, for us, the best solution to ensure the maintenance and creation of jobs in this strategic sector of the Quebec economy,” said Quebec’s Minister of Economy, Science and Innovation, Dominique Anglade, in a statement.
Karl Moore, a professor at the Desautels Faculty of Management at McGill University, said the partnership was “the right thing to do” and makes the CSeries “more viable going forward.”
“Building the final assembly in the U.S. for the U.S. market, that would seem to take a lot of the wind of out the sails of Boeing ’s lawsuit,” he said.
The deal came following reports that Bombardier was looking for investors and considering selling parts of its aerospace business.
According to a Bloomberg report citing sources familiar with the matter, Bombardier had been considering a disposal of assets, including its Q400 turboprop and CRJ regional-jet unit.
The CSeries program has been a key part of Bellemare’s five-year turnaround plan.
This is exactly the right thing for the CSeries program. It creates a clear path for fully unlocking the value of the aircraft.