Bombardier deal puts pressure on rival Boeing
Canadian manufacturer’s deal with Airbus may make it hard for others to stay cost-competitive
Airbus SE’s acquisition of a majority stake in Bombardier Inc.’s CSeries plane threatens to leave Boeing Co. trailing in a looming race to develop a new generation of more-advanced short-haul jets.
At one level, the deal appears to be a neat way of providing Airbus with a smaller narrow-body aircraft, fitting below its own A320-series models and competing with the smallest variants of Boeing’s 737 workhorse, while alleviating pressure on Bombardier from a bitter trade spat with its U.S. rival.
At another, the pact gives the European planemaker access to a technologically advanced, fuel-efficient design that could form the basis of its challenge in the highest-volume jetliner sector for years to come, saving billions in development costs and putting the squeeze on Boeing, which is only now embarking on plans for a new short-haul model.
“It makes it tough for Boeing to be costcompetitive in the narrow-body space,” said Nicholas Heymann, an analyst at William Blair & Co. in New York.
Heymann estimates that piggybacking on Bombardier’s CSeries could save Airbus $10 billion (U.S.) in development costs.
“The CSeries could supplant the A319 and eat into demand for the 737 Max 7.” HOWARD RUBEL ANALYST, JEFFERIES
The Airbus-Bombardier alliance makes a 737 replacement even more critical for Boeing, which may need to recast the “dynamics and timing” of new aircraft programs to take account of changed competitive realities, said Ernie Arvai, founding partner of the AirInsight consulting firm.
Airbus’s move turns the tables on its rival after Boeing appeared to have gained on edge with its plans for a 220- to 270-seat aircraft fitting between the biggest single-aisle planes and the smallest wide-bodies to reopen a market that hasn’t been properly served since the U.S. company’s 757 ceased production more than a decade ago. Nicknamed the 797, the model is slated to debut in the mid-2020s.
By bringing Bombardier’s CSeries into the fold, Airbus gains a plane featuring a high proportion of composite materials — a first in the narrow-body segment — and far more modern design than either the Boeing 737 or Airbus’s own A320.
That technology could help it challenge the 797 after Airbus seemed powerless to keep up, distracted by the troubled production ramp-ups of its newest A350 and A320neo planes, efforts to bring a re-engined A330 to market and the saga of whether to upgrade its slow-selling A380 superjumbo.
When announcing the deal, Airbus chief executive officer Tom Enders said it’s too early to speculate on whether the plane will form the basis for the company’s next short-haul offering, while acknowledging that it is likely to take cues from areas such as the Canadian model’s cockpit design and advanced aeronautics. The accord marks a change of heart by the CEO, who personally vetoed a similar alliance plan two years ago when the future of the CSeries was in doubt and Airbus was starting out on the A350 ramp-up.
Boeing’s product-development head, Mike Sinnett, said Tuesday that the 797 will serve a “very different market” and that CSeries sales in its current niche suggest “there isn’t a lot new” in technological terms.
Regardless of the development boost for Airbus, the ramifications for Boeing may be severe, with its Toulouse, France-based rival able to bundle the CSeries and the larger A320 into a single offer. That would form a formidable lineup in a singleaisle market that’s by far the biggest category in commercial aviation.
CSeries customers said they were thrilled with the Airbus-Bombardier combination. Carsten Spohr, CEO of Deutsche Lufthansa AG, said in Brussels that the deal is “good for Bombardier, good for Airbus and good for Lufthansa,” while Martin Gauss, his counterpart at Air Baltic, launch customer for the larger CS300 variant, said that “to have both of them now as a partner is perfect.”
Airbus, which following the transaction will own 50.01 per cent of the CSeries program without any initial contribution of funds, may also be able to rationalize the bottom end of its own range to focus on the bigger and more lucrative A320 and A321.
“The CSeries could supplant the A319 and eat into demand for the 737 Max 7,” Howard Rubel, an analyst with Jefferies, said in a note, referring to the smallest of Boeing’s reengined 737s. Both the Airbus A320neo and the CSeries share the same geared turbofan engine made by Pratt & Whitney.
With the backing of Airbus, the Bombardier model, already outperforming customer expectations, in turn becomes the plane in its category, Heymann said, transforming order prospects for an aircraft whose future had appeared in doubt after complaints of unfair state aid from Boeing had led U.S. President Donald Trump’s administration to impose a 300-per-cent import tariff.
A second production line at Airbus’s plant in Mobile, Ala., could help sidestep the duties won by Boeing. The plane already has more than 50 per cent of its content coming from the U.S. and a new facility could render the aircraft a “domestic” product and so free from trade restrictions, according to Rubel.
A second production line at Airbus’s plant in Alabama could render the CSeries a ‘domestic’ product for U.S. sales