Airbus takes majority stake in Bombardier's C Series program

KING 5's Glenn Farley reports.

Airbus, the European rival to Boeing plane manufacturer, announced Monday it would buy a majority stake in Bombardier’s C Series jet that has been threatened with a 300% U.S. tariff.

The deal is the latest volley in a major trade dispute, as Airbus plans to build some of the 6,000 planes projected over the next 20 years at its new assembly line in Mobile, Ala.

The deal calls for Airbus to provide procurement, sales and marketing support for the planes, which will seat 100 to 150 passengers, in exchange for 50.01% of the program.

"Some customers will be convinced it will be a great product and it is here to stay," Airbus CEO Tom Enders said in a statement.
But Boeing, which had complained about Canadian subsidies for Bombardier, remained critical of the deal.

"This looks like a questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the U.S. government,” Dan Curran, a Boeing spokesman, said in a statement. “Our position remains that everyone should play by the same rules for free and fair trade to work.”

The U.S. Commerce Department recently announced preliminary duties of 80% and 220% on the C Series planes. But those decisions must still be finalized and the U.S. International Trade Commission could still overrule them.

Delta Air Lines, for one, would like to buy the planes. Delta placed an order last year for 75 of the planes and CEO Ed Bastian told investors during an earnings call that the carrier expects to pay for them without the tariff.

“We will not pay those tariffs. That is very clear," Bastian told investors Oct. 11.  "We intend to take the aircraft."

While Boeing alleged that the planes compete against variations of its popular 737 aircraft, Bastian argued that there was no Boeing option and that the only competitor is the Embraer E190 aircraft from Brazil.

Enders said the Bombardier deal provides an Airbus offering of planes with 100 to 150 seats. The A320 family, which competes against the 737, has 150 to 240 seats.

"I have no doubt that our partnership with Bombardier will boost sales and the value of this program tremendously,” Enders said. "Not only will this partnership secure the C Series and its industrial operations in Canada, the U.K. and China, but we also bring new jobs to the U.S."

Canadian Prime Minister Justin Trudeau has said his government could stop doing business with Boeing if the U.S. doesn't drop its trade complaint against Bombardier.

Canada had been in talks to purchase 18 Super Hornet fighter jets from Boeing, but those have been on hold because of the Bombardier dispute.

“The arrival of Airbus as a strategic partner today will ensure the sustainability and growth of the C Series program, as well as consolidating the entire Québec aerospace cluster," said Dominique Anglade, Quebec's deputy prime minster of economy, science and innovation.

Jerry Dias, national president of Unifor, Canada's largest private sector union, said the U.S. effort to weaken Bombardier actually strengthened it.

"The attempt to weaken Bombardier has pushed it to join with one of its competitors, which should not have had needed to happen," he said.
Airbus is not assuming any debt as part of the deal and it has an option to buy out Bombardier after seven-and-a-half years and the Quebec government in 2023.

The C Series program drove Bombardier to the brink of bankruptcy two years ago before it was bailed out by the Quebec government.

Bombardier chief Alain Bellemare said having Airbus as a strategic partner "increases confidence that the aircraft is here to stay."

By noon Tuesday, Bombardier's stock had risen 19% to $2.81 Canadian dollars per share.

Chicago-based Boeing's complaint claims Bombardier's new C Series passenger aircraft receives Canadian government subsidies that give it an advantage internationally. The Quebec government invested $1 billion in exchange for a 49.5% stake in the C Series last year. Canada's federal government also recently provided a $275 million loan to Bombardier, which struggled to win orders.

Contributing: The Associated Press

© 2017 KING-TV


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