Airbus to take majority stake in Bombardier C-Series jet program! - DA.C
 

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Old 10-16-2017, 08:22 PM   #1 (permalink)
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Default Airbus to take majority stake in Bombardier C-Series jet program!

WOW! This is a game changer for Bombardier!

https://finance.yahoo.com/news/airbu...--finance.html

MONTREAL/PARIS (Reuters) - Airbus SE said on Monday it would acquire a majority stake in Bombardier Inc's CSeries programme in a deal that the Canadian plane-and-train-maker said would boost sales and position the company strategically against a potentially costly U.S. trade dispute with Boeing Co .

The deal, which would come at no cost for Airbus, would give the European planemaker a 50.01 percent interest in CSeries Aircraft Limited Partnership (CSALP), which manufactures and sells the jets, the companies said.

Airbus Chief Executive Tom Enders said the company has offered to assemble some of the narrowbody jets at its U.S. plant in Alabama for orders by American carriers. The U.S. assembly line would mean the 110 to 130 seat jets would not be subject to possible U.S. anti-subsidy and anti-dumping duties of 300 percent, Bombardier Chief Executive Alain Bellemare said at a press conference.

"There is a ton of strategic value in doing this deal," Bellemare said.

Talks for the deal first started in August. Enders said the deal is different from an earlier round of talks in 2015, when Airbus abruptly ended negotiations, Reuters reported then. He said the plane is performing better.

"It's an entirely different situation," he said.

Under the deal, Bombardier will own about 31 percent, while Investissement Québec, the investment arm of the province of Quebec, will hold 19 percent once the deal closes.

Separately, Quebec's largest pension fund, which holds a 30 percent stake in Bombardier's rail division, said the decision "strengthens the company, improves its prospects for growth, and makes the company more robust over the long term, which is important to shareholders.”

The deal also provides Airbus warrants exercisable to acquire up to 100 million Class B Shares of Bombardier, the companies said.

The deal comes amid a trade dispute with U.S. rival Boeing Co over the C-Series jet. The U.S. government has slapped steep preliminary anti-subsidy duties on sales of the C-Series jets over that dispute.

A Boeing spokesman were not immediately available for comment.

Airbus will provide procurement, sales and marketing, and customer support expertise to CSALP, the companies said.

There will be no cash contribution by any of the partners, nor will CSALP assume any financial debt, they said.

Bombardier expects a $400 million loss in commercial aircraft this year, but has set a breakeven target for 2020.
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Old 10-17-2017, 01:09 PM   #2 (permalink)
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Default Re: Airbus to take majority stake in Bombardier C-Series jet program!

It's rough out there in the commercial airplane arena, and one might say that Airbus did an end-around on this one. Boeing, Airbus and Bombardier are all state subsidized in one way or another. The 300% tariff seemed a despiration play to me, especially in that Boeing doesn't have or plan to have a competing plane to the Bombardier C series. This makes for a great spectator sport. The Sky's the Limit, Doug

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Old 10-17-2017, 04:04 PM   #3 (permalink)
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Default Re: Airbus to take majority stake in Bombardier C-Series jet program!

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Originally Posted by doug seeley View Post
It's rough out there in the commercial airplane arena, and one might say that Airbus did an end-around on this one. Boeing, Airbus and Bombardier are all state subsidized in one way or another. The 300% tariff seemed a despiration play to me, especially in that Boeing doesn't have or plan to have a competing plane to the Bombardier C series. This makes for a great spectator sport. The Sky's the Limit, Doug
Yep, your post hits the mark on several fronts. Take a look at the article below. Now that Airbus and Bombardier are best buds; will Boeing do the same with Embraer?

https://finance.yahoo.com/news/analy...--finance.html

Analysis - Midnight in Toulouse: How CSeries deal shook status quo

TOULOUSE, France (Reuters) - Two years ago, Airbus Chief Executive Tom Enders halted negotiations to buy Canada's CSeries programme at midnight after the talks with Bombardier leaked to Reuters. On Tuesday, he performed a U-turn by backing a similar deal after all - again at dead of night.

The nocturnal gymnastics by Europe's largest aerospace group stunned the aircraft industry which had been riveted for weeks by a trade dispute between Boeing and Bombardier that threatened to hit the CSeries with large U.S. import fees.

Now, the 110-130-seat jet will be built for U.S. airlines at Airbus's Alabama assembly plant, circumventing any import penalties in a move that apparently caught Boeing off guard.

Analysts say that potentially turns the CSeries from an attack on U.S. jobs, as portrayed in Boeing's complaint, to a job creator in a key Republican state, though Boeing termed the move a "questionable deal" between two of its subsidised competitors.

The deal also signals the end of Airbus efforts to promote the A319, its smallest jet which has not posted a sale in years.

"The stunning Airbus-Bombardier partnership for the CSeries programme guarantees the future of the new airplane, kills off the A319 and thrusts a big stick up Boeing's tailpipe," Leeham Co analyst Scott Hamilton wrote.

Strategically, however, the move extends well beyond the noise of Boeing's spat with Bombardier and could trigger a riposte from other planemakers, including Boeing itself.

Commercial aerospace has four main powers dominated by Airbus and Boeing, which share the market above 150 seats.

Brazil's Embraer and Canada's Bombardier compete between 100 and 150 seats as well as in the market for smaller regional jets.

But China and Russia lead a field of new entrants vying to break into the $125 billion a year commercial market, along with smaller regional players such as Japan.

BOEING-EMBRAER ALLIANCE?

Tuesday's deal starts to rearrange the deck in a move that many have been expecting since former Airbus head Louis Gallois warned six years ago that the market was getting too crowded.

In particular, it could drive Boeing closer to Embraer, with which it already cooperates. Embraer's E2 jet is one of the main potential losers from the CSeries deal.

"The world has two top-tier airframers, and two second-tier airframers," said Teal Group analyst Richard Aboulafia.

"Airbus and Bombardier are now allies. This greatly increases the likelihood of a stronger Boeing-Embraer alliance as a response."

Such a move has long been contemplated in private.

The CSeries benefits from a new type of efficient engine. Its launch in 2008 eventually prompted Airbus to put the same generation of engine on its own A320 to protect its main profit source.

That in turn forced Boeing to dump plans for an all-new single-aisle plane in 2011 and opt for a makeover of its best-selling 737 with similar engines, to be known as 737 MAX.

But sitting in Boeing's filing cabinets are designs for an all-new jet that would have involved intense collaboration with Embraer, according to two people familiar with the project. A template for closer co-operation therefore already exists.

Boeing and Embraer declined to comment.

The two companies already work on projects including runway safety and alternative jet fuels. Their partnership has intensified in recent years to include Boeing’s commitment to joint sales and support of Embraer’s KC-390 military aircraft.

The Airbus-Bombardier deal also marks a pause in strategic advances made by China, widely seen as the most serious future competitor to Airbus and Boeing. [nL4N1MS1SD]

Debt-laden Bombardier had been in talks with China as it waited for Airbus to come around to the CSeries. [nL2N1MR0RW]

"China has missed out on a huge opportunity to advance its aims by not getting the CSeries," an industry strategist said.

PRODUCT STRATEGY

The deal also has potentially far-reaching consequences for product strategy and technology at Airbus and Boeing.

A person close to Bombardier said Airbus would aim to pressure the key Boeing 737 MAX 8 model by squeezing it from below with the CSeries and from above with the popular A321neo. Some critics say it could also develop a larger CSeries.

But critics say airlines don't want such a patchwork of products. The deal clashes with one of the core philosophies in the Airbus brochure to date - a compatible family of aircraft where pilots and maintenance staff can be redeployed easily.

Airbus will also get its hands on promising technology.

Workers in Belfast, whose jobs have been at the centre of a political storm over the Boeing-Bombardier dispute, are using innovative wing production techniques that may now be deployed by Airbus for future jets. [nL8N1IC4DF][nL8N1M75D6]

That could increase tensions at the World Trade Organisation where Boeing has battled with Airbus for years over government loans. Bombardier received such UK funding in Belfast, meaning recent trade friction may shift to the larger stage at the WTO.
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Old 10-17-2017, 09:02 PM   #4 (permalink)
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Default Re: Airbus to take majority stake in Bombardier C-Series jet program!

Well, looks like Boeing just responded to the Airbus and Bombardier hookup:

https://finance.yahoo.com/news/airbu...--finance.html

Boeing says Bombardier CSeries jets may face hefty duties despite Airbus deal

MONTREAL/TOULOUSE, France (Reuters) - Boeing Co said on Tuesday that Bombardier Inc's CSeries jets could still be hit with high U.S. import duties, even if they are assembled in Alabama through an industry-changing deal with Airbus.

The deal announced on Monday gives Airbus a majority stake in Bombardier's troubled CSeries jetliner program, securing the plane's future and giving the Canadian firm a possible way out of a damaging trade dispute with Boeing, in which the U.S. Commerce Department has threatened to impose a 300 percent import duties.

Boeing said that the announced deal has no effect on the pending U.S. Department of Commerce proceedings. "Any duties finally levied against the C-Series... will have to be paid on any imported C-Series airplane or part, or it will not be permitted into the country," Michael Luttig, Boeing's general counsel, said in a statement.

Investors cheered the winners of the deal that is set to shake up the $125 billion a year market for large jets. Bombardier shares jumped 15.7 percent on Tuesday, while shares in Toulouse, France-based Airbus rose 4.8 percent.

The transaction would give Airbus a 50.01 percent stake in an entity recently carved out of Bombardier to produce and market the CSeries, four years after it first flew with a goal to enter the large jets market.

But in a move emblematic of the huge risks of aerospace competition, Bombardier will get just one dollar for the majority stake in exchange for Airbus's purchasing and marketing power to support an aircraft that has won fans for its fuel efficiency but had not secured a new order in 18 months for the 110-130 seat plane due to doubts over its future.

Bombardier's strategy of performing final assembly in Alabama might allow the CSeries to avoid duties because the trade case targets partially and fully-assembled aircraft, said U.S. international trade lawyer William Perry.

Bombardier and Airbus could argue they are importing parts, like the wing from Northern Ireland, to be assembled in the United States.

"That may be the loophole Bombardier is hoping to use," he said by phone.

'ONE DOLLAR DEAL'

In reality, the terms of the deal mean Bombardier could pay Airbus to take over by agreeing to underwrite $700 million of risks related to cost overruns in coming years.

"It's an unexpected move by Airbus but indicates they see good market potential for the CSeries. Neither they nor Boeing currently offer an aircraft in the regional jet market," said aerospace consultant John Strickland of JLS Consulting.

The deal is similar to one that Airbus walked away from in 2015 when it decided the investment in a plane that had not yet entered service was too risky - with one major difference: that some of the jets will be produced in the United States.

That could change the power balance in Bombardier's costly trade dispute with Boeing, though it is not the main reason why the two former rivals have come together, executives said.

"Assembly in the U.S. can resolve the (tariff) issue because it then becomes a domestic product," Bombardier's chief executive, Alain Bellemare, told reporters at Airbus's headquarters in Toulouse.

Airbus CEO Tom Enders hailed the tie-up as "a win for Canada ... a win for the UK," referring to Bombardier's wing-making factory in Northern Ireland whose future had been threatened by the distant trade war.

He said it would also create new U.S. jobs.

The deal appeared to catch Boeing off guard. Locked in a separate 13-year trade dispute with Airbus, Boeing on Monday called it a "questionable deal" between two of its subsidized competitors.

CANADIAN APPROVAL

Bellemare said he hoped the deal would be approved within six to 12 months. Canadian Innovation Minister Navdeep Bains, who must officially decide whether to green-light the deal, said it looked like "Bombardier's new proposed partnership ... would help position the CSeries for success".

Bombardier said the partnership should more than double the value of the CSeries program.

While it will lose control of a project developed at a cost of $6 billion, the deal gives the CSeries improved economies of scale and a better sales network.

For Airbus, the deal strengthens the bottom end of its narrowbody portfolio after poor sales of its own A319 model and expands its global footprint, potentially opening up further deals in other sectors in Canada.

Tony Webber, a former chief economist at Qantas, said the CSeries could complement Airbus's existing single-aisle models.

Bellemare said the deal was expected to close in the second half of 2018.

"We're doing this deal here not because of this Boeing petition. We are doing this deal because it is the right strategic move for Bombardier," he said, referring to Boeing's complaint that the Canadian firm received illegal subsidies and dumped CSeries planes at "absurdly low" prices.

NO JOB LOSSES

Bombardier said the deal would not result in job losses and would keep the head office in Montreal. Unions said the deal could benefit workers.

The Boeing-Bombardier dispute has snowballed into a bigger multilateral trade dispute, with British Prime Minister Theresa May asking U.S. President Donald Trump to intervene to save British jobs.

Bombardier is the largest manufacturing employer in Northern Ireland and May's Conservatives rely on the support of the small Northern Irish Democratic Unionist Party (DUP) party for their majority in parliament.

Business Secretary Greg Clark said Britain would work closely with the planemakers, while the DUP said the agreement was "incredibly significant news" for Belfast.

Talks for the deal between Airbus and Bombardier first started over dinner at the end of August.

Enders said the deal was different from an earlier round of talks in 2015, when he abruptly ordered an end to negotiations. He said the CSeries' had since been certified, entered service and was performing well.

Some analysts said the deal could drive Boeing closer together with Brazil's Embraer, with which it already cooperates.

Bombardier is in the middle of a five-year turnaround plan after considering bankruptcy because of a cash-crunch as it developed multiple planes simultaneously, including the CSeries.
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