Is it the greatest coup in aviation manufacturing history? It was certainly surprising and no amount of carping, crowing and spin from Boeing is going to make them look good. Boeing, just get used to it, you lost, you screwed up, go sit in a corner and sulk.
I’ve spent a while on the phone and online getting everyone’s views on what it means for both Airbus and Bombardier, and there is, unsurprisingly good and bad, mostly depending on your point of view. The negativity is usally around guesswork and lack of information.
The general view however is that Bombardier get the best deal long term and so do the tax payers of Quebec, who wont have to bail it out again.
Generally Airbus is taking a significant risk, but one it can mitigate if it uses every weapon in it’s not inconsiderable arsenal to make the CSeries work.
Airbus has obtained for zero investment, the rights to the CSeries and its production in the longer term. It has acquired – and this was much of the attraction, access rights to the technology, and it has taken upon itself the possibility of the whole thing vanishing without a trace if this goes horribly wrong.
CSALP has been created: CSeries Aircraft Limited Partnership. This entity will build and market the CSeries, arrange all of its parts and material acquisition, through Airbus. This will lower the cost of buying parts as Airbus will deploy its global purchasing arm to leverage better deals. It will remain based in Quebec. Airbus will own 50.01% with Bombardier owning 31% and Investissment Quebec owning the rest.
Airbus will build the facility in Alabama and expand the facility in Quebec as sales grow. That means jobs in the United States. And in Canada, and in Northern Ireland.
Airbus has taken on the acceptance of losses of $350m each year 2018, 2019 and 2020. Bombardier will continue to fund the programme as planned during 2017-18 and accept any losses in 2017.
There’s a lot of complex legal jargon in the agreement, but in essence, Airbus has the rights to acquire at full market value the CSALP company at a later date. It will, if it takes up the options – and there are reasons it might not, but I’m sure they will, mean Airbus owns the CSeries by 2024/5.
So what does it really mean?
Firstly Airbus are over the moon about this. They have been wooing Bombardier and tried to buy the whole company a year ago. Boeing tried to crush it. Airbus were nice to it and tried to buy it. This way, Boeing’s hostility and short-sightedness ensured Airbus would be met with a favourable response when they had a fresh idea on how to proceed. An idea that was born entirely out of Boeing’s aim to get ridiculous 299% tariffs added to the CSeries, which not only infuriated Delta who were buying the jet, but gave Airbus the idea of getting round them.
They knew the US Courts would agree with Boeing, it was a foregone conclusion, and the parties involved worked on that basis. Boeing were oblivious in their short-lived triumph, and frankly made to look like a bunch of vindictive amateurs by Airbus and Bombardier.
Airbus have already started looking at winding down the A319ceo and neo programme. The CSeries will entirely replace it and the A318, and with Airbus bringing the unit price down you can expect some significant sales.
There’s also credibility. This is a big issue, and it’s why many companies didn’t jump in to the CSeries from day one. Airlines are nervous ninnies when it comes to something new. Bombardier’s outlook wasn’t 100% future-safe and that’s enough for most airlines to get the jitters. Airbus remove that issue, and that opens up a wider market willing to talk.
Airbus will not want to spend over $1 billion in losses. They are deeply motivated to make sure they sell enough to firstly prevent them, then make profits. It may mean losses for two years, but by year three they’ll be expecting traction and a positive result.
Airbus also now have an even bigger lever on the Pratt & Whitney to get things moving, they’re already under huge pressure and this just makes things even more urgent.
Bombardier – and Canada – have achieved something truly remarkable in the CSeries. What other single economy, without a massive industrial and economic base has managed to produce an entire airliner, of such sophistication and so technologically advanced? All of the EU, China, Russia and Brazil, with Japan struggling with the MRJ. All of them far more massive economies and with bigger industrial bases than Canada.
It’s already an international programme, centre bodies built in China, wings in Northern Ireland, parts from around the world. That Airbus have just saved themselves the cost of developing a replacement for the A319/18 is true. Fulfilling a long-held desire of having something to sell in a market desperate for sub 150 seaters, that are flexible and viable in dozens of environments, means that the aircraft and those who build it have a longer term future, in high paying, high-tech aviation jobs the world over. Bombardier hasn’t surrendered, its evolved and accepted reality, but that doesn’t in any way demean its achievement.
Boeing’s attitude is in tune with the destructiveness of the current attitude in Washington D.C. Aggressive negativity has an equal, inverse and opposite reaction. The Airbus and Bombardier tie-up is one of them.