Airbus Buys a Majority Stake in Bombardier’s C Series Aircraft

Wow! Some news rolled in early Monday evening that is sure to shake up the aviation industry as we know it. Today, French Aerospace giant Airbus announced that it has acquired a majority stake in Bombardier’s new C Series Aircraft. 

The C Series has recently been in the news after the U.S. Government instituted a (ridiculously high) tariff against its import to the United States. To recap, here is the timeline of events related to the C Series.

• Late September 2017: The U.S. Department of Commerce institutes a 220 percent tariff on all C Series imports.
• October 6th, 2017: The U.S. Department of Commerce slaps Bombardier with another 80 percent tariff on C Series imports. This brought the combined tariff’s close to 300%.  Dominic Gates of The Seattle Times said it best:
  

  Essentially, this tariff “means that any U.S. airline wishing to buy a C Series plane must pay the U.S. government an amount equal to 300 percent of the price it pays Bombardier.” (Gates, October 6th)

• Today, October 16th, 2017: Airbus announces that it has acquired a majority stake of the C Series program.

What Will This Airbus-Bombardier Relationship Look Like?

There is a lot to unpack here:

• Airbus just acquired the brand new C Series jet that is looking to shake up the 100-150 seat market. One that they argue is not adequately currently served by Airbus or Boeing.
• Bombardier will set up a second C Series Manufacturing plant in Mobile, Alabama. Mobile is currently the home of Airbus’ U.S. manufacturing plant, so this cooperation makes perfect sense for both parties and will result in a more streamlined supply chain and service delivery.
• This secondary assembly location will complement Bombardier’s primary manufacturing location, which will remain located in Quebec.

 

According to Bombardier: “The single aisle market is a key growth driver, representing 70% of the expected global future demand for aircraft.” If this is truly the case, then Airbus just purchased one of the up and coming products that will transform the industry in the years to come.

What Does This Mean For the Tariff?

Neither Bombardier nor Airbus has commented on whether this will affect the imposed U.S. tariff, although I suspect we will see some significant changes made to it. For starters, Bombardier will begin to manufacture some of these jets in Mobile, AL. How does the U.S. plan on imposing a tariff on products manufactured within the United States?

Currently, Delta has 75 of these aircraft on order, which it is scheduled to begin taking delivery of in 2018. They have long said that they do not plan on paying any kind of tariff on any C Series jets they receive. As a result, I think we can chalk this announcement up as a big win for Delta. My guess is they are thinking that the tariff just got a whole lot harder to justify.

From a consumer standpoint, the tariff’s demise would be great. The C Series looks like a magnificent aircraft, with just a 2-3 layout in a single aisle configuration. For our sake, lets hope the U.S. government rules in favor of increased competition, and the end of the tariff. I am looking forward to Delta finally renewing some of its short haul fleet with these aircraft.

To the Point!

After the dust settles, I am sure we will see the future of the tariff clarify, most likely in the coming days. It will be interesting to see just how the U.S. Department of Commerce reacts to this purchase.

These were just some quick bullet points to give you the gist of the deal. I will be sure to write another post when we hear more regarding the tariff and any other significant developments related to this deal.