Airbus takes control of Bombardier jet Boeing tried to kill

5 stunning stats about airlines
5 stunning stats about airlines

Airbus on Monday announced it was taking control of rival Bombardier's embattled C Series airliner program, building a powerful transatlantic alliance in a bitter fight with Boeing.

The C Series has come under attack from Boeing, (BA) which alleged that Bombardier (BDRAF) had sold the 100 to 150-seat jet to Delta Air Lines at "absurdly low prices." The U.S. Department of Commerce has levied a preliminary 300% import tariff on the plane, setting up a diplomatic row that has drawn in the Canadian and U.K. governments.

The Airbus deal could enable the C Series to dodge the huge tariff by assembling the planes in the U.S.

Under the agreement, Airbus (EADSF) will acquire 50.01% of the program. Crucially, the European plane maker will establish a second final assembly line for the jetliner in Alabama, where it currently builds larger single-aisle jets for U.S. airlines. The facility will be expanded to make room for manufacturing the C Series.

The arrangement potentially opens the door for more U.S. carriers to sign up for the jet. JetBlue Airways (JBLU) and Spirit Airlines (SAVE), both large Airbus customers, have previously voiced support for Bombardier's position against the Department of Commerce. And it could salvage business with Delta (DAL), which has said it won't pay the tariff.

Airbus denied that its goal was to avoid U.S. tariffs on the new jet. But the assembly line plans it unveiled mean the C Series will now be "made in the U.S.A."

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

Related: Boeing v. Bombardier: Tariff is now 300%

Airbus will not make any upfront investment in Bombardier's jet. But the Canadian plane maker will gain access to the European company's greater scale in marketing, sales, customer support and supply chains.

Under the deal, Bombardier and Investissement Québec will own approximately 31% and 19% of the C Series program respectively.

Airbus' backing gives a boost to employment in Quebec where the jet is assembled, as well as Northern Ireland, where the wings are made and China, where the jet's center section is made.

The British government welcomed the deal.

"While there are still some steps before the deal is completed, this is clearly a significant move forward for the C Series and for the workforce in Northern Ireland," Secretary of State for Northern Ireland James Brokenshire said.

The U.S. Department of Commerce's move to slap tariffs on jet had cast doubt on the program's future.

Delta Air Lines chief executive Ed Bastian said last week the airline had no intention of paying the tariff. He cautioned that there were other options for the airline, including delaying the jet's arrival while a resolution was reached. Delta declined to comment on the Airbus-Bombardier deal.

"We feel confident they'll be waiting for the right solution," said Bombardier's chief executive Alain Bellemare of Delta. Bellemare said they are discussing options with the airline including potentially delivering the jets from the Alabama factory once it's ready, which is years away.

bombardier cs100 stats

Assembling the planes in Alabama gives Airbus and Bombardier added political clout in Washington. The U.S. International Trade Commission is set make a final ruling on Boeing's claims against the C Series in February.

The European and Canadian plane makers have been in talks since August, said Airbus Group CEO Tom Enders, who denied the deal was motivated by Boeing's complaint. Airbus and Bombardier attempted to link up in 2015, but those talks fell through once news of the negotiations became public.

Enders said this year's discussions were different because Bombardier has completed the C Series jets, which airlines have been flying since last year.

The deal allows Bombardier and Quebec to exit the program in 2023, selling their stakes to Airbus in the years to come.

"At the end of the day, this is going to be an Airbus program," Rainer Ohler, vice president of communications for Airbus Group, said in an interview. "It's going to be a threesome, we take the majority now and over time we take 100% of the program."

The deal is expected to close in the second half of 2018.

Related: Justin Trudeau warns Boeing over trade dispute

In a single move, Bombardier and Airbus have gone from rivals to partners. Airbus' retiring chief salesman John Leahy had long mocked the small airliner, and aggressively and repeatedly blocked the plane from winning deals at airlines around the world.

The move has broad implications for U.S. aerospace manufacturing and the global balance of power to build jetliners for the world's airlines. Melding the Airbus product line with Bombardier's C Series gives the European company a broad range of airplanes -- from 100 seats all the way through Airbus's 555-seat A380 superjumbo -- as it seeks to craft deals and win business over Boeing.

Airbus appears content to let its smallest single-aisle jetliner, the A319neo, die. That aircraft hasn't sold since 2012, said Enders, and will be supplanted by the CS300, the larger of Bombardier's C Series models.

Boeing has sought to kill the nascent jetliner before it gained signification commercial traction, but it now faces a competitor with Airbus' resources and reach.

Bellemare said he is "highly confident we'll be able to secure more orders under the Airbus umbrella."

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