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Airbus buys majority stake in Bombardier CSeries passenger jet business
- bookbinder 9y agoFor a split second I read "Airbus" as AirBnB and I was like "whaaaaaat?"
- bookbinder 9y agoLooking at the negative score my comment received, I now remember, why I stopped visiting HN. (No sense of humor allowed.)
- jerrycruncher 9y agoCitation links?
- joelrunyon 9y agoI read it this way too. Seems my brain is working on auto-complete...
- swasheck 9y agodamn you, autocorrect!!
- deleted 9y ago[deleted]
- pmilot 9y agoThis is pretty big news for people living in Québec, as the Québec government invested heavily in the C-Series last year. At the time, the move was criticized as a big gamble and an irresponsible handling of taxpayer's funds because the C-Series' success was far from guaranteed and there were legitimate concerns about Bombardier's leadership. With this move by Airbus, the government's stake in the project was reduced from 49% to 19%. I'm no economist, but it seems that the crisis was avoided?
- guiomie 9y ago"Bombardier Inc. announced Monday it has sold a majority stake in its CSeries passenger jet business to European aerospace giant Airbus for no cost." ... Does "for no cost" mean for 0$? I guess this means the Quebec Government was diluted, thus is the crisis really avoided?
- AnimalMuppet 9y agoIt might mean "for no loss", that is, for what it paid for it. No cost to the taxpayers. Note well: I do not know if that is the correct interpretation.
- guiomie 9y agoThe guardian seems to add more details: "If Airbus’s plan works, it’s ingenious. It will get a 50.1% stake in the C-Series without paying a penny and will collect some cheap warrants on Bombardier’s shares" https://www.theguardian.com/business/nils-pratley-on-finance/2017/oct/17/airbuss-ingenious-bombardier-plan-is-comeuppance-for-boeing https://www.theguardian.com/business/nils-pratley-on-finance...
- AnimalMuppet 9y agoAh, that seems to rule out my interpretation.
- Cyph0n 9y agoAccording to the article, Airbus bought the stake "at no cost". Unless I'm misunderstanding something, shouldn't this be a loss for Quebec? I guess the Airbus/Boeing duopoly is here to stay. Bombardier looked like a promising future competitor... They still have their rail business, so all is not lost.
- Doctor_Fegg 9y agoIt's possible that Bombardier Rail may be absorbed by a merged Siemens/Alstom - the dust hasn't settled yet.
- slavik81 9y agoThis is a clever resolution to a dispute that was going to hurt everyone involved. There was quite a scary trade war brewing.
- simlevesque 9y agoWhat makes you think this is a resolution ? I've followed this story closely and I think it's far from the end of the dispute.
- slavik81 9y agoJust misplaced optimism. I'm a little less hopeful now, having seen Boeing's response.
- astrodust 9y agoThere's been one simmering ever since the original free trade deal in the 1980s. If it's not softwood lumber it's potatoes or airplanes.
- chinathrow 9y agoAnd Boeing issuing statements like it's kindergarten. https://twitter.com/Boeing/status/920373843142864896 https://twitter.com/Boeing/status/920373843142864896
- valuearb 9y agoBoeing is a bunch of idiots, the C series didn’t compete with them at all. A company like Boeing that gets massive government contracts and depends on free trade shouldn’t be shitting on free trade.
- amunicio 9y agoI would not characterize Boeing as idiots... More like paranoids. Boeing is scared (panicked?) of having a new entrant. The commercial jet industry has huge costs of entry that act as a very high barrier for newcomers. The C series, if successful, would have acted a stepping stone into bigger jets that would be competing directly with Boeing. Airbus buying the C series is, in a way, a small victory for Boeing. It leaves the market as a duopoly and ensures that Bombardier will not get into bigger planes. It also sends a strong signal that no third competitor will be allowed. At least until the Chinese government heavily subsidizes a homegrown competitor with huge military tanker contracts.
- jonknee 9y ago> A company like Boeing that gets massive government contracts and depends on free trade shouldn’t be shitting on free trade. Opposed to all the other airliner manufacturers that don't get government contracts? From the article: > The Quebec government invested $1.25 billion in exchange for a 49.5 per cent stake in the CSeries last year. The federal government also recently provided a $344-million loan to Bombardier, which struggled to win orders. And of course Airbus is partially owned by France, Germany and others. Everyone in this story has deep government ties.
- acomjean 9y agoI presumed the parent meant huge non-airplane military contracts. Airplanes are 69% of revenue but just 54% of profits (now that the dreamliner is in production)[1]. The rest is defense were margins are higher. I was working years ago at a defense contractor who was a sub on a Boeing radar project. The running joke was the Government was giving Boeing work to let it capitalize the design of a new plane. [1]https://www.fool.com/investing/2017/01/30/boeing-earnings-the-defense-edition.aspx https://www.fool.com/investing/2017/01/30/boeing-earnings-th...
- addicted 9y agoSounds like Airbus is getting parts of Bombardier for cheap and Bombardier is getting the clout to fight Boeing and the US's patently obvious, possibly illegal, trade protectionism. And this should further endear Canada to the EU over the US, and probably make the Brits also happier about the EU (The British jobs were most at risk). I am no expert but that's what it looks like to me. Nice move if so.
- plandis 9y agoWhat? Boeing’s claim is that Canada illegally subsidized Bombardier which seems to be true. But yes it’s the US’s fault that happened
- athenot 9y agoWe're just more clever at subsidizing Boeing in ways that don't look like a subsidy. For example, the Air Force bid that was about to be won by Airbus got re-spec'd in order to match the requirements with what Boeing happened to provide (number of engines, iirc).
- noir_lord 9y ago250m a copy, it'll never fly, I'll take 300. TBH it's not that clever, it's just that the US can use it's out-sized economic might to force smaller countries to accept it.
- vanattab 9y agoI believe athenot is referring to the KC-X program in which Airbus definitely got screwed. https://en.wikipedia.org/wiki/KC-X https://en.wikipedia.org/wiki/KC-X
- valuearb 9y agoBoeing doesn’t even sell anything in Bombardiers class, they aren’t competitors. And as a US taxpayer i’m all in favor of foreign governments subsidizing my travel with cheaper commuter jets.
- Zarathust 9y ago"Buys" is a strong word for "gets for free". From the article: Bombardier Inc. announced Monday it has sold a majority stake in its CSeries passenger jet business to European aerospace giant Airbus for no cost.
- panzer_wyrm 9y agoIsn't the proper term gift?
- nv-vn 9y agoNo. The cost just wasn't monetary. If I understand correctly, Airbus gets the CSeries and Bombardier no longer has to make a profit out of their debts. So basically Airbus paid for CSeries by taking on CSeries' debts. Also, Bombardier still owns stake in CSeries, so any profit from CSeries is still positive for them. Since Airbus can provide the manufacturing in the US, this seems like a net profit compared to the alternative.
- Zarathust 9y agoThis is incorrect. Airbus does not share existing debt, but may contribute up to 300M per year to new debt for the next 3 years. From the article: "Airbus is not assuming any debt as part of the deal."
- strictnein 9y agoA good friend worked at Bombardier until recently and I got the full sales pitch and walkthrough of a model of one of these planes a couple of years ago at an overseas airshow. They were really nice and had some innovative features. Unfortunately, this was a big bet by Bombardier and it failed. "They are fucked" were his words, when I asked him about it today. Not sure where people discussing this as a US vs CA or that this is somehow a win are getting those ideas from.
- ajross 9y agoIs it too much just to ask why anyone cares so much? I mean, this was a "big bet" by Bombardier to enter a market dominated by an aircraft designed 49 years ago. I mean... it's a mature market. You don't make plays for a mature market unless you have a clear value advantage, and I don't see that Bombardier does in any real sense. No one gets upset when agricultural products (many of them, frankly, more high tech than these things) get caught up in similar trade disputes, which happens regularly too. I can't help but think this is driven in large part by a perception of this as a US assault on Canadian innovation, when it's really just another corn war.
- caf 9y agoThe CSeries is a regional jet. The market it's aimed at is serviced by aircraft like Boeing 717, BAe 146, Embraer E-jet, Fokker F100 and Bombardier's own CRJ700. Most of those are now out of production or nearing the end of their production run, which is why new, cheaper to operate designs for this category are being developed (Embraer and Mitsubishi are also developing new regional jets). The funny thing is that Boeing doesn't even have a competing product in this market!
- peckrob 9y agoBoeing isn’t fighting the CSeries for what it currently is. The CS100 and 300 in themselves don’t directly complete against any Boeing planes. Their worry is that a successful CSeries could spawn a stretch CS500 that would be begin moving in on the 737. Boeing underestimated Airbus in the 70s and 80s, and they’re trying not to make the same mistake again. They were trying to head this off before it gets that far.
- drzaiusapelord 9y agoThis is fairly predictable. With a hostile Trump administration towards Canada, we're losing influence with Canadians so they will continue to cozy up with Europe. Not sure what Trump's endgame here is other than alienating once allies and economic partners. Trump went instantly to nuclear and Trudeau was forced to respond in kind. This is what happens when diplomacy is little more than namecalling and 'my way or the highway.' The USA isn't this unstoppable juggernaut everyone must bow down to and accept being bullied from. Europe, China, Japan, Russia, Brazil, Turkey, etc are all vying for influence and will take advantage of our every misstep. Europe certainly did today.
- KSS42 9y agoCSeries Production for US market will be in USA. Trump gets to say that he brought jobs to USA.
- deleted 9y ago[deleted]
- rpiguy 9y agoIt’s still a win for Boeing and Trump. Bombardiers plans to enlarge the CS series to compete with the 737 will not happen as Airbus already has the Neo. The threat of a new entrant is gone, jobs move out of Canada to the airbus plant in the US, and the CS stays at a size below the prime markets Boeing and Airbus compete in. While I am sure Boeing would rather have the program killed entirely this still works out very well for them.
- wahern 9y agoThe A319neo is as good as dead. According to https://www.ft.com/content/201bf186-b350-11e7-a398-73d59db9e399 https://www.ft.com/content/201bf186-b350-11e7-a398-73d59db9e... , the A319neo hasn't had a sale in over 4 years. Airbus previously passed on this Bombardier deal several years ago because of the market segment conflict with the A319. Given there have been zero sales in the interim, I think it's a safe assumption that Airbus has decided to throw in the towel on the A319 and embrace the C-Series. Not just for the product but also for the strategic multinational relationships. Maximizing those relationships requires committing to the C-Series. The deal doesn't make sense unless Airbus is all-in. Your point about a stretched C-Series being off the table stands, but that's very different from Airbus suffocating the C-Series altogether. With the A319 out of the way Airbus would have every incentive to position the C-Series against the smaller 737MAX variants.
- ChuckMcM 9y agoThis is an interesting hack. According to sources Airbus gets 50.1% of the Class C jet's "business", in exchange for building them in a pre-existing plant in Alabama so that they are immune to the 300% tariff that the US was planning to impose (considering to impose?) on them. The hack allows Bombardier to recoupe its design costs by selling planes. They will no doubt get less margin selling them through Airbus but it is better that having to flush that investment down the tubes.
- tareqak 9y agoIt might benefit Bombardier and their investors, but if the C series jet was going to be manufactured in Canada by Canadian workers, this ends up harming those (potential?) jobs in favour of American workers who previously never had any sort of relationship with Bombardier. To me, the whole situation is a schoolyard example of "having your cake and eating it too".
- sf_rob 9y agoThe alternative may have been "having no cake" since they would not be profitable without successfully fighting the 300% tariff.
- tareqak 9y agoI actually agree. To clarify my position further, I am specifically accusing the United States and Boeing as the ones who are trying to "have their cake and eat it too" in this matter.
- cloakandswagger 9y agoIs there something inherently wrong with looking out for your own best interests? Or in this case, the best interests of your country?
- UnoriginalGuy 9y ago
- deleted 9y ago[deleted]
- gok 9y agoA shrewd move by Airbus. It's likely they could have gotten the EU to enact a large tariff against the CSeries in Europe too, but instead they're getting a 737 MAX 7 competitor for free and getting to avoid political fallout in the process.
- moeadham 9y agoBombardier is hugely popular in Québec. The press coverage here has been so anti-boeing they have launched a PR campaign. Any politician that signs any military contract with Boeing is going to pay a huge price in Québec; maybe high enough to lose an election. Boeing likely mis-calculated the politeness of their neighbors.
- BareNakedCoder 9y agoNot just in Québec.
- dgudkov 9y agoBoeing now trying to fix this PR disaster and airing ads on Canadian TV saying how much they love Canada.
- allengeorge 9y agoYeah. I don't know many people (outside of Manitoba, maybe?) who are buying that load of bovine feces. No one liked the BBD bailout, but we can all see a 300% duty for what it is: naked politicking.
- JumpCrisscross 9y agoWhat's the value of the Canadian aircraft market to Boeing in comparison with the global narrow-body market?
- allengeorge 9y agoI'll post what I did earlier: This is a huge blow for the Canadian aerospace industry, but the best that BBD could do in a bad situation. The plane itself is great, but management incompetence and customer worries about the company's long-term prospects made it a hard sell. Then, when BBD did make a sale to Delta, Boeing's naked politicking and the current administration's unreasonable duty made the situation untenable. BBD is essentially handing over the keys to the kingdom here: Airbus gets control of the program for nothing (they only have to allow the C series to be manufactured at an existing plant in Mobile) and if the program is successful they have the right to buy out the entire partnership; if it's unsuccessful they can walk away. Plus, it's unclear to me whether it's a way to actually push the C-series or a way to start conversations around it and then upsell customers to one of Airbus' existing narrowbodies. Again, not a good situation for BBD. Airplane manufacturing is a heavily political, heavily subsidized business, and since Canada is much smaller than the other players on the stage (US, EU, China, Russia) with a non-existent defence program it doesn't have the money or the weight to effectively compete.
- verelo 9y agoWhile I agree with everything you said, I would add that I think the US government is being anti-competitive here and a bit underhanded. Boeing has historically got a pretty sweet deal from the US government [1] in tax breaks, $8.7B worth! Not in the form of R&D grants like BBD get from Canada, a similar approach they take to other industries such as software development [2]. The outcome here is virtually the same, it’s just an alternative approach. This to me is pretty absurd show of irony and somewhat provocative move by the government. On the plus side, my BBD stock jumped 20% today, so I unloaded it. Not all bad news I suppose... [1] https://www.reuters.com/article/us-wto-boeing-idUSKBN19029Q https://www.reuters.com/article/us-wto-boeing-idUSKBN19029Q [2] https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program.html https://www.canada.ca/en/revenue-agency/services/scientific-...
- allengeorge 9y agoOh, definitely - I t’s a case of the pot calling the kettle black. Not only does the US give Boeing huge tax breaks, but the defense expenditures are calculated to subsidize the commercial aircraft program. Unfortunately for us Canadians neither BBD or the government has the means to take on Boeing and the US respectively. My only hope - and a slim one - is that Boeing is permanently frozen out of defence procurement here.
- _Codemonkeyism 9y agoQuality journalism "The current Airbus A320, a rival for the CSeries, is for 180 passengers or more and Airbus hasn't sold an A320 in three years." A320neo (the "current Airbus A320") orders: 2015: 583 2016: 343 2017: 47 ~1000 orders in the last three years, with 5000 orders all in all. https://en.wikipedia.org/wiki/Airbus_A320neo_family https://en.wikipedia.org/wiki/Airbus_A320neo_family
- joelhaasnoot 9y agoThat should probably read A319 - several other more reputable aviation sources mention this (for instance: https://www.forbes.com/sites/richardaboulafia/2017/10/17/bombardier-airbus-cseries-boeing https://www.forbes.com/sites/richardaboulafia/2017/10/17/bom...) According to this list: https://en.wikipedia.org/wiki/List_of_Airbus_A320_orders https://en.wikipedia.org/wiki/List_of_Airbus_A320_orders, the A319ceo (current) has a backlog of 50 orders and the A319neo has just 20.
- _Codemonkeyism 9y agoThanks for catching that! Technically "Airbus hasn't sold an A320 in three years." isn't right about the A319 as there have been orders the last three years, agreed no one wants it though. Most A319neo orders look to be modified to be A320neo orders, so customers moving to a larger jet - perhaps it's cheaper than cancelling and buying Bombardier/Embraer. Or there is no demand for small planes in the ~120 passengers class.
- skgoa 9y agoThere is huge demand, but the higher purchase and operating costs of the 320 family compared to the 737 family and C series make the 319 uncompetitive.
- _Codemonkeyism 9y ago"[...] compared to the 737 family [...] uncompetitive." No sure where you've got that from, the A320neo has 5000 orders, the 737Max has 4000 orders with the MAX7 not selling well (same size as A319neo).
- sho 9y agoBoeing is playing an extremely dangerous game here and they just keep on doubling down. They have an awful lot to lose if other countries, especially the EU, start to think they've crossed the line. A lot of people think their management decline started when they moved their HQ to Chicago, away from their R&D and manufacturing. But prior to this incident they demonstrated not only how much influence they can wield in the US Govt, but their willingness to use it whatever the appearance, with the KC-46A contract - the US Military had already decided to buy Airbus's a330-derivative tanker aircraft, but Boeing managed to get the decision overturned and their objectively inferior tender accepted instead. From the press coverage at the time the unfairness, and near-corruptness, of this manoeuvre was not lost on other governments. And now this - again they have demonstrated their hooks into government at the highest levels and willingness to use them for dirty tricks, in this case an outrageous 300% tariff on a tiny non-competitor based on absurd arguments about healthcare costs. Literally no-one in the aviation community thought it was even slightly reasonable. So now they've driven that tiny company and its airline program (and to be fair, they made a lot of their own mistakes) into the arms of their biggest competitor and by extension the EU. The biggest strategic blunder imaginable. Now the C300 is an EU program. And yet they just keep upping the ante: https://twitter.com/Boeing/status/920373843142864896 https://twitter.com/Boeing/status/920373843142864896 Last week they were trying to dare the governments of Canada and Ireland to start a trade war. Now it's the governments of France and Germany as well. And yet they continue to just hold down that accelerator. It's not lost on anyone that their theme of "america first no matter what" and hardball negotiations/threats by twitter seems eerily reminiscent of the current government in DC. So yeah. Boeing, and by direct extension the US Government, seems intent on playing an ever more dangerous game of Trade War Chicken with an ever increasing list of opponents. If they win the battle but lose the war, like they did with BBD, the solution is to start a bigger war. It's shocking, it's arrogant, and America's biggest exporter has a lot to lose should anyone decide to call their bluff. The geopolitical implications of this are interesting too. Just like there's no way Boeing is acting like this without assurances from the government that it's got their back, there's no way Airbus would have moved without assurances from its own member governments. The speed of the action was breathtaking - negotiations only started in August. This can only mean that the EU feels it has the upper hand should any real dispute arise. It's pushed Canada closer to the EU too. I wonder what's next.