Airbus Secures Bombardier In Dogfight With Boeing

By Robert Zebney, International Business Writer

Airbus and Boeing Co. have spent decades and billions of dollars trying to out build and outsell each other at air shows and on factory floors around the world. Airbus just scored a point in its rivalry with Boeing, just north of the Unites States’ border.

The European based plane manufacturer reached an unusual, no-cost deal with Canada’s Bombardier. The deal caused Airbus shares to go up Tuesday, and boosts both companies’ prospects in Asia along with saving thousands of Bombardier jobs in Quebec and Northern Ireland.

The deal could also help Bombardier avoid heavy U.S. duties that had helped to push the Canadian company near the edge of bankruptcy. The agreement gives Airbus a majority stake in Bombardier’s C-Series passenger jets and some C-Series planes will now be assembled at an Airbus plant in Mobile, Alabama. Airbus rejected a deal with Bombardier three years ago. Airbus CEO Tom Enders says Airbus is feeling more confident now in the C-Series jets and its own ability to take on a new production line.

The deal is a rare bright spot for Airbus, who faces growing legal troubles coming from corruption investigations in Great Britain, France, and Austria. Airbus shares rose 2.8% Tuesday in Paris before falling back slightly to 79 euros. The Airbus CEO wants to assure investors that the Canadian deal will save money for both companies by combining supply chains and production. He also added that the deal puts Airbus in a great position at no cost and no risk to Airbus.

The move comes after the United States Commerce Department put harsh duties on Bombardier, accusing them of selling C-Series planes in America below cost and receiving government subsidies.

The Commerce Department announced it would put an 80% duty on top of the current duties of nearly 220%. This case was a win for Boeing, which brought the complaint to the attention of the department. Airbus, who is in a long-running trade battle with Boeing, argues that the U.S. Company receives illegal tax breaks that act like subsidies and hurt the competition.

Officials and unions in Northern Ireland cautiously welcomed the Airbus-Bombardier deal; Bombardier currently employs 4,000 people at its Belfast factories. At the same time, some worry that the deal is liable to further scrutiny from the U.S. administration that may see it as an attempt to dodge their trade tariffs.

The Airbus acquisition will be reviewed by the Government of Canada. Airbus will gain a 50.01% interest in C-Series Aircraft Limited Partnership, which makes and sells the plane. It will not pay anything for the stake in the company, a recognition that the unit will see sales increase merely by being part of the Airbus group. Bombardier will own 31% and the Quebec government’s investment agency will hold 19%. Airbus is not assuming any debt as part of the deal and it has an option to buy out Bombardier after 7.5 years and the Quebec government in 2023.

 

A version of this article appeared in the Tuesday, October 24th print edition.

Contact Robert at

robert.zebney@student.shu.edu

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