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Forum2-Fall2017AirbustakescontrolofBombardierjetBoeingtriedtokill.docxAirbus notches win over rival Boeing with Bombardier deal
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Key Concepts from Chapter 6:
· Launching Strategic Offences
· Defensive Strategies.
· Timing a companies
· Offensive and Defensive Strategic Moves
· Horizontal Merger and Acquisition Strategies
· Vertical Integration Strategies.
· Outsourcing Strategies
· Strategic Alliances or Partnership Arrangements.
Airbus notches win over rival Boeing with Bombardier deal
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CTV News Channel: 'Battle of aircraft titans'
President, Mt. Auburn Capital investment firm, Conor Bill says Airbus will benefit by gaining new technology to compete with Boeing.
CTV News Channel: 'Blockbuster' Bombardier deal
CTV's Michel Boyer reports on Airbus taking control of the Bombardier C-Series program saying the deal is mainly for the company's survival.
CTV National News: Buying into the CSeries
Airbus announced it was buying a majority stake in Bombardier's CSeries, giving a boost to the troubled project. Glen McGregor reports.
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Angela Charlton, The Associated Press Published Tuesday, October 17, 2017 7:41AM EDT Last Updated Tuesday, October 17, 2017 10:27AM EDT
PARIS -- Airbus scored a point in its high-stakes rivalry with Boeing by striking a deal just across the U.S. border.
The European plane maker reached an unusual, no-cost deal with Canada's Bombardier that sent Airbus shares up Tuesday, boosts both companies' prospects in Asia and should save thousands of Bombardier jobs from Quebec to Northern Ireland.
It could also help Bombardier avoid heavy U.S. duties that had helped push the Canadian company near bankruptcy. The announcement late Monday gives Airbus a majority stake in Bombardier's C-Series passenger jets, and some C-Series planes will now be built at an Airbus plant in Mobile, Alabama.
RELATED STORIES
· Airbus shakes up industry with majority stake in Bombardier CSeries program
· Quebec rules out more government aid for Bombardier
· WTO appoints panel to review Bombardier CSeries subsidies
· How Canada's fight with Boeing began in Washington
PHOTOS
An Airbus A380 at the Paris Air Show, on June 18, 2015. (Francois Mori / AP)
Bombardier's CSeries 100 touches down after its maiden test flight on, September 16, 2013 in Mirabel, Que. (THE CANADIAN PRESS / Ryan Remiorz)
Boeing called it a questionable deal by two state-subsidized competitors.
It is a rare bright spot for Airbus, which is currently facing growing legal troubles stemming from corruption investigations in Britain, France and Austria. Airbus shares rose 2.8 per cent in Tuesday in Paris before falling back slightly to 79 euros.
Airbus CEO Tom Enders sought to assure investors that the Bombardier deal will save money for both companies by combining supply chains and production. He argued that it will improve the appeal for C-Series jets, which have struggled for customers.
"This puts us in an excellent position ... with no cost, with no risk," Enders said of the deal. He added it will allow Airbus to expand activities in China and "strengthen our global industrial footprint."
While Airbus rejected a deal with Bombardier three years ago, Enders said Airbus is feeling more confident now in the C-Series jets and its own ability to take on another production line.
The move comes after the U.S. Commerce Department imposed harsh duties on Bombardier, accusing it of selling C-Series planes in America below cost and receiving government subsidies.
The Commerce Department announced it would impose an 80 per cent duty on top of duties of nearly 220 per cent. The case was a win for Boeing, which brought the complaint.
Airbus -- in a long-running trade battle with Boeing -- argues that the U.S. company receives illegal tax breaks that act like subsidies and hurt competition.
Officials and unions in Northern Ireland cautiously welcomed the Airbus-Bombardier deal. Bombardier employs more than 4,000 people at its Belfast factories and will deliver 125 new C Series jets to Delta Air Lines next year.
Davy Thompson, regional officer of the Unite union, called it a "welcome development - one that gives breathing space to the C Series itself and which we anticipate should safeguard the future of C Series production jobs in Belfast for the foreseeable future."
However, Ross Murdoch of union GMB warned that "This deal is liable to further scrutiny from the U.S. administration that may see it as an attempt to dodge their trade tariffs. ... GMB hopes both Bombardier and Airbus have taken cast iron legal advice to ensure they don't get rid of one legal challenge only to open themselves up to another."
The Airbus acquisition will be subject to Canadian government review. Airbus will acquire a 50.01 per cent interest in C Series Aircraft Limited Partnership, which manufactures and sells the plane. It will not pay anything for the stake, a recognition that the unit will see sales increase merely by virtue of being part of the Airbus group.
Bombardier will own 31 per cent and the Quebec government's investment agency will hold 19 per cent.
Airbus is not assuming any debt as part of the deal and it has an option to buy out Bombardier after 7 1/2 years and the Quebec government in 2023.
Airbus takes control of Bombardier jet Boeing tried to kill
by Jon Ostrower @jonostrowerOctober 17, 2017: 8:06 AM ET
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.
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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.
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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