Europe's Airbus to buy majority stake in Bombardier CSeries program
Published Monday, October 16, 2017 12:53PM EDT
Last Updated Tuesday, October 17, 2017 7:45AM EDT
In a blockbuster announcement for the industry, European aerospace giant Airbus Group is buying a majority stake in Bombardier's CSeries program.
The two aircraft manufacturers announced the partnership Monday evening, calling it a win-win situation for both parties.
The news comes weeks after the United States announced 300 per cent tariffs on exports of the aircraft following a complaint from rival Boeing.
The partnership brings together two complementary product lines, with the 100-150 seat market segment expected to represent more than 6,000 new aircraft over the next 20 years.
The CSeries headquarters will remain in the Montreal area but a second assembly line for the 100- to 150-seat plane will also be ramped up at the U.S. Airbus facility in Mobile, Alabama.
“Airbus is the perfect partner for us, Quebec and Canada,” said Bombardier CEO Alain Bellemare in a statement. “This partnership should more than double the value of the CSeries program and ensures our remarkable game-changing aircraft realizes its full potential.”
Officials from Bombardier said this would not have any negative impact on Bombardier jobs in Quebec.
The final assembly of the CSeries line of aircraft currently takes place at the Bombardier facilities in Mirabel.
The partnership will extend the current 20-year market forecast by five years, securing the future of the 2,000 jobs at the Mirabel plant until 2041, in addition to maintaining the headquarters at Montreal.
“Yesterday they weren’t sure of the future of the program,” said David Chartrand, Quebec co-ordinator for the International Association of Machinists and Aerospace Workers. “Today, if they can go to bed tonight and they can talk to their families and they can say, ‘I’ve got a guarantee until 2041, at least.’”
The Quebec government said it hopes the deal will not only secure jobs at Bombardier, but in the entire aerospace cluster in Quebec, which represents close to 40,000 workers.
“It gives more credibility to the product, having somebody like Airbus behind us and I think it’s a good thing,” said Chartrand. “I look at it optimistically, in having secured the jobs that we have now and hopefully, moving forward, having a good relationship with Airbus.”
The partnership is expected to result in significant CSeries production costs savings by leveraging Airbus's supply chain expertise.
"The CSeries, with its state-of-the-art design and great economics, is a great fit with our existing single-aisle aircraft family and rapidly extends our product offering into a fast growing market sector," said Airbus chief executive Tom Enders.
Airbus will acquire a 50.01 per cent interest in the CSeries Aircraft Limited Partnership (CSALP), which manufactures and sells the plane.
Bombardier will own a 31 per cent stake.
The Quebec government's investment agency will hold 19 per cent -- a year after it invested US$1 billion for a 49.5 per cent stake in Bombardier's CSeries commercial jet program.
No money will be exchanged in the deal, and the CSeries partnership will assume no debt.
Airbus can buy out Bombardier after 7.5 years and the Quebec government in 2023.
Quebec's minister of the economy Dominique Anglade reacted positively to Monday's news.
“In the current context, the partnership with Airbus is, for us, the best solution to ensure the maintenance and creation of jobs in this strategic sector of the Quebec economy," she said.
“You’d rather have 50 per cent of a big pie than 100 per cent of a small pie,” said Karl Moore, McGill management professor. “It’s the right thing for Bombardier, it’s the right thing for the CSeries. It’s the right thing for Quebec," he said, adding, “We’re more likely to have jobs in Quebec aerospace today than we were yesterday.”
Unifor, the union which represents many Bombardier workers, said it’s too early to celebrate even though Airbus's stake could strengthen the CSeries.
"It is a sad day that a high-tech Canadian treasure is ending up in European control, but we can take some satisfaction that the CSeries is getting some needed stability," said Unifor National President Jerry Dias.
"The attempt to weaken Bombardier has pushed it to join with one of its competitors, which should not have had needed to happen," Dias said. "Ultimately, the U.S. actions have created a stronger Bombardier."
Federal Economic Development Minister Navdeep Bains said he would review the international sale.
"Proposed investments of this kind require the government to consider whether they are in the national interest. The Airbus deal, like all significant proposed investments in Canada by non-Canadians, is subject to the Investment Canada Act-an act which I oversee," he said.
"In my review, I'll be looking to see how this deal will benefit Canadians, support our aerospace sector and create good jobs."
Bains seemed optimistic about Canadian jobs, saying, "This presents further opportunity to grow our aerospace industry and create well-paying middle-class jobs across the country."
Airbus already employs 1,900 people in Canada, generating $1.2 billion of Canadian supply chain spending.
Bombardier has faced cash-flow problems in recent years, prompting Quebec's pension plan to purchase a large stake in the company's train division, while the government also invested in the CSeries.
Anglade said Quebec is open to recouping its investment.
"When there was investment made by the government of Quebec initially in the CSeries, we said that we were looking for another partner. We've always said that, it was very open. In anything that we would be looking at any proposal, we would look at the number of employments. Number one is the number of jobs that we have in Quebec, and to make sure that we maintain the environment for the aerospace industry," said Anglade prior to the announcement.
"If you look at the numbers in the aerospace industry right now they're pretty good. Actually there are a lot of things happening in the aerospace industry in Quebec and we want to maintain that."
She said, however that Bombardier could not count on getting more cash from government.
"I think we've done enough for the aerospace industry," she said.
Anglade said she welcomes news that other players might be interested in investing in Bombardier.
A long legal battle ahead is also expected to cut into Bombardier's cash flow, as it was counting on selling 75 CSeries jets to Delta airlines.
Delta has said it wants those jets, and that it won't pay the punitive duties demanded by the U.S. government.
The U.S. Dept. of Commerce has imposed two sets of duties totalling more than 300 per cent on Bombardier's CSeries following a challenge from Boeing, an American company which never tried to sell planes to Delta.
With files from The Canadian Press