Airbus apparently has adjusted its attitude toward the Bombardier C Series, something the European airframer’s COO for customers, John Leahy, once disparaged as little more than a “nice little airplane.” On Friday, less than four days after Airbus announced its intention to take a 50.1 percent stake in the C Series program, CEO Tom Enders declared that the model would collect at least half of a 6,000-aircraft market for 100- to 150-seat narrowbodies over the next 20 years.
“The same guy now says it’s a terrific little plane,” Enders told Canadian television network BNN on Friday. “From an Airbus perspective that’s a small plane...But I tell you it’s all hands on deck now at Airbus to make it a roaring success in the future.”
Although Enders said he expected a “rough and tough” few months ahead, as the U.S. International Trade Commission considers a final decision due in February on whether or not to impose anti-dumping duties on C Series sales into the U.S., he dismissed the U.S. Commerce Department’s preliminary determination of a near 300-percent tariff as “utterly ridiculous.”
“Not everyone likes our partnership,” said Enders. “And that company in Seattle is particularly opposed to that. I think that is obvious. But it’s not like we’re afraid of that.”
Under the terms of the deal Airbus will enter into commercial agreements related to C Series sales, marketing and procurement management, including leading negotiations to improve supplier agreements and customer support. At closing, expected in the second half of 2018, none of the program partners—including the Quebec provincial government--will contribute any cash and Airbus will get a call option to take full control of the program after seven years.
“Airbus is bringing tremendous value to the program,” said Bombardier CEO Alain Bellemare on the day of the announcement. “They are clearly endorsing the C Series, they are bringing supply chain expertise, they have an amazing marketing network and a great aftermarket support organization that is unleashing so much value that we expect to more than double the current value of the program.”
Bombardier and Airbus attempted to reach a similar agreement in 2015, but the deal fizzled when Airbus’s due diligence failed to find a compelling case for it. In this case, Enders quipped that “the stars were aligned this time.
“It’s an entirely different situation than it was two or three years ago,” said Enders. “At the time there was no certified C Series; now we have the CS100, the CS300 certified. At the time, looking at our own burdens and challenges, we didn’t have the A320neo, we didn’t have the A350 ramp up going well…so with the achievements we've made and the achievements that Bombardier has made with the C Series, that decision was far easier to take for us.”
Enders said that discussions began in August, well ahead of the U.S. Commerce Department’s preliminary ruling to impose up to 300 percent worth of tariffs on Bombardier’s sale of 75 CS100s to Delta Air Lines at the behest of Boeing. The duties would effectively disqualify the C Series from sale in the U.S., removing the biggest market from Bombardier's available pool of potential customers. The eventual manufacture of the C Series in the U.S. could theoretically remove that barrier to sale there.
However, Bellemare denied that the Commerce Department case motivated the agreement, notwithstanding his acknowledgment that, in fact, domestically produced aircraft in the U.S. would not fall subject to any tariffs. “It’s very clear that we’re not circumventing anything here,” said Bellemare. “[But] the fact is when you produce an aircraft in the U.S. it is not subject to any import duty under the current U.S. rules.” Enders agreed, adding that the European company hasn’t yet decided whether the Mobile facility would export the C Series outside the U.S.
Although he said the companies haven't definitively committed to building Delta's CS100s in Mobile, Bellemare also said the option “is on the table,” meaning the airline would need to agree to reschedule first deliveries for some time beyond the current spring 2018 target. “They [Delta] have been very clear that they love the aircraft and that they'd be willing to wait to get the C Series,” he reported. “Now that we have the deal announced we'll [engage] in more in-depth discussion with Delta. But we feel confident that they will be waiting for the right solution.” Enders added, however, that Airbus could establish C Series production in what he termed a relatively short period of time.
While the addition of the C Series certainly adds value to Airbus's product portfolio, it also appears likely to spell the end of further efforts to sell the A319, whose seating capacity overlaps with that of the CS300. “We haven't sold any A319s since 2012,” said Enders. “That says it all.”