Airbus, Bombardier deal hits Boeing with double whammy





Paris (AFP) - Airbus and Bombardier are inflicting double damage on Boeing with a deal that fills a gap in the Europeans' aircraft range and gives Bombardier a fighting chance to avoid punishing US tariffs, analysts say.

In the middle of the European night, Airbus issued a surprise announcement that it would take a majority stake in Bombardier's marquee C-Series airliner programme, aiming for significant production savings on the C-Series aircraft and making use of Airbus's international reach for sales.

The agreement, which Airbus chief Tom Enders called "a win-win deal for everyone", gives the European company a stake in Bombardiers' mid-range programme without the need to immediately inject cash -- allowing it to keep its war chest intact for future battles with arch-rival Boeing.

"Boeing has walked into its own trap," said analysts at the Aurel BGC brokerage in Paris. "They tried to shut their northern competitor out of the American market and are now faced with an alliance between their two main rivals."

- The beauty of the operation -

"The beauty of the operation is that it is free," Aurel BGC added. "In the short term, Airbus won't have to spend a single euro."

For Bombardier, the deal means crucial support for a programme that was struggling even before President Donald Trump's administration slapped a 220-percent countervailing duty, as well as an 80-percent anti-dumping tax, on Bombardier CS100 and CS300 aircraft imported into the United States.

The world's aerospace sector is consolidating and Airbus is getting one step ahead of Boeing with access to Bombardier's 100 to 150 seaters which are seen as a perfect fit for its existing portfolio.

"Airbus is extending its product range by protecting its positions from the bottom up," said Philippe Plouvier at the Boston Consulting Group. "There are real commercial and strategic synergies here for Airbus whose future lies in pursuing its Asian strategy and strengthening its positions in North America," he said.

Airbus will now be able to concentrate even more on the core of its portfolio, medium-range aircraft with 180 seats or more, he said.

Bombardier, meanwhile, has been unable to transform its industrial prowess into commercial success, and found itself buckling under development costs running up to $5.4 billion.

- Bombardier 'out of options' -

Bombardier "had to accept that they really were heading into difficulties," Plouvier said. "They were running out of options and to top everything off they were under attack from Boeing."

Airbus will now take 50.01 percent of the shares in CSALP, the entity which manages the C-Series programme, with Bombardier and Investissement Quebec holding 31 and 19 percent respectively. The programme's production headquarters will remain in Quebec.

Uncertainty over the future of the C-Series programme has kept potential buyers away, analysts said, but Airbus predicted that this would now no longer be a problem.

"With that partnership, these potential customers will be convinced that this is not only a great product but that it is there to stay," Enders said.

Bombardier chief Alain Bellemare said he was especially looking to tap into Airbus's expertise in supply chains, marketing and aftermarket support to "unleash value".

Recognising that the American aircraft market is key, Airbus and Bombardier said they plan to build a joint assembly line in Mobile, Alabama, where Airbus already has a production facility.

- Boeing calls deal 'questionable' -

Apart from bringing the operation closer to American customers, the move is also a powerful response to the tariffs and taxes Trump has aimed at Bombardier and which a presence on US soil could make redundant.

"The fact is when you produce an aircraft in the US, it is not subject to any import duty under the current US rules," said Bellemare.

Boeing was quick to condemn the deal between its rivals.

"This looks like a questionable deal between two heavily state-subsidised competitors to skirt the recent findings of the US government. Our position remains that everyone should play by the same rules for free and fair trade to work," said Phil Musser, a spokesman for Boeing.

But Bellemare retorted: "We're not circumventing anything here."

Investors liked the deal, pushing Airbus shares four percent higher in European afternoon trading on the Paris stock exchange. Boeing shares dropped one percent in early trading in New York.

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