Airbus takes majority stake in C Series programme

Airbus takes majority stake in C Series programme

Airbus has acquired a majority stake in Bombardier’s C Series aircraft division.

The French manufacturer will acquire a 50.01% interest in the C Series Aircraft Limited Partnership (CSLAP) – the operator of Bombardier’s C Series programme – at no cost on closing.

Bombardier’s equity stake in the partnership will drop from 50.5% to a minority 31%. The other existing shareholder, Investissement Quebec, will drop its 49.5% stake to 19%.

The agreement also gives Airbus the option to fully acquire the C-Series programme in 2023.

CSLAP will not take on any debt from the deal. Bombardier’s funding plan for it will remain unchanged and will fund the cash shortfalls from the deal up to $350 million for the first year.

Bombardier predicts that this investment will more than double the value of the C Series programme after a year of slow sales.

Airbus will provide procurement, sales and marketing, and customer support services to the programme to boost its global presence. Its first steps are to expand the C Series primary assembly line in Canada and add another final assembly line in Alabama. The partnership’s headquarters and primary assembly line will remain in Quebec.

Saving Grace

Bombardier needed a solid investor. The US Department of Commerce announced last month that it will impose a 219% tariff on its sales in February, following allegations by Boeing that Bombardier was dumping its C Series in the US. Bombardier put out the call for further investment following the move.

The new funding will help mitigate the tariff’s potential impact on the C Series’ US market penetration. Bombardier’s order book of 125 C Series aircraft with American airline Delta will be subject to the tariff.

Airbus’ plans to boost C Series assembly in Alabama might also be a potential solution to circumventing the tariffs and boost the C Series presence in the US – the world’s biggest commercial aviation market.

Bombardier’s corporate bonds took a large hit last month when the tariff was announced. The company’s senior unsecured notes were down seven points at 99.963 the day after the DoC’s announcement.

Single-Aisle Market

This acquisition is set to be a “win-win” for both Airbus and Bombardier. The C series will fill the niche in Airbus’ portfolio for a 100-150 seat single aisle jet and complement Airbus’ higher-end 150-240 single-aisle focus.

Both manufacturers claim the single-aisle market will see major growth going forward, with 70% of expected global future demand for aircraft being for the single-aisle market.

Tom Enders, Airbus CEO, said: “This is a win-win for everybody! The C Series, 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. I have no doubt that our partnership with Bombardier will boost sales and the value of this programme tremendously.

“Not only will this partnership secure the C Series and its industrial operations in Canada, the UK and China, but we also bring new jobs to the US. Airbus will benefit from strengthening its product portfolio in the high-volume single-aisle market, offering superior value to our airline customers worldwide.”

Alex Baldwin
By Alex Baldwin October 17, 2017 13:16