The Aerospace & Defence sector has been a headline grabber in recent months and it seems the news flow isn’t going to dissipate anytime soon!
Wires broke news early Tuesday that Airbus had agreed to take a majority stake in Bombardiers CSeries jet program, a complete U-turn from two years ago after similar discussions came to a halt.
The return of Europe’s largest aerospace group to the negotiating table stunned the aircraft industry which has been riveted for weeks by the trade dispute between Bombardier and Boeing, which threatened to hit the CSeries with a c.300% US import tariff (although CEOs for both Bombardier and Airbus have said the partnership is not driven by the US trade dispute). Now the narrow-body aircraft will be built for US airlines at Airbus’s Alabama assembly plant, circumventing any import penalties and turning the CSeries from an attack on US jobs (as portrayed in Boeing’s complaint) to a job creator in the key Republican State.
More important is the potential for wider implications across the sector. Strategically, this decision by Airbus extends beyond the dispute between Boeing and Bombardier and could trigger a riposte from competitors. The deal has fundamentally altered the landscape and raises the question whether this will drive further consolidation among aircraft manufacturers, with some commentators potentially touting a deal between Boeing and the Brazilian manufacturer, Embraer (with which it already cooperates on runway safety and alternative jet fuels).
“The French-based plane maker is acquiring 50.1% of the programme, the future of which was left in doubt after Canadian company Bombardier was hit by a 300% import levy by the United States. The huge tariff followed a complaint from Boeing that the company had dumped its C-Series jets at “absurdly low” prices. In a sign of the extent of the challenges facing Bombardier, Airbus did not pay anything for the majority stake. The European aircraft manufacturer will use its global firepower and supply chain to provide procurement, sales and marketing, and customer support to the jet programme.”