The C-Series was to be Bombardier‘s big push up the ladder in the world of aircraft makers. Long known for its regional jets, the Quebec company had aspirations to break into the market for bigger commercial airplanes. That’s what the C-Series was all about.
But with the recent deal with Airbus, Bombardier hasn’t just ceded a majority stake of its crown jewel to its European competitor. The partnership also includes an option for Airbus to buy out Bombardier’s share in the C-Series after 7.5 years and the Quebec government’s share after 2023.
If that happened, would Canada go back to having an aerospace company that only makes small planes and has a reputation for being late on delivering trains?
The federal government has yet to approve the deal, and Ottawa has pledged to protect Canadian jobs before it does.
Under the current terms of the partnership announced Oct. 16, however, “there is a potential” for Bombardier to lose the C-Series, said William Mitchell, professor of strategic management at the University of Toronto’s Rotman School of Management.
Still, the partnership was likely a matter of survival for Bombardier and might still end up being a good deal for Canada’s aircraft maker if it builds a good working relationship with Airbus, Mitchell added.
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Bombardier could learn a lot from Airbus
Although Airbus could eventually buy up the entire C-Series, it might not want to, said Mitchell.
Making airplanes is a complex business with a big market, and “nobody has the skills to do it all themselves.”
Bombardier clearly had the skills to design a narrowbody aircraft with superior fuel efficiency, it also seems to have no problem assembling the planes, said Mitchell.
Airbus knows Bombardier can do that.
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Where Canada’s aircraft maker has fallen short over and over again and run into huge cost overruns is managing the supply chain, i.e. making sure all the plane parts are manufactured properly, within budget and delivered on time, said Mitchell.
That’s where Airbus will step in to help, according to the deal, in addition to lending a hand with sales, marketing and customer support.
In fact, Bombardier stands to learn a lot on global supply management from Airbus, according to Mitchell.
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Deal likely won’t end U.S. trade dispute but raises threat of lawsuits against Boeing in Europe
The other big advantage of the Bombardier-Airbus engagement, as has been widely reported, is that Airbus can assemble C-Series airplanes for American airlines at its Alabama plant. That will likely circumvent Boeing’s attempts to shut Bombardier out of the U.S. market.
To be clear, the deal won’t stop the trade dispute between Boeing and Bombardier in its tracks.
The partnership “doesn’t directly change the trade remedy case,” Matthew Kronby, partner at Bennett Jones in Toronto, told Global News.
Boeing itself was quick to note that on Tuesday.
But Kronby “strongly suspects” that establishing a second assembly line for the C-Series in the U.S. will allow Bombardier to sell its planes there, including those it has already promised to Delta Airlines.
If that were the case, it wouldn’t matter much if the U.S. moved to slap 300-per cent import duties on made-in-Canada C-Series airplanes. Quebec-made airplanes would be sold internationally, while the Alabama plant would serve U.S. customers.
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Not only that, but Bombardier’s partnership opens up Boeing to retaliatory lawsuits from Airbus in the European Union, Kronby added.
Europe’s aircraft maker could very well bring a “tit-for-tat remedy case against Boeing” that takes aim at the generous subsidies the American aerospace company receives from the U.S. government.
Boeing’s 737 aircraft is considered a direct competitor of the C-Series and Airbus could argue it faces unfair competition – just like Boeing did with Bombardier.
If Boeing was trying to kill the C-Series with the trade spat, “that may have backfired,” said Kronby.