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Airbus Deal: Is Bombardier Really Sold On the Merit of the CSeries?

Airbus Deal: Is Bombardier Really Sold On the Merit of the CSeries?

Just a little over two years ago, we reacted to media reports suggesting that had held secret talks with in order to give them a major stake in their all-new program. The title of the article was: Is Bombardier Fully Sold On the Merit of the CSeries?

At that time, the Montreal-based manufacturer was struggling to complete and certify the aircraft. Since then, it was a different story. The aircraft did get certified and successfully entered revenue service with SWISS and Air Baltic as launch customers.

Then followed what was announced and celebrated as a major sales to Delta Air Lines with a firm order for 75 aircraft. That deal was seconded by another large order from the Canadian flag carrier, Air Canada for 45 units.

As of today, the aircraft has clearly proven its superiority in the marketplace as we have been saying, especially at a time when the vast majority of media and industry analysts were suggesting that the CSeries program was a huge mistake for Bombardier to have ventured to initiate.

Against all odds, the Canadian manufacturer has effectively turned the tides as we thought it would. And everybody loves the aircraft. It is the uniquely advanced design in aircraft technology within its category.

So, following the recent announcement of a major partnership deal with Airbus with 50.01% stake in the CSeries, there are some important questions worth asking. And the first one is no different than what we have asked two years ago. Is Bombardier fully sold on the merit of the CSeries?

The second question is as follows. Why is Bombardier so keen on giving away or rather “getting rid” of its best aerospace product ever?

Was the pressure from Boeing with regards to imposing unreasonable tariffs on US import of the aircraft not a good sign that the CSeries is a definite winner, worth keeping and fighting for?

About two years ago and following the failure to reaching a similar agreement with its European competitor, John Leahy, the Chief salesman of Airbus was reported to have said that “Bombardier was ready to give the CSeries to Airbus for a song”. That was certainly a huge mistake at that time as far as we are concerned. Now that the aircraft has effectively convinced the market of its superiority, why is Bombardier ready to give it away for free, not even for a song? Based on the details of the agreement, Airbus in not going to invest any cash into the program, instead it is Bombardier that will keep on pumping money in to support the deal.

This so-called win-win partnership deal with Airbus, appears more to be yet another terrible strategic move on the part of Bombardier. On the one hand, it is not even sure yet that this arrangement will prove successful in containing the open hostility of Boeing toward the game-changing aircraft, which is a genuine signature of Quebec’s ingenuity. On the other hand, it does not seem to be an appropriate solution for the alleged under-pricing of the CSeries, particularly in the Delta deal, which has dried all prospects for other significant sales for more than a year. Why? Because having Airbus sell the aircraft may still not convince other airlines to buy it at a price much higher than what Delta reportedly got theirs for.

This Airbus-Bombardier deal certainly is open for much scrutiny. However, we will conclude this article with the following two questions:

  1. Why didn’t Bombardier opt for a marketing and sales arrangement with Airbus or even Boeing or some other partner instead of giving away its best product for free?
  2. Why give a majority stake to Airbus, especially at this point in time and not even for a song?

It was obvious long ago that the CSeries is the future of Bombardier, especially knowing that the regional aircraft market has become much crowded. Given that Airbus could take over the entire program a few years from now, one may very well wonder what the future holds for the Montreal-based aircraft maker.

 

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Kofi Sonokpon

Kofi Sonokpon

Managing Editor of Airline Profits, the first aviation magazine devoted to improving airline effectiveness and profitability, Kofi Sonokpon has more than 20 years of international experience in aviation. Kofi holds an IATA sponsored Master of Business Administration (MBA) in Air Transport Management from the John Molson School of Business at Concordia University in Montreal. Kofi Sonokpon is a speaker, an airline business thought-leader, and author an innovative book series intended for the 21st century airline, namely Airlines for Business and Airlines for Technology.