Canada's Bombardier Inc. announced on Monday it has sold a majority stake in its CSeries passenger jet business to European aerospace giant Airbus for no cost. The move comes after lackluster sales and after the U.S. Commerce Department imposed harsh duties on Bombardier, charging the Montreal-based company is selling the CSeries planes in the U.S. below cost and receiving government subsidies.
The US Commerce Department recently announced it would impose an 80% duty on top of duties of nearly 220%. The case has been a win for U.S.-based rival Boeing. The Seattle based company has said it didn't move early enough against Airbus subsidies in the 1970s. Airbus is now is a global giant.
The move by Bombardier could possibly circumvent duties being imposed on the CSeries. The CSeries headquarters will remain in the Montreal area, but a second assembly line for the 100- to 150-seat plane will be set up at Airbus's facility in Mobile, Ala., so the plane can be sold in the United States.
Airbus chief executive officer Tom Enders said an aircraft produced at a U.S. Airbus facility would not be subject to duties under the pending U.S. investigation.
Enders said the acquisition extends the company's product offering into the fast-growing 100- to 150-seat market sector. The current Airbus A320, a rival for the CSeries, is for 180 passengers or more and Airbus hasn't sold an A320 in three years.
Enders said some airlines have been reluctant to purchase Bombardier's plane because of doubts the program would continue. It has been hurt by lackluster sales and was bailed out by Quebec and the federal government.
Some customers will be convinced it will be a great product and it is here to stay, Enders said, who revealed the talks started in August and were not motivated by what competitors are doing.
He rejected a deal to acquire it three years ago, but said circumstances have changed, saying the plane is now certified and receiving rave reviews. Airbus is not assuming any debt as part of the deal.
Bombardier chief executive officer Alain Bellemare said having Airbus as a strategic partner increases confidence that the aircraft is here to stay. He said they'll secure more orders and double the value of the program. By securing the U.S. market you end up securing the program, he said.
Airbus will acquire a 50.01 per cent interest in the CSeries Aircraft Limited Partnership, which manufactures and sells the plane. Bombardier will own 31% and the Quebec government's investment agency will hold 19%.