Bombardier surges on Airbus deal

Shares in Bombardier surged after the company ceded control of its slow-selling C Series jet programme to Airbus.

The deal improves the chances that the all-new single-aisle aircraft will catch on with airlines worldwide, backed by Airbus’s marketing muscle.

Bombardier hasn’t landed a major order since April 2016 and the plane absorbed a new blow in recent weeks when the US commerce department slapped it with 300% tariffs after a complaint by Boeing.

That move put into question at least 1,000 jobs in Belfast where parts for C Series jets are manufactured. The Canadian plane maker employs a total of 4,000 people at its Belfast operations and it remains unclear what the long-term implications of the Airbus tie-up will be.

“The value associated with the reduced stake is likely much higher,” Fadi Chamoun, a BMO Capital Markets analyst, said in a note to clients.

“For Bombardier, the deal reduces risk and opens up the opportunity for the programme to achieve commercial success that would have been nearly impossible to contemplate otherwise.”

Airbus’s control of the C Series boosts the jetliner’s viability after over $6bn (€5.1bn) in development costs drained Bombardier’s cash and forced the Montreal-based manufacturer to rely on government assistance.

The deal gives Airbus a smaller narrow-body aircraft fitting below its own A320-series models and competing with the smallest variants of Boeing’s workhorse 737.

Bombardier’s widely traded Class B shares had climbed 25% in Toronto trade at one stage. The company’s $1.25bn of 6.125% due in January 2023 surged. Shares in Airbus, based in Toulouse, climbed 4.8%. Boeing fell less than 1% at one stage.

Following Boeing’s complaint to the US that Bombardier sold at least 75 of its C Series jets to Delta Air Lines for “absurdly low prices”, the Trump administration imposed the import duties in recent weeks — roiling US relations with Canada and the UK.

Airbus believes it can get around the tariffs by locating some production of the C Series at Alabama factory, said Patrick de Castelbajac, Airbus’s strategy chief. The plane would also continue to be built in Canada. “The aircraft would be manufactured on US soil,” he said.

Under the deal, Airbus will acquire a 50.01% stake in the single-aisle plane platform. The Canadian firm will own 31% while the province of Quebec, an investor in the C Series, will hold 19%. None of the partners will contribute any cash when the deal closes.

Bloomberg and Irish Examiner


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