Tim Hepher -
Two years ago, Airbus Chief Executive Tom Enders halted negotiations to buy Canada’s CSeries programme at midnight after the talks with Bombardier leaked.
On Tuesday, he performed a U-turn by backing a similar deal after all — again at dead of night.
The nocturnal gymnastics by Europe’s largest aerospace group stunned the aircraft industry which had been riveted for weeks by a trade dispute between Boeing and Bombardier that threatened to hit the CSeries with large US import fees.
Now, the 110-130-seat jet will be built for US airlines at Airbus’s Alabama assembly plant, circumventing any import penalties in a move that apparently caught Boeing off guard.
Analysts say that potentially turns the CSeries from an attack on US jobs, as portrayed in Boeing’s complaint, to a job creator in a key Republican state, though Boeing termed the move a “questionable deal” between two of its subsidised competitors.
The deal also signals the end of Airbus efforts to promote the A319, its smallest jet which has not posted a sale in years.
“The stunning Airbus-Bombardier partnership for the CSeries programme guarantees the future of the new airplane, kills off the A319 and thrusts a big stick up Boeing’s tailpipe,” Leeham Co analyst Scott Hamilton wrote.
Strategically, however, the move extends well beyond the noise of Boeing’s spat with Bombardier and could trigger a riposte from other planemakers, including Boeing itself.
Commercial aerospace has four main powers dominated by Airbus and Boeing, which share the market above 150 seats.
Brazil’s Embraer and Canada’s Bombardier compete between 100 and 150 seats as well as in the market for smaller regional jets.
But China and Russia lead a field of new entrants vying to break into the $125 billion a year commercial market, along with smaller regional players such as Japan.
Tuesday’s deal starts to rearrange the deck in a move that many have been expecting since former Airbus head Louis Gallois warned six years ago that the market was getting too crowded.
In particular, it could drive Boeing closer to Embraer, with which it already cooperates.
Embraer’s E2 jet is one of the main potential losers from the CSeries deal.
“The world has two top-tier airframers, and two second-tier airframers,” said Teal Group analyst Richard Aboulafia.
“Airbus and Bombardier are now allies.
This greatly increases the likelihood of a stronger Boeing-Embraer alliance as a response.”
Such a move has long been contemplated in private.
The CSeries benefits from a new type of efficient engine.
Its launch in 2008 eventually prompted Airbus to put the same generation of engine on its own A320 to protect its main profit source.
That in turn forced Boeing to dump plans for an all-new single-aisle plane in 2011 and opt for a makeover of its best-selling 737 with similar engines, to be known as 737 MAX.
But sitting in Boeing’s filing cabinets are designs for an all-new jet that would have involved intense collaboration with Embraer, according to two people familiar with the project.
A template for closer co-operation therefore already exists.
Boeing and Embraer declined to comment.
The two companies already work on projects including runway safety and alternative jet fuels.
Their partnership has intensified in recent years to include Boeing’s commitment to joint sales and support of Embraer’s KC-390 military aircraft.
The Airbus-Bombardier deal also marks a pause in strategic advances made by China, widely seen as the most serious future competitor to Airbus and Boeing.
Debt-laden Bombardier had been in talks with China as it waited for Airbus to come around to the CSeries.
“China has missed out on a huge opportunity to advance its aims by not getting the CSeries,” an industry strategist said.
The deal also has potentially far-reaching consequences for product strategy and technology at Airbus and Boeing.— Reuters
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