Airbus-Bombardier CSeries deal means no tariffs on US-assembled aircraft, says CEO

Oct. 16, 2017, © Leeham Co.: The stunning Airbus-Bombardier partnership for the CSeries program guarantees the future of the new airplane, kills off the A319 and thrusts a big stick up Boeing’s tailpipe.

Boeing won big victories in its trade complaint filed with the US government, winning 300% tariffs on every CSeries imported into the US, throwing into doubt a big deal with Delta Air Lines for up to 125 aircraft.

US assembly line

The Airbus-Bombardier deal includes establishing a second CSeries assembly line at Airbus’ Mobile (AL) plant. Bombardier CEO Alain Bellemare is confident CSeries assembled there for delivery in the US will be duty-free.

This means Delta will have to reschedule its deliveries, if the US government doesn’t reverse preliminary findings on the duties or the US Court of International Trade or another venue doesn’t overturn the findings.

The news probably stunned Mobile officials, too. LNC was in Mobile last week; officials didn’t say anything about it then, and Airbus today told LNC that since this was a “material” announcement, they could not tell Mobile officials until the transaction was announced.

The transaction is scheduled to close in the second half of next year, after regulatory approvals.

Filling a gap

The deal fills a major gap in the Airbus product line: below 150 seats. Airbus CEO Tom Enders said there hasn’t been a sale of the A319, the 126-seat model, since 2012. The CS100 seats 100-110 passengers and the CS300 135-145 (and 160 in high density).

Enders declared that the CSeries presented no competition to Airbus because of the lack of sales for the A319.

Boeing, on the other hand, offers the 737-700, which will be phased out with the 737-7 MAX. Poor sales of the 7 MAX prompted a redesign, adding 12 seats. But the move hasn’t spurred sales.

The trade complaint Boeing filed with the US government asserted the CS100/300 will kill the 7 MAX and threaten the 737-8 MAX. The US government agreed, and levied the tariffs.

Alain Bellemare, CEO of Bombardier, firmly declared that any CSeries assembled at Mobile and delivered to a US airline or lessor will not be subject to tariffs.

With sales of the 7 MAX non-existent, and a duty-free CSeries available to US customers, Boeing has a huge product gap at the bottom end of its product line.

Boeing did not respond to an email seeking comment.

Boeing and Embraer have had several commercial agreements, though none for the E-Jets. It remains to be seen whether the Airbus-Bombardier deal will prompt something new between Boeing and Embraer.

67 Comments on “Airbus-Bombardier CSeries deal means no tariffs on US-assembled aircraft, says CEO

    • @Dave:
      “Time for Boeing to find a new CEO.”
      Especially interesting is the sharp contrast in mentality between Airbus vs Boeing towards competition fm the CSeries as this story indicated . Conversely, Boeing has been declaring the opposite to the Trump admin essentially saying <>.

      CSeries program won’t be threatening the bread & butter 320Neo fm Airbus’ PoV but it will for the bread & butter Max8 fm Boeing’s PoV?

      In any case and through their reactions, it’s pretty clear which of these 2 aerospace giants has a CEO with a more pragmatic, long-term global narrowbody product planning outlook….

      • I think Airbus recognizes that the CS300/CS500 gives them a chance to slide the A320.5 in as a 737-8 killer for small money, relieve them of the cost of developing the 319 neo, and provides the absolute perfect replacement for all the DC-9 derivatives that are quickly running out of life/economic viability.

        • There are over 2000 A319’s and 737-700′ flying at the moment that needs replacement, it could be a good start for the CS program.

  1. What a stunning deal! Boeing have screwed themselves with Delta, who in their right mind would go cap in hand to Trump to do that??

  2. Of course, there won’t be any tariffs. The fuselage and cockpit sections will be shipped in from Canada/China and the wings from Northern Ireland, engines from Connecticut, etc. — just like the A320. For US airlines, this is going to be an
    aircraft that will be manufactured in America and having no less US content than a 787.

  3. This is the best News I’ve heard in years and the best outcome for CS series.

  4. Below is an excerpt from Chapter 26 of the USITA Anti-Dumping Manual, which is titled “Scope and Anticircumvention Determinations”, which discusses “Merchandise Completed or Assembled in the United States”. I would be surprised if Boeing did not petition to have any final CVD and dumping duties that are assessed extended to aircraft assembled in Mobile (my principal residence is in Alabama by the way, I’m not opposed to anyone moving business here). The more parts that don’t come from Canada, the harder it will be for Boeing to be successful. Potential problems for Airbus include that the scopes so far have included partially assembled aircraft, and that the criteria for a circumvention finding include whether imports into the United States increased after the imposition of the order, and the nature of research and development undertaken in the United States. See the link after the excerpt for the full chapter.

    A. Merchandise Completed or Assembled in the United States

    Parts, components or subassemblies of the subject merchandise are not usually presumed to be included within the scope of an AD/CVD order unless the language of the order clearly specifies that they are. After an AD/CVD order is issued, respondents may begin to import parts or components of the subject merchandise for completion in the United States and sale to U.S. customers. Through a circumvention inquiry, those parts can be brought into the scope of an AD/CVD order if the Department finds that:
    • the completed merchandise being sold in the United States is the same “class or kind” as the merchandise subject to the order;
    • this merchandise is completed or assembled from parts produced in the foreign country subject to the AD/CVD order;
    • the process of assembly or completion in the United States is minor or insignificant; and,
    • the value of the parts or components is a significant portion of the total value of the merchandise.
    See Section 781(a)(1) of the Act and 19 CFR 351.225(g).

    In determining whether a process is “minor or insignificant,” the Department will consider the level of investment in the United States necessary to perform the completion or assembly, the nature of the research or development undertaken in the United States, the nature of the production process, the extent of U.S. production facilities, and whether or not the value of the processing performed in the United States represents a small proportion of the value of the merchandise sold. See Section 781(a)(2).

    The prerequisite for an affirmative circumvention finding is that the difference in value between the imported merchandise and the finished product must be small. When comparing the value of the imported parts to the total value of the merchandise, the Act does not establish a specific value-added percentage that constitutes “significant portion.” The legislative history denotes that Congress recognized that the facts of circumvention vary from case to case and intended that the Department employ wide discretion in these situations. See Ausimont USA, Inc. And Ausimont SPA, v. United States, 882 F. Supp. 1087, 1099 (CIT 1995).

    Finally, the Department will take into account the relevant patterns of trade, whether the U.S. assembler is affiliated with the foreign producer, and whether imports into the United States increased after the imposition of the order. See Section 781(a)(3) and 19 CFR 351.225; see also Initiation of Anticircumvention Inquiry on Antidumping and Countervailing Duty Orders on Hot-Rolled and Bismuth Carbon Steel Products from the United Kingdom and Germany, 62 FR 34213 (June 25, 1997); Granular Polytetrafluoroethylene Resin From Italy; Final Affirmative Determination of Circumvention of Antidumping Duty Order, 58 FR 26100 (April 30, 1993).

      • Definitely a lawyer. Trump is definitely not a lawyer. He will not want to explain how taxing ALABAMA is America first to those very good people over there. This is when their ideology crashes, when it affects their own pockets. Watch them quietly find a way to sweep it under the rug like it never happened.

        Boeing got jumbo played. But don’t worry, Tru,p will comp them with fat military and airfare one contracts at ridiculous margins. Just don’t call these government subsidy. It’s just taxpayer money wrapped around the flag.

    • I would suspect very strongly that before Airbus invested in Mobile AL, they got all kinds of written assurances about what is considered a US domestic produced Airbus Aircraft. With such assurances and agreements in place, there is NO WAY a tariff can be applied to them

    • CSeries already has 55% of its parts sourced from the USA before this deal. Now it will be built in the USA bringing in even more money (probably 2B investment in assembly line) and lots of NEW jobs. This plane will be more american than the 787. And I’d love to compute the 737 US content (the 737 and its LEAP engines). The CSeries engines are 100% Pratt innovation, all American, not European LEAP engines. So, would they tax the CSeries and leave the Mobile A320 alone? That would make no sense as the CSeries is more American than the A320. So, would Boeing tax both and kick them out of the US market? Oh boy, good luck with that. Boeing is screwed any way you look at it. But sure, papa Trump could change the rules again, why not. It’s not like aerospace is a capitalist market. Next step: now that we’ve established (thank you Boeing) that the CSeries and the 737 are competitors, I hope Canada calculates every nickel and dime of Boeing subsidies so that we tack that onto the price of every 737 entering Canada. Let’s see if Trudeau still has his boxing gloves.

      • You are wrong about the GTF engines being ‘all american’ P&W has worked with its partners MTU from Germany, Avio from Italy and a Japanese consortium to develop and build various sections.

      • “The CSeries engines are 100% Pratt innovation, all American, not European LEAP engines.”

        “all American” ?
        Look at the partnership structure of Pratt respective IAE

    • But another twist
      “Best of all, thanks to reciprocal treaties, the US can’t impose tariffs on Airbus products while the EU can’t do the same to Boeing products. ”
      -Airways mag

    • I agree with AP_Robert but for different reasons. Boeing have nowhere to go so they will need to take the protectionist route. They have chwnce given what I’ve read through LNC and others with regard to US law. They shouldn’t have a chance but they do!

      History shows that protectionism only delays judgement day. The world is surrounding Boeing to the point at which Airbus are in its backyard. Boeing should think of Darwin, evolve or perish

      • Boeing should think of Darwin, evolve or perish

        They will work on improving the nasty/sneaky vector of their strategies. The established method is doubling up on a failed strategy expecting some surmounting trigger level to be reached.

        • Engineering is the last resort, but sooner or later they will run out of legal options or it will dawn on them that it’s what they are founded on.

    • Boeing imports quite a bit of the 787 from abroad – they would be axing themselves in the foot, again.

  5. In a strange way this is a win for Boeing. This deal almost certainly ensures that the C Series will not be developed beyond the CS300. I think Boeing’s big fear was competition from an expanded CSeries family that would compete directly with their products. This deal also means that Boeing won’t be competing with two companies but just one i.e. it maintains the status quo. In this sense Boeing’s trade complaint gambit paid off.

    For Airbus, for the relatively small price of building a final assembly line they are getting control of the program ensuring that the CSeries will not be developed into larger versions that directly compete with the A320

    Another winner is Donald Trump. Thanks to his bullying Mobile Alabama is about to get a lots of jobs transferred from Canada. When the official groundbreaking takes place I bet Trump will be on hand to take credit.

    As a Canadian I think this stinks.

    • I wouldnt count on the CSeries not going beyond the CS300. After all Airbus could have in its plans a new wing for the A320 series which is optimised for the A321 and a stretched derivative. The CS500 ( say 160-190 seats) fills in the gap between that plane and the CS300 (135-145 seats)

      • After all Delta are flying 3 class MD90s with 160 seats which would suit a future Cs500 just nicely

      • A320 margins are determined by 737-8 prices. A CS500 would command far better pricing than either of those two. Airbus’s 50pc in a future CS500 might bring in more profit than an A320 does. Replacing the A320 with a CS derivative allows Airbus to optomize future A320 developments on the A321/etc. As I posted before, both 737 and MOM are threatened. Boeing will no doubt try any legal trick they can find to stop this, but I’m guessing CS must be over 50pc US once it is assembled in the US.

        • Even before being assembled in the US the C Series had 55% US content so it was outrageous that the Trump administration would impose a 300% tariff on a product that employs 22,000 US workers in 11 states (including swing states won by Trump)

    • As a Canadian I am glad to see professional management coming to rescue an aircraft that deserves to succeed and, hopefully, an end to the Beaudoin family’s access to the federal piggy bank.

    • Bombardier had no money for a CS500. So, it would never have made it onto the market in time to gain traction ahead of a new single-aisle design that Boeing was probably planning for mid-end 2020s. Well, now Boeing has no choice but to move that date forward now. BY THEIR OWN FAULT! The CSeries had so many chances of stumbling on any rock. Bombardier is still struggling to deliver 30 planes this year. Delivered 7 last year. Maybe 45 next year (well, not anymore)? Boeing could’ve let them struggle for 5 years before maybe reaching 100 planes per year (and all bets were still off on that one) and by then, we’d be in year 2022. But now, with Boeing’s excellent management, they forced Bombardier to sell the CSeries to Boeing’s biggest competitor. Airbus won’t get nibbled from below anymore. No more disruptive technology issues (disruptive in the TRUE Harvard Business School Clayton Christensen definition). Now only that, but Airbus plugged every hole from 100 to 200+ seats in the single aisle. And Boeing’s actions made a SECOND assembly line come online for the CSeries (something that would NEVER have happened had they let BBD suffer its growing pains). And parts will now be ordered at a discount (thank you Airbus). Expect CSeries parts costs to dramatically reduce. So, we were talking about the CS500, sorry. CS500 could see the light of day for commonality reasons. Example: some airlines might want a full CSeries suite. Surely Airbus will calculate very closely. Some might go all-CSeries and tack on a CS500. Others might go A320 and up and leave CSeries completely out. In the end, an A320 (6 abreast) operator won’t switch to a CS500 (5 abreast) if they already own A320/A321 and other common planes. But AirBaltic and others might be interested in the CS500. But if Airbus calculate any cannibalization, they won’t do it, for sure. It would be interesting to see what LH or Swiss would do (A320 vs CS500). But I see a CS500 as having more chances of seeing the light of day now than yesterday. There was just no money for it yesterday. If China bought the CSeries then, yes, CS500 and CS700 would be prioritized for tomorrow. But now, it’s up to the Airbus number crunchers. And that’s fine. Better have 50% of lots of money than 100% of nothing.

    • @Kevin:
      “This deal almost certainly ensures that the C Series will not be developed beyond the CS300.”
      I won’t be so certain especially beyond the 2022~23 timeframe when CSeries program would hv generated 8yrs worth of cashflow fm deliveries. It’s also around those yrs when 320Neo(not 321Neo) backlog start to taper off more significantly. Plenty of time fm now till then for Airbus to ask existing 320 customers whether they want simply more of the same 320Neo or switch to a hypothetical but quick to develop CS5 for future needs beyond 2023.

      “…Boeing won’t be competing with two companies but just one i.e. it maintains the status quo.”
      True. However, the remaining competitor suddenly has 2 weapon families to fight against the 737Max family in every narrowbody sales campaign/battlefield worldwide…..that’s no way a “status quo” at all.

      “In this sense Boeing’s trade complaint gambit paid off.”
      In another sense, the “paid off” for Boeing will be:
      Before this tariff case=
      CSeries wasn’t even on the negotiation table during so many narrowbody sales campaign worldwide.
      After this tariff case=
      John Leahy’s global army of sales will walk into almost every sales meeting with customers bringing along 2 narrowbody product lines.

      “Mobile Alabama is about to get a lots of jobs transferred from Canada.”
      Partially agree. Some of the new jobs re CSeries program to be created in the future will be but the existing ones won’t be affected. In fact, if Airbus is successful in selling more CSeries worldwide(e.g. U.S. mkt penetration due to duty-free status) than currently projected by BBD, more CSeries jobs in Canada must be created to support the increased volume regardless of what happen @ the Airbus Alabama assembly line.

      “As a Canadian I think this stinks.”
      Also as a Canadian & a global citizen, I think this won’t be a zero sum game in terms of CSeries program jobs Quebec vs Alabama. Contrary to popular belief(i.e. whom hv no idea what does made in Canada/U.S. actually mean these days in the context of a globalized supply chain), a win-win scenario is possible…..well, except for the folks @ Boeing Renton.

      I mean just imagine the alternative outcome if:
      – Airbus decide NOT to invest in CSeries and no U.S. assembly line.
      – DL order for upto 125 frames(equivalent to 1/3 of the entire backlog) vanished due to insane tariff.
      – No future prospect to realistically sell/export any CSeries in the large U.S. mkt.

      As a result of the above:
      – Massive CSeries job cuts in Canada will occur anyway.
      – U.S. customers interested in CSeries will hv no choice but to buy more Max instead and then Boeing must add more U.S. jobs @ Renton anyway.

      Feel free to decide which outcome is actually less stinky….

    • @Kevin: I read some interesting views on AirwaysMag coverage of this story by Vinay Bhaskara: re-engined versions of the CS100, CS300 and a potential stretched CS500 could become the eventual replacements for the A320neo family – instead of Airbus having to worry about building a NSA, they can now focus investment in a MOM family with an A321-sized aircraft as the base model.

      • I am hoping that it will go somewhere in this directions as well. We will have to see what Airbus really hopes to gain from this manoeuver. Seeing as they plan on opening a second assembly line, I would say that it looks good.
        I think we will need more details on who makes the decisions and how are they made. i.e. Do both companies need to agree on closing an assembly line in the future? Do both companies need to agree if a future variant is developed? Who has overall control and ownership of the design? Does this stay stable for this 7 year period or does it all change after that?

    • The C500 must be on the cards, it gifts Airbus a market leader and allows the A321 to be invested in to make it more of a NMA. I am not sure where Boeing will go, it now needs both NSA and NMA. So at present where is Boeing?

      It has the existing 777 cash cow disappearing, it has a one trick pony in the MAX 8 in the NB, it has 787 paying back its debt and it has 777x suffering from ME3 jitters.

      How could Boeing senior management be so dumb, the Cseries was either going to Comac and giving them a massive technological fillip or as we have seen, to Airbus. It wasn’t going to disappear.

      Airbus must be laughing their socks off, as with so many great strategic wins it has come about by a dumb move from the opposition

  6. Excellent news! Airbus has more comfortable planes nowadays and covers the entire spectrum from 100 to 600 pax. This could help airlines move to an all-Airbus fleet.

    This should help kill off the entire 737 MAX and give it a long-overdue funeral (and earlier than Boeing had planned for, LOL), and good riddance to the 737’s fuselage design from 1956/1957!

    The only problem is that Boeing will be forced to deploy the 797 (a.k.a. “Y1”) in a hurried manner. The 797 would replace the 737 + 757 + 767, but obviously be optimized for the mid-range of the above pax count (roughly that of the 757-200). It follows that the shortened 797 (let’s call it the 797-100) would have very crappy performance (with the exception of excellent field performance), whereas the 797-200 and 797-300 would have between excellent overall and very good overall performance.

  7. I’d say in similar density:
    CS 300 135 seats
    737-7 150 seats, 3m stretch of CS
    A320 162 seats, 5m stretch of CS
    737-8 174 seats, 8m stretch of CS
    I see them doing a CS 500 4m stretch, which will be the gold standard for a 3 class 150 seat aircraft. I think Southwest still may take a few hundred 737-7, unless flying 737-8 with 50 seats empty is cheaper for some reason. The A320 will still be a relevant high density option. The CS can’t be stretched enough to impact the 737-8.

  8. Actually I could see them doing the CS500 and this would kind of take over the lower end of the A319/A320 and the new benchmark for the current A320 would be the A321 with a new wing and a slight stretch of the current A321. With the CS series, Airbus gets a completely new aircraft for this segment (rather than developing a totally new aircraft of which Boeing needs to do to replace the B737). In any case, Boeing loses forces them to accelerate the B737 replacement.

    • Why do you think Scott puts up with all our nonsense? Mass brain storming.

  9. I have a sad feeling this is the end of Bombardier as an aerospace company . According to the deal Airbus has the option to buy out Bombardier’s share in 7 1/2 years. Unlikely Bombardier will ever develop another aircraft program. What’s next? will they sell off the Q400 and the Downsview plant? And if that happens what about the Global jets that are built at Downsview. Is that program on the auction block as well?

    • They are probably done in commercial aerospace in the long run. Canada does not have the political clout to support such a business. BBD aerospace I suspect will be an aerostructures company and biz jet manufacturer. But I think in the longer run the biz jets will also go as you really cannot fund only biz jets without commercial to subsidize the development. Its been a long time since BBD made money on commercial planes. They will get some of the money they spend on Cseries back and probably sell or shut down Q and CRJ.

      • Gulfstream does Ok on doing biz-jets without a commercial arm. They now have 2 different fuselage sizes for the larger type with the ending of production of the G3/4/5 series plus the smaller G280 ( and out of production G150). Dassault of course do well with their business jet line.

  10. I hope that this deal doesn’t go through, and the Canadian government takes Bombardier through a pre-packaged bankruptcy-restructuring….after which they eliminate the two families (Cosa Nostra!) voting majority. Such a strategic conglomerate has should long ago have been forced into professional management as a condition to the state assistance it’s been receiving. While it’s early days (hours) for the deal and the details need to be digested, it seems counter-intuitive to me that Airbus would want to maximise the potential of the Cseries platform at the expense of its sunk costs in the A320 programme, and seems to be incentivised NOT to do so in the next 7.5 years so as not to “overpay” for its options. Surely it would have been better to entice UTC into a strategic JV in the CSLAP. Little Pierre, and Canada’s crony political-economy have done great damage.

  11. 5am and I’m wide awake… Hooray… Because this is wide-awake stuff.

    This is what I had predicted and wished for. An eventual ‘pre-built and designed’ optimized and modern A318/319 replacement (for pennies) leaving airbus to focus on 320/321/322/nma.

    Bring the cs100/300 into the airbus Family and FBW/cockpit system in time (if needed). Ahhh… A sweet day… And two-fingers to BBB (big-baby-belong).

  12. Just returned from the States.

    Wish I was there a few days longer when this news broke.

    Absolutely brilliant!!!!

  13. The CSeries will probably be the 1st ever Trans-Atlantic commercial aircraft program in existence….well sort-of(because the program was developed before it became Trans-Altantic).

    • Not really, Canadair previously built its own version of the Bristol Britannia-
      CL44 Yukon- with a better engine the RR Tyne. And before that they did a version of the DC4 with Merlin engines.
      The Yukon was supposed to be bought by USAF Air transport service in exchange for Canada buying the Voodoo fighter- after scrapping its own Arrow. The USAF already had the KC135 tanker so preferred the cargo version in-spite of the extra ordinary range of the CL44.

  14. I Ned to toot my own horn a little for repeatedly suggesting Bombardier build a US FAL. I even wrote that they could do a deal to make it happen, but I thought Delta. This is even way better.

  15. Suddenly Dubai could be interesting, maybe a CS300 and A350 doing a flypast together…..

    • Ding-dong the witch is dead… what old witch… that old witch. Great when bullies get their comeuppances… He he.

  16. I don’t expect any future narrowbody announcements from Airbus until this partnership is finalized and granted by the antitrust authorities.

    But I guess that Airbus will internally work on an rewinged version of the A320 line with the sweetspot close to the A321 NEO LR.
    This would allow to build three optimized aircrafts, for the largest segment of the commercial aircraft market:
    -A CS500 only capable for short range, but more efficient than anything else
    -A slightly stretched A320 optimized for mid range
    -A streched A321 optimized for the lower part of the MOM market

    I expect a very interessting Farnborough Air Show 2018.

    Furthermore I expect that Airbus will immediateley start the works on buildings for a second assembly line in Mobile. And they will hire more wokers there soon, they will learn all the general skills on the existing A320 line, which will allow a fast C-Series ramp up when the deal is finalized.

  17. One thing i can count on, is a professional unbiased opinion on topics discussed on this site.
    At least i thought so…..thrusting a big stick up someone’s tailpipe.
    C’mon ,show a little more class. .
    Look i think it’s completely unmerited on boeings part ,but to add a childish remark like that.
    GROW UP.!!

    • I think you’re being a bit sensitive about the analogy.
      But hey, it’s a free country!

  18. Vive la différence ! Long life to competition between A+B & B !
    The 737 days are numbered, wake up Boeing !

    • All AB need is to wait for Boeing’s MoM….., and take them to the cleaners with a 787 “killer”.

  19. How to sum this?

    Seattle punts the CSeries all the way into the open arms of Toulouse.


  20. Ironic, how the estranged orphan no one wanted as quoted by sir John should suddenly find a home there..
    Hmm..everything’s coming out smelling like roses for ab now.
    Now you must convince shareholders it was a wise move as well..
    Lackluster orders at best,planes spending more time on the ground than in the air,engine issues that seemingly never going away..
    Business decisions based on spite rarely come out well.
    Who knows what will become out of this ..
    Find it very entertaining. ..

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