Airbus buys majority stake in CSeries–details to come

Press Release

Airbus and Bombardier Announce C Series Partnership
 Airbus to acquire majority stake in the C Series Aircraft Limited Partnership
 Partnership brings together two complementary product lines, with 100-150 seat
market segment expected to represent more than 6,000 new aircraft over the next 20
years
 Combination of Airbus’ global reach and scale with Bombardier’s newest aircraft family
to create significant value for customers, suppliers, employees and shareholders
 Significant C Series production costs savings anticipated by leveraging Airbus’ supply
chain expertise
 Commitment to Québec: C Series Aircraft Limited Partnership headquarters and
primary assembly to remain in Québec, with the support of both companies’ global
supply chains
 Airbus’ global industrial footprint expands with the C Series Final Assembly Line in
Canada, resulting in a positive impact on operations in Québec and across the country
 Growing market for C Series results in second Final Assembly Line in Mobile,
Alabama, serving U.S. customers.


Amsterdam / Montreal, 16 October 2017 – Airbus SE (EPA: AIR) and Bombardier Inc.
(TSX: BBD.B) are to become partners on the C Series aircraft programme. A corresponding
agreement was signed today. The agreement brings together Airbus’ global reach and scale
with Bombardier’s newest, state-of-the-art jet aircraft family, positioning both partners to fully
unlock the value of the C Series platform and create significant new value for customers,
suppliers, employees and shareholders.

Under the agreement, Airbus will provide procurement, sales and marketing, and customer
support expertise to the C Series Aircraft Limited Partnership (CSALP), the entity that
manufactures and sells the C Series. At closing, Airbus will acquire a 50.01% interest in
CSALP. Bombardier and Investissement Québec (IQ) will own approximately 31% and 19%
respectively.

CSALP’s headquarters and primary assembly line and related functions will remain in
Québec, with the support of Airbus’ global reach and scale. Airbus’ global industrial footprint
will expand with the Final Assembly Line in Canada and additional C Series production at
Airbus’ manufacturing site in Alabama, U.S. This strengthening of the programme and global
cooperation will have positive effects on Québec and Canadian aerospace operations.
The single aisle market is a key growth driver, representing 70% of the expected global
future demand for aircraft. Ranging from 100 to 150 seats, the C Series is highly
complementary to Airbus’ existing single aisle aircraft portfolio, which focuses on the higher
end of the single-aisle business (150-240 seats). The world class sales, marketing and
support networks that Airbus brings into the venture are expected to strengthen and
accelerate the C Series’ commercial momentum. Additionally, Airbus’ supply chain expertise
is expected to generate significant C Series production cost savings.

Airbus is strongly committed to Canada and its aerospace sector with Canadian suppliers
extending their access to Airbus’ global supply chain. This new C Series partnership is set to
secure jobs in Canada for many years to come.

“This is a win-win for everybody! The C Series, with its state-of-the-art design and great
economics, is a great fit with our existing single-aisle aircraft family and rapidly extends our
product offering into a fast growing market sector. I have no doubt that our partnership with
Bombardier will boost sales and the value of this programme tremendously,” said Airbus
Chief Executive Officer Tom Enders. “Not only will this partnership secure the C Series and
its industrial operations in Canada, the U.K. and China, but we also bring new jobs to the
U.S. Airbus will benefit from strengthening its product portfolio in the high-volume single-aisle
market, offering superior value to our airline customers worldwide.”

“We are very pleased to welcome Airbus to the C Series programme,” said Alain Bellemare,
President and Chief Executive Officer of Bombardier Inc. “Airbus is the perfect partner for CSeries, Québec and Canada. Their global scale, strong customer relationships and operational expertise are key ingredients for unleashing the full value of the C Series.

This partnership should more than double the value of the C Series programme and ensures our remarkable
game-changing aircraft realizes its full potential.”

“The arrival of Airbus as a strategic partner today will ensure the sustainability and growth of
the C Series programme, as well as consolidating the entire Québec aerospace cluster. In
the current context, the partnership with Airbus is, for us, the best solution to ensure the
maintenance and creation of jobs in this strategic sector of the Québec economy,” said
Québec’s Deputy Prime Minister, Minister of Economy, Science and Innovation and Minister
responsible for Digital Strategy, Dominique Anglade.

Ownership Structure and Agreement Highlights
The C Series programme is operated by CSALP in respect of which Bombardier and IQ
respectively hold approximately a 62% and a 38% interest. The Investment Agreement
contemplates Airbus acquiring a 50.01% interest in CSALP. Airbus will enter into commercial
agreements relating to (i) sales and marketing support services for the C Series, (ii)
management of procurement, which will include leading negotiations to improve CSALP level
supplier agreements, and (iii) customer support. At closing, there will be no cash contribution
by any of the partners, nor will CSALP assume any financial debt. It also contemplates that
Bombardier will continue with its current funding plan of CSALP and will fund, if required, the
cash shortfalls of CSALP during the first year following the closing up to a maximum amount
of US$350 million, and during the second and third years following the closing up to a
maximum aggregate amount of US$350 million over both years, in consideration for nonvoting
participating shares of CSALP with cumulative annual dividends of 2%, with any
excess shortfall during such periods to be shared proportionately amongst Class A
shareholders.

Airbus will benefit from call rights in respect of all of Bombardier’s interest in CSALP at fair
market value, with the amount for non-voting participating shares used by Bombardier
capped at the invested amount plus accrued but unpaid dividends, including a call right
exercisable no earlier than 7.5 years following the closing, except in the event of certain changes in the control of Bombardier, in which case the right is accelerated.

Bombardier will benefit from a corresponding put right whereby it could require that Airbus acquire its interest
at fair market value after the expiry of the same period. IQ’s interest is redeemable at fair
market value by CSALP, under certain conditions, starting in 2023. IQ will also benefit from
tag along rights in connection with a sale by Bombardier of its interest in the partnership.
The Board of Directors of CSALP will initially consist of seven directors, four of whom will be
proposed by Airbus, two of whom will be proposed by Bombardier, and one of whom will be
proposed by IQ. Airbus will be entitled to name the Chairman of CSALP.

Subject to obtaining the required approval from the Toronto Stock Exchange, the transaction
also provides for the issuance to Airbus, upon closing, of warrants exercisable to acquire up
to 100,000,000 Class B Shares (subordinate voting) of Bombardier (representing
approximately 5% of the aggregate issued and outstanding Class A Shares (multiple voting)
and Class B Shares of Bombardier on a fully-diluted basis, and approximately 5% of the
aggregate issued and outstanding Class A Shares and Class B Shares on a non-diluted
basis), at an exercise price per share equal to the US$ equivalent of C$2.29, which
represents the volume-weighted average price of the Class B Shares over the five trading
days ending Friday, 13 October 2017. The warrants will have a five-year term from the date
of issue, will not be listed and will provide for market standard adjustment provisions,
including in the event of corporate changes, stock splits, non-cash dividends, distributions of
rights, options or warrants to all or substantially all shareholders or consolidations.

The issuance of the warrants and their terms were negotiated between Bombardier and
Airbus at arm’s length and will not materially affect control of Bombardier. Security holder
approval will be required under Toronto Stock Exchange rules due to the fact that the
warrants will be issued later than 45 days from the date upon which the exercise price was
established. Such approval is expected to be obtained by way of written consent of
shareholders holding more than 50% of the voting rights attached to all of Bombardier’s issued and outstanding shares.

60 Comments on “Airbus buys majority stake in CSeries–details to come

  1. Wow, just wow. The implications are huge.

    Any chance of sorting the formatting out? It’s quite hard to read the way it is now. Thanks!

    • reverse it.

      US admin in lockstep with Boeing tried to fend that off via “making it expensive”. ( indication : the rather crass way used as MoO. Wonder how that works out now.

      But interesting that this did create no indicator waves beyond what the snoops have access to and that made the US react.

  2. So…. if Final Assembly shows up in Mobile, how does the DoC deal with that?

  3. Game, set and match — Airbus

    50.01 percent controlling interest and additional CSeries FAL in Mobile — and an enormous amount of goodwill gained in Canada and the UK. Perhaps, Canada will be invited to join the new Franco-German fighter jet programme. This is a massive loss for Boeing and American aerospace.

    No wonder why Delta Airlines believe they won’t be paying that 300 percent tariff. LOL!

    • A fair amount of gloating there – that said, it’s well-deserved gloating, considering how pretty much anybody who wasn’t Boeing or the DoC thought that Boeing’s claim didn’t have much merit, and that the imposed tariffs (and implicit protectionist agenda behind them) were ridiculous and counter-productive for the US’s competitiveness. Just like they were in Russia, as it happens, where Aeroflot still found a way to operate much more efficient Boeing and Airbus planes, while the whole exercise didn’t really help Tupolev et al that much. Developing better planes (like the SSJ or the MC-21) has a much better chance of being a successful approach.

  4. 300%… for good value more, for Bombardier ? Hahahahaha ! Good move Boeing ! Yes, you can ! Make Bombardier Great Again…

    • Not a god one. I wont lighten up today. It implies you’re blaming Rusian double agent and multi rapist Trump as the source of the problem. This is all just BS created entirely by Boeing and you know it. Nobody to blame but themselves. And this is huge as Trump himself would say. Boeing really are 2nd. in aerospace now behind Airbus.

  5. oooof, boeing has done a great job of shooting themselves in the foot and its not like airbus to rub their noses in it 😉 !
    This is an absolute nightmare scenario for both embraer and boeing, the formers e2 aren’t in service yet they now face even stiffer competition, this may also force boeing to either take a bigger interest in embraer or shelve their mom and go for a clean sheat single aisle family.

    • I’m sure Embraer will do fine. They rule the 80-120 seat segment and have a large customer base, world wide support network and backlog in place. The are strong enough to be independent at this stage.

      • Maybe not, how much further into bed will boeing get with embraer? New fal in seattle?
        Because im sure when these e2’s start to get delivered, im sure a few more court cases may be in the offing!

        • Hope this could help make BBD to improve on the CRJ900, a great aircraft in my eyes. Maybe with GTF’s (PW800’s equivalent?), a CRJ900NEO and CS100 could make life difficult for the E-Jets.

  6. “No cash is changing hands in the deal and the C Series partnership assumes no debt as part of the transaction, the partners said.” (from the Globe and Mail)

    Did BBD just give away the farm?

    • Sounds like it. Bombardier just gave away controlling interest in its major program to a competitor for free. This has to be the dumbest deal in Canadian business. With Airbus controlling the program I suspect we can forget about a CS500 Cs700 etc. A sad day for Canadian aerospace. To ad insult to injury Donald Trump will now be able to boast that he is bringing jobs to Mobile as a result of his bullying tactics. I expect we will see more jobs poached from Canada under the Trump admin.

      • Airbus is paying for the CSeries FAL in Mobile and will bring their Commercial Aircraft’s sales organization to the table. IMJ, this is a win-win situation for the aerospace industry cluster at Mirabel — by securing the existing CSeries FAL and at the same time opening up opportunities for participation in future Airbus civilian and defense-related programmes.

      • Canda will win as Airbus will make the C-series a more competetive product. Just swapping out the Bombardier standard practices manual and some strange Canadian suppliers to Airbus suppliers will make the C-series hold a firm position above the ERJ195-E2 and below the A320neo. I.e. replacing both the A319neo and 737-7MAX. It kind of forces Boeing to spend money on both the 797 and a new 737 successor like the D8 that can become the 7D7 and stop paying stock dividents for some years. Airbus should thank LH for revising the CS300 to what it is today.

        • If Airbus launches an all new MoM Boeing will be like a cat on a “hot tin roof”?

      • Yes, it does seem like Bombardier has given away the farm for free… but, in the longer term, this may ensure their survival in the commercial mainline single-aisle market. 49% of something is better than 100% of nothing.

      • Are you sure? CS500 is the most interesting part of the deal. Airbus has a soft entry into replacing the A320 allowing it to go for the A322 development in the sound knowledge that they are covered at the bottom end. If they opt for the CS500 in the next 2 years they have the luxury of a full order book of A320 for 5+ years and can have two entrants that could be argued to be better than the MAX. Oh Boeing what were you thinking!!! You have, through your actions, made a minnow into a shark

        • Wonder how long before Boeing runs to someone and cries about something X.

          • Not long but theres not much they can do. They might get a lot more cosy with Embraer.

            NSA is the next big thing. Boeing might move quicker than you think.

            A CS500 type plane with a range of 5,000 nm. Thats the newest game in town.

    • It’s what I have long argued. BBD were out of cash but the programme was too valuable to just wither on a vine. The options were clear for some time, either BBD cosy up to Comac which was possibly financially better but technically and politically fraught with problems. The alternative being to sell out to Airbus. Airbus must be laughing, they had a strong hand as they had no reason to do the deal and as a result they have gained a fully developed programme worth $10bn to them in a segment that would have eventually have required investment. I am not quite sure what BBD get out of the deal, possibly just the chance of upside in 7.5 years and the chance to avoid writing off the whole programme.

      Boeing have messed up
      1 they could have bought the programme
      2 the Cseries was never going to allow BBD do anything more than scratch the surface of the NB market
      3 they have singlehandedly forced a small problem to become a major headache
      4 they have created a toxic environment that may affect other programmes

      • Of course, when you jump into bed with Trump you’re going to create a toxic environment.

  7. I/we speculated for many years on this. This announcement however creates a suitable April 1st feeling with me.

    I and others speculated Boeing could / should do this. Enabling them to focus on a bigger (>170 seats) NSA/NMA family. Maybe this was a pre emptive move by Airbus. Boeings recent legal action to kill BBD aviation with this nit credible argumentation, amazingly supported by the CoC, pulled the trigger in Canada.

    A short term win for Boeing, using the political climate in the US, is coming back at them. Delta will get their aircraft.

  8. Forget the CS500, CS700 and CS900. Imagine the CS70, CS75 and CS85! Dear Embraer, you will have to start thinking about buying the Q400 series!

  9. They should have called the partnership C-SLAP instead because that’s what it’s doing to Boeing’s trade complaint.

  10. Have to offer CANADAIRbus as a new identity.
    Sorry could not come up with anything appropriate incorporating de Havilland.
    Cheers

  11. Time will tell…..is this a pretty good sign that there will never be a CSeries 500?

    • A simple, stretched CS500 having the same MTOW as the CS300 — but with a significantly shorter range than the CS300 — will IMJ complement the A320neo nicely.

      • Its early days but I am excited. Think the “AC”500 could be there sooner rather than later?

        That makes room for an ~3m stretched and longer range A320Plus with the 322’s wing?

    • Or it could even mean there will be very soon a CS500. Boeing was and is afraid of that aircraft and it would allow Airbus to hurt Boeing and take away more of their market share.

      Airbus has its production filled on the A320 family and has no need to worry too much about a CS500 competing with its own products.

      • If CS500 gets the go ahead Airbus will have a part of the best aircraft in clase, and can drop the A320 and concentrate on optomizing the design around the more profitable A321/etc
        Boeing gets hit in the 737-8 market and in the Botton half of the potencial MOM market.
        Sounds like a good business plan to me.

  12. Back several years, Airbus basically stated : if Bombardier ever launch the C-Series, we will crush them! Is this crunch time?

    • Hello OV-099,

      I have done so, in the comments for the “Airbus-Bombardier C-Series deal means no tariffs on US-assembled aircraft, says CEO” post. I think that Bombardier now obviously has a much better hand to play, but that the dispute will likely drag on for many years with Boeing petitioning to have any final duties extended to US assembled aircraft. I also believe that Airbus has a top notch legal team, which wasn’t the case for Bombardier, and that having assistance from the Airbus legal team will greatly increase Bombardier’s chances for success in legal proceedings.

      • My apologies, AP_Robert — it was meant to be ironic (with a little bit of sarcasm thrown in). 😉

        As f0r Boeing’s case, I’m afraid it’s dead, no matter how much lawyering is applied. Aggressive lawyering is typically counterproductive — in this case backfiring enormously as the CSeries will now effectively become an Airbus product.

  13. Airbus is a multinational anyway. Longer term adding another western entity in Canada wouldn’t be much of an issue.

    I would not be surprized if Boeing was again so self convinced and non listening they didn’t see this coming.

    • “Longer term adding another western entity in Canada wouldn’t be much of an issue.”

      That’s exactly what they’re doing.

      As for Boeing shooting themselves in the foot — I’d guess that you remember well PAS 2011, when Boeing was telling themselves that the 737-800 was more efficient than the A320neo.

  14. This may seem insignificant, but Airbus will increase its stake in Bombardier with 100,000,000 shares. The train, the subway, what does Airbus mean? New world…

    • Hello Capitaine Scarlet,

      From all that I have read so far Airbus in investing in CSALP, with stands for C- Series Aircraft Limited Partnership. If this is true, then Airbus is not acquiring any interest in Bombardier’s train or subway business.

  15. One can imagine that at present Boeing holds a council of war. What do you think managers are saying?

  16. AHAHAHAHAHAHAHAHAHAHAHAHHAAAAHHHA

    McBoeing’s chickens come home to roost. couldn’t happen to a nicer bunch. Literally Suicide By Lawyer.

    with this, I see the death of the 737-7 and A319, quick roll out of the CS500 to undercut the 737-8 an MD88/90 replacement market.

    Airbus can now take their time and see what Boeing’s NMA/NSA looks like and formulate a knockout punch while raking in all that sweet A320/cSeries cash.

  17. Yeah, big, bad Boeing huffed and puffed and tried to blow Bombardier’s house in…

    …and when that didn’t work, big, bad Boeing went to to Trumpty Dumptie and said “…if you huff and puff and help us blow Bombardier’s house in return we’ll pay millions of dollars to underwrite an horrific spectacle of an inauguration that will go down in history as among the most sparsely attended, darkest moment in American history…

    So big, bad Boeing, and their teeny-tiny handed Dotard came up with their hairbrained, bat “sheet” crazy, dumber than dumb, short-sighted “plan” whereupon together they huffed, puffed, and tried to blow Bombardier’s house in…

    …except Bombardier had a much smarter plan of their own that laid bare for the whole world (except the Dotard lovers, of course) to see just how incredibly, no, make that SPECTACULARLY, STUPID Boeing’s and the Dotard’s (or is it Moron it’s so hard to tell these days which, or BOTH, words best applies!) “plans” were…

    …talk about crash and burn…in this case, Bombardier, Airbus, and who knows, perhaps Justin Trudeau and many others, made Boeing, Trump, Osama bin Bannon, and that whole bunch of arrogant nutters look exactly like buffoons they so very much are.

    And this is for a business transaction…

    …translate this insanity to international affairs, and well, hey, is it any wonder even Republicans with half a brain cell or more are concerned our country is being so badly mismanaged we just might wake up one morning soon to the news of an overnite tweetstorm that has us on the edge of World War III.

    Boeing’s ill-conceived plan to kill of a competitor, furthered by an administration so hopelessly clueless, is not just hubris, or even Airbus/Bombardier hoisting both by their own petard…

    And it’s not just stupid…it’s beyond words, catastrophically STUPID.

    If this is “Winning” or the “plan” they have to “Make America Great Again” it boggles the mind to consider what losing looks like…

    Boeing and Trump played a dangerous game, and they both lost.

    …and they both GOT EXACTLY WHAT THEY SO RICHLY DESERVED.

  18. Oh my, my! What have you done to yourself, Boeing? Huge expenditures on B787, 777-X not as hot as it should be, A321 doing so well, 40-60 split with Airbus in narrow body market BEFORE this deal … one mishap after another. Looks like your future is now very much dependent on a successful MOM/NSA. Hope it all goes well!

  19. From the agreement between Bombardier and Airbus:

    « Airbus will benefit from call rights in respect of all of Bombardier’s interest in CSALP at fair market value (…) exercisable no earlier than 7.5 years following the closing. (…) IQ’s interest is redeemable at fair market value by CSALP, under certain conditions, starting in 2023. IQ will also benefit from tag along rights in connection with a sale by Bombardier of its interest in the partnership. »

    CSALP is C Series Aircraft Limited Partnership.
    IQ is Investissement Québec

    This means that Airbus will likely own 100% of the C Series in 7.5 years.

    This agreement is the consecration of the financial failure of the C Series program for Bombardier.

    The C Series will have been a great technical success, in which Bombardier will have lost billions of dollars, and from which Airbus will benefit for a bargain price.

    For the C Series, it’s Black Monday.

  20. Very clever move. ..as efficient as décision tout go tout NEO
    B has to find ideas and money quickly to recover some kind of leadership
    A is now clearly market leader
    Intersting to watch how Wall Sreet react

    • Announcement of a 787 production increase was a move to fend off the impact of this in the share ecology.
      ( Just like “Air Berlin buys more 787” 3 days ahead of the NTSB battery disaster report.)

  21. What a bombshell news! I could not believe my eyes as I read daily news overview. Kudos to Keesje for predicting it.
    Oops Boeing did it again (shoot themselves in the foot).

  22. I’ve got mixed feelings about this. Glad to see what seems to be considered an excellent aircraft get the lifeline and support it needs, glad to see the jobs and supply chains have a strong future, glad to see Boeing get one in the eye after the way they’ve behaved and congratulations to Airbus, but sad that even a company as large as Bombardier, with such a product, couldn’t survive against the duopoly.

    As for the deal, I wonder how long it was planned at Airbus. Was it just waiting for a suitable trigger after they’d done their analysis way past, or was it a scramble.

    It ought to shock Boeing investors though. Boeing had the pressing need to renew, had the trade area, the closer ties and the history to be the partner (or buyer) the C Series and managed to completely mess it up through its bad, misguided attitude.

    • I have to say that I was really looking forward to the David VS Goliath war. History continuous to see smaller companies getting gobbled up by massive conglomerates. This goes on in every sector and what chance do smaller company’s have to make a difference. C series was a chance to make a dent but got gobble up! See you David, nice knowing you!

  23. The more I think, the more I believe this is really a big chance for Airbus. And hopefully they do play their cards well now.

    Assume they extend the CSeries family with a CS500 and even a CS700. The CSeries will cover from the low end up to the heart of the existing 737/A320 families.

    On top of that, Airbus could equally start a new MOM/NMA starting where the CS700’s capacity ends. A dual aisle, with an oval fuselage, in two to three lengths to cover anything from 180 up to 300 passengers from shorter to medium stage length. Build the new MOM in a way that eventually it has cockpit commonality with the CSeries and you have covered the whole range from 100 to 300 pax from very short to 7-8 hour legs.

    The A320 family can run for another 5-10 years until backlog has been delivered while the CS500/700 provide new slots in the mid-term.

  24. So I’m out of the news cycle for a few days thanks to some private (very joyous) events… and this happens.
    I was already wondering if something like this might come to pass, especially as BBD and Airbus had already been talking to each other about a similar deal a year or two ago.

    I haven’t looked through all the details, but at first it seems like a win-win for both parties involved. Airbus get a great platform at the lower end of the single-aisle market, which enables them to up-size their A320 replacement. So in consequence, they could conceivably do an A320 replacement family that also covers Boeing’s MOM space, while not giving away the lower end of the single-aisle market, as the CSeries is covering that.
    BBD on the other hand get an FAL at Airbus’ Alabama site and still stand a decent chance – with Airbus’ added marketing expertise and reach – to gain more customers not just in the US, but worldwide.

    That said, considering how many things have to fit together behind the scenes to make these things happen, I’m surprised it did actually happen.

Leave a Reply

Your email address will not be published.