Oct. 18, 2017, © Leeham Co.: It was the annual media day in 2010 that Airbus declared war on the Bombardier CSeries.
Lufthansa Group in 2009 was the launch customer of the CSeries with an order for 30 CS100s and options for 30 more.
Bombardier had won a major order from Republic Airways Holdings, which then owned Frontier Airlines, an exclusive A319/320 operator. Republic ordered 40 CS300s and optioned 40 more. It was this order that spurred Airbus’ wrath. It was this order that would push Airbus into launching the re-engined A320neo family.
John Leahy, Airbus COO-customers, and Tom Williams, then EVP of programs, declared to the assembled international media that Airbus would aggressively compete against Bombardier.
Now, seven years later, Airbus and Bombardier are partners.
“We will not do with Bombardier what Boeing did with Airbus,” Leahy declared. Boeing initially ignored Airbus, allowing it to grow. Airbus, Leahy said, would not allow Bombardier to do the same with the CSeries.
Williams declared Airbus would not let Bombardier establish a “beachhead” with the CSeries against the A319. A re-engined A320 family would destroy the business case for the CSeries, Williams said.
Airbus was true to its word. It dropped the price on the A320 in head-to-head competitions, offering airlines a larger airplane for the same price as the CS300. Bombardier was blocked from several deals.
Boeing, on the other hand, made the decision to ignore Bombardier until BBD nearly swooped in to land a big order from United Airlines in early 2016. Boeing sold the 737-700 to UAL for a reported price of around $24m. Then Bombardier won a deal with Delta Air Lines the following April. Boeing filed its trade complaint a year later.
The battle was on. And Airbus swooped in to acquire a majority stake in the CSeries program for C$1.
Leahy today told LNC he always thought the CSeries was a “cute little airplane.”
“I always said it was a cute little airplane, and it is,” Leahy said. “I always knew that going up against Boeing and Airbus and that they didn’t have a support network, they didn’t have much of a commercial organization, it was going to be difficult to really get inroads into the market.
“We were competing against it for years, rather successfully,” he said. “I think so did Boeing, so I am shocked beyond belief that Boeing was trying to kick a dog when he was down. If Boeing had totally ignored them, they probably would have rolled over and died. Why they had to go pressing the Trump Administration for 300% tariffs is beyond the pale. I think a lot of reports that that forced them into our hands are probably true.”
As Boeing and Airbus develop the successors to the 737 and A320, the trend toward up-gauging suggests the new airplanes may start at 170 seats and go up. Program launch of these aircraft will almost certainly be no later than 2025.
Does this mean Airbus, which by then may own 100% of the CSeries program, will develop a CS500 to provide a family of airplanes from 100 to 150 seats?
Leahy, who retires by the end of this year, wouldn’t say.
“Two things you’ve got to remember. Until this closes [in 2018], we are not working with them, so I don’t want to get into how we’re going to change product strategy going forward or how we’re going to work on deals together,” he said. “We’re blatantly not going to discussing product strategy or working on deals together until the deal closes.”
After the deal closes, then Bombardier and Airbus will sit down and discuss product strategy, Leahy said.
Boeing claims that even if the CSeries is built in Mobile, it will be subject to tariffs if the US government affirms preliminary findings. Leahy disagrees.
“I cannot imagine that you would an airplane that is built with substantially more than 50% US parts, built in Alabama by US workers would somehow be classified as a foreign product because Boeing would like to see that,” he said. “As an American I would find that shocking. I can’t imagine that would happen.”
The Boeing attack on Bombardier has been roundly criticized for the potential cost to Boeing. Canada threatened to exclude Boeing from a fighter acquisition. The United Kingdom vowed retaliation. Conventional wisdom believes Delta won’t buy Boeing in its current RFP between the A321neo and the MAX 9/10 (Delta says it will be a fair competition).
One analyst LNC has talked to says Boeing doesn’t care about the present cost. Leahy agrees.
“Whatever it costs now, it’s worth it not to have competition,” Leahy said of Boeing. “That, I think, is an admission of a weak product line and a weak commercial organization that they say we just can’t afford that competition. Competition is too costly for us. We need to find a way to just block competition.”