Bombardier’s bittersweet year

Dec. 28, 2017, © Leeham Co.: Two thousand seventeen had to be a bittersweet year for Bombardier.

Despite landing two good, blue-chip orders in 2016—Air Canada and Delta Air Lines—it hadn’t achieved the “commercial momentum” hoped for. At long last, Letters of Intent for 31+30 and 12+12 orders and options were announced this year for the CS100 and CS300 from an Unidentified European carrier and Egyptair respectively. Officials hope to firm these up by the end of this year.

No additional C Series orders were forthcoming for the rest of 2016 and none for 2017 when Boeing stepped up and puked all over the program.

In April, Boeing filed a trade complaint with the US government. Boeing would prevail with the US Department of Commerce, which preliminarily determined to levy a 300% tariff on each C Series imported into the US.

The US International Trade Commission took up the case Dec. 18; a decision is due next month. If ITC finds there was no harm to Boeing, the DOC decision goes away.

Giving the program away

With the trade complaint at the DOC awaiting final determination, Bombardier and Airbus announced the latter was buying 50.01% of the C Series program for US$1. Bombardier continued to assume the risk, up to $700m, and to invest $300m to establish a US final assembly line next to Airbus’ Mobile (AL) plant to service US customers.

Boeing immediately sniffed at the transaction. In testimony before the ITC Dec. 18, and in briefing papers filed with ITC and the DOC, Boeing noted that the deal isn’t final—an argument that ignored the requirement several governments (including the US, which approved) had to give anti-trust clearance before the deal can become final.

Boeing continued to downplay the deal, charging that it is nothing more than a circumvention of the crushing tariff that (at that point) was preliminarily imposed by the DOC.

There’s certainly evidence that the deal was spurred by the trade complaint and tariffs. But at the same time, a case could be made the deal may have transpired anyway. Bombardier hadn’t sold a C Series for more than a year after the Delta order. Deliveries were being delayed by engine supply issues from Pratt & Whitney, which was buried with the well-publicized problems with the Airbus A320neo engines.

Furthermore, Bombardier’s reputation for after-market support remained an issue and trying to break into the Airbus-Boeing duopoly remained daunting.

Joining with Airbus

The deal with Airbus may well have come down to, “if you can’t beat ‘em, join ‘em.”

While BBD gave the program away for $1, officials claimed the long-term benefits to Bombardier by Airbus’ strength in marketing and product support will pay off for shareholders.

Airbus fills a hole at the bottom end of its product line, which Boeing can’t or won’t. Airbus gets access to new technology in the C Series for future airplanes.

Plans to build the FAL in Alabama will proceed regardless of the ruling by ITC, Bombardier says. Delta and BBD agreed that deliveries will only be from Mobile. They want to remove any cloud over future deliveries that Boeing might refile a trade case on imports from Canada, should it lose the ITC case. Having the Mobile plant for US deiveries also removes a cloud for potential US customers,  Delta and Bombardier told the ITC.


Finally, the outcome of the claimed benefits of the Airbus-BBD deal will take years before the industry sees the results.

Other airplane programs

The CRJ and Q400 programs, meantime, continue to struggle. Indications are that Bombardier loses money on every Q400 delivered and the airplane has a low, double-digit market share against the ATR-72.

The CRJ’s future rests entirely on no change to the US Scope Clause, which limits the size of airplanes that can be flown by regional partners of US major carriers.

The outlook

The outlook for 2018 rests in large part on the ITC ruling due in January for the C Series program.

Officials have a hard decision to make about the future of the Q400 program. Although there was speculation this year that the Chinese were poised to buy the program, at this writing, no such transaction had been announced. Absent a sale, Bombardier needs to decide whether it’s time to terminate the program.

As for the CRJ—the airplane may have a future as long as the Mitsubishi MRJ remains in limbo. The MRJ is already seven years late. There is no assurance there won’t be more delays.

25 Comments on “Bombardier’s bittersweet year

  1. At the rate at which consolidation is taking place I can foresee three large combines within the near future

    Comic/ Irkut (or whatever aspect of the Russian aero industry)

    Mitsubishi will be left alone with a failing programme and the scene is set for a global struggle for supremacy surpassing even today’s concentrated ownership of civil aviation production.

    Unfortunately fortune does not always favour the brave, Bombardier will become subsumed into Airbus. The Embraer/ Boeing tie up is very interesting. I would be surprised if the Brazilian govt would lift the golden share without major concessions, Embraer seem to be doing a lot right if only they can find a way around the scope clause

    • As neither Mitsubishi nor Embraer is going to break the scope clause (there is no going around it, a US Union bargaining agreement is an iron clad item) your only choice is to come out with an aircraft that is large enough and good enough to work straight up (717 etc.)

      Mitsubishi was foolish to do an aircraft that was not a match fore the E series, take on the C series area or just not do it.

      Its going to be a sales/financial flop.

      Embraer is going to maybe (likely) joint venture, they are not going to be sold.

      Boeing does not want Embraer as a whole, the Brazilian government is not going to let it get cherry picked apart.

      Frankly the only thing Embraer has that Boeing is remotely interested in current product is the KC390.

      The rest would be design capability and engineers to make a C Series competitor that does not exists yet that Boeing wants as cheap as it can get (its that alluring path to gold like drugs that they went down with the 787, outsource it and make lots of bucks)

      Boeing does not even want the regional operation, its the capability to make a larger aircraft they would be interested in.

      • Mitsubishi doing a commercial airliner makes as much sense as Northrop Grumman doing one. Within Japan, its Kawasaki who does the large military airframes with its commendable P-1 4 engine sub hunter and its C2 twin engine A400 sized airlifter.
        Mitsubishi does the ‘fast military jets’ and their lack of experience shows on the MRJ, even though its a Japan wide program

  2. Being subsumed into Airbus would be a result.What worries me about the C series is producing it economicaly. Brazil verses UK,Canada and a mess in China.
    BBD were totally skint and I’m concerned that not enough money was spent on tooling and processes.If suppliers were risk sharing partners it might be difficult to get competitive prices from them.The cost of shipping wings,etc must be significant. If Airbus can sort out these problems,there window of opportunity might be fairly short before B/E comes along with something slightly better and cheaper to produce.

    • You should keep in mind that both Airbus and Embraer have opened up major US building operations.

      Its the low cost country for tech assembly!

    • All these products (Korean washers, Spanish olives…) continue to exit. And so shall it be with the C Series, in all probability.

  3. Whilst the outlook for 2018 may rest on the decision by the ITC, let’s not forget that the longer term is far less influenced by that agency. Sure, it would be very nice if the ITC said “nothing doing, no tariffs are required”. However if the CSeries does become a big global seller there’s no real problem; owning the global market would be a nice piece of compensation for the ITC deciding to conclude “Boeing got hurt”.

    It would be ironic if this whole episode becomes seen as the final straw that pushed Boeing out of the single aisle market altogether.

    • Well it might take awhile considering there’s over 4.000 left to build and with hundreds of new orders coming in yearly.

  4. Remember that Bombardier triggered the trade case action by refusing to reply at all. Don’t get me wrong, I don’t side with Boeing in this but that is how it works.

    • Yea that’s the amazing thing.

      Canada does huge amount of business with US, huge.

      And the BBD lawyers don’t know US law? Beyond amazing (maybe short of France not stopping German in the easily defended Ardennes in WWII)

      Probably the biggest snatch of Defeat from the Jaws of Victory since the Miami Dallas US Football Game in the snow (my wife loves that one – not football but seeing men play in snow or mud)

    • @Ed: It’s not correct that BBD didn’t “reply at all.” It argued Commerce was asking questions to which answers weren’t available (like how much do the Delta airplanes cost to produce at a time when the airplanes weren’t in production). Commerce concluded this response, and others like it, were non-responsive.

    • Well that is not accurate. They did not reply to the DOC request to how much it would cost to build the Delta airplanes, for the very simple reason that they DO NOT KNOW. Once they have shipped 10-20 planes to Delta then that info is avail. This is why anti-dumping action cannot be undertaken until dumping has occured under WTO rules. The US has just ignored these rules and the treaties they signed.

  5. So what is really left of BBD?

    Supplier and assembly for Airbus on the C Series.

    Q Series in deep trouble (or worse)

    Some trains?

    • Add in the CRJ has to compete against a lot newer and better E Series, MRJ maybe (small one)

    • They have over 600 very large ‘Global type’ business jets flying, even more CRJ regional jets and then there is the smaller jets both Learjet and Challenger range.

  6. @transworld And the business jet division. The global 7000 comming up is selling well. And the challenger 350 is the most delivered buisness jet in the world. The aerostructure division is going pretty good also.

  7. It’s laughable that everyone has forgotten all of the subsidies and special set asides Boeing has received over the years . They looked down on Bombardier when they announced their idea of a new updated fuel efficient aircraft . Now that it has come to fruition and many reputable airlines have taken a good hard look at the C series and want them Boeing cries foul. I would love to see Bombardier coupled with Airbus. Familiarity breeds contempt some good old fashioned competition between the two biggest kids on the block might not only provide better choices it should give us a much higher quality product the flying public would appreciate. Don’t forget factories in the USA , Jobs .

  8. Looks like IAG is getting Niki, not sure whats the situation with the aircraft. Niki had some very interesting and “niche” slots, the fleet of 15 A321’s most likely to big in many instances.

    CS300’s (100’s?) could potentially be ideal for many of the routes. There are ~65 A319’s in IAG, CS300’s could fit in well for the Groups requirements.

  9. In 2017 Bombardier delivered 17 CS100/300s. In the same timeframe Sukhoi delivered 34 SSJ100s. That’s double 🤔

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