From war to partner: Airbus and the CSeries

John Leahy

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.

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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.

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To Kill a Better Bird

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Introduction

Oct. 12, 2017, © Leeham Co.: Boeing’s brash and controversial move to file the trade complaint with the US Department of Commerce is a bold gamble designed to kill the Bombardier CSeries entirely, not just block it from the US market, people familiar with the strategy tell LNC.

The threat Boeing fears from the CSeries is not really about the 737-700 or 7 MAX, they say, but truly about the future of the 737-800 and 8 MAX.

While Boeing as clear in its filings with the US International Trade Commission (ITC) and Department of Commerce (DOC) about the alleged threats, some insight to Boeing’s thinking explained by people familiar with the situation was provided.

Summary
  • Boeing hopes blocking the CSeries out of the US market will have a ricochet effect on Bombardier’s pricing strategy elsewhere.
  • With a higher price, Boeing believes it can successfully compete head-to-head in acquisition campaigns.
  • Boeing’s fear is really about the CS300 dragging down the price against the 7 MAX, which will have a cascading effect on the 8 MAX.

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US declared Bombardier impeded trade probe, uncooperative and found dumping as a result

Oct. 10, 2017: The US Department of Commerce concluded Bombardier was uncooperative, didn’t answer its questions and impeded the trade investigation in the Boeing complaint.

Accordingly, under US law, Commerce could draw negative conclusions toward Bombardier and found it “guilty” (our word) of violating anti-dumping laws in its sale of the CS100 to Delta Air Lines.

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Boeing’s Bold Ambition, Part 2

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Introduction

Oct. 9, 2017, © Leeham Co.: When Boeing launched the 787 program in 2003, an after-market maintenance program called Gold Care followed.

It wasn’t successful. Few customers signed up for it.

Stan Deal, CEO of Boeing Global Services.

But the lessons learned are important for Boeing’s drive to vastly expand its presence in the global commercial airplane after-market business.

Boeing Commercial Airplanes and Boeing Defense, Space & Security (and the latter’s predecessor, Integrated Defense Systems) provided services to the airlines, lessors and government customers, but now there is a dedicated business unit.

Boeing Global Services was announced nearly one year ago, on Nov. 21. When Boeing reports its third quarter earnings at the end of this month, for the first time revenues and profits for BGS and its predecessors will be a line-item in the earnings statements.

Stan Deal, the CEO of BGS, acknowledged the poor start of Gold Care in an interview with LNC. But from this unhappy experience, Boeing learned what officials hope lays the foundation of a new, robust business.

Summary
  • 787 Gold Care didn’t start out well.
  • Gold Care is rejigged and rebranded.
  • BGS services Airbus aircraft, too.

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US finds “dumping,” adds 80% tariff to CSeries

Here it is, the press release from the US. The tariff is what Boeing originally asked for, 79.82%. A far higher one was expected, following last week’s subsidy determination.

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Pontifications: 49 years ago, the first 747 rolled out

By Scott Hamilton

Sept. 30, 2017, © Leeham Co.: Today is the 49th anniversary of the roll-out of the Boeing 747-100.

On Nov. 7, United Airlines operates its last 747 flight. Delta Air Lines ends it 747 service this year. Afterward, there won’t be a single US operator of the passenger model.

The 747 remains in service with US cargo carriers Atlas Air, Kalitta Air, UPS and a few others. Globally, British Airways, Lufthansa and Korean Air Lines are among those flying the passenger model.

Ted Reed, one of the writers of TheStreet.com, asked me earlier this month to give some thoughts about the 747. Below is what I gave him; he excerpted some for his column in Forbes. The focus was on US operators.

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Assessing the impact of the Bombardier decision

Sept. 27, 2017, © Leeham Co.: The aviation world is still in shock over the size of the tariffs the US Department of Commerce plans to impose on Bombardier C Series deliveries to Delta Air Lines.

The DOC yesterday preliminarily decided to impose a 220% tariff on each CS100 delivered to Delta.

Delta Air Lines Bombardier CS100.

Deliveries are scheduled to begin in April.

And this is only half the case. This week’s decision is about launch aide and the equity investments BBD received for the CSeries.

Next week, it will be a determination whether Boeing and the US airline industry faces the threat of injury. Observers believe DOC will conclude there is.

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Decision memo issued in Boeing-Bombardier case

Sept. 27, 2017: Here is the US Department of Commerce’s decision in the Boeing-Bombardier case.

Our analysis will be forthcoming. Decision 092617, 34 pages.

Pontifications: Next steps in Boeing-Bombardier trade complaint

By Scott Hamilton

Sept. 18, 2017, © Leeham Co.: The US Department of Commerce is due next Monday to hand down its preliminary decision on whether to impose tariffs on Bombardier’s C Series sold to Delta Air Lines.

The price dumping complaint, filed by Boeing earlier this year, cleared the US International Trade Commission on a 5-0 vote. The ITC found probable cause (my words) to proceed with the complaint. From there, investigation shifted to the DOC.

The details are complex and need not be recapped here. What is important are the next steps, assuming—as widely expected—DOC sides with Boeing.

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