Airbus added a twist to a U.S.-Canada trade dispute by announcing a plan to partner up with Bombardier, the Boeing Co.’s Canadian rival.
The plan calls for Airbus to take on a majority stake in Bombardier’s C Series line of passenger jets, which is due to be hit by U.S. tariffs of nearly 300 percent.
Europe-based Airbus will own 50.01 percent of the C Series limited partnership, leaving Bombardier with about 31 percent and Investissement Quebec with 19 percent. The partnership’s headquarters and primary assembly line will remain in Quebec, but Airbus said it would expand C Series production to its manufacturing site in Alabama.
No money will change hands immediately under the terms of the deal.
The two companies said the partnership would play off their complementary strengths. “This is a win-win for everybody,” Airbus CEO Tom Enders said in a news release.
“This partnership should more than double the value of the C Series program and ensures our remarkable game-changing aircraft realizes its full potential,” said Alain Bellemare, Bombardier’s president and CEO.
It could also affect U.S. plans to move forward with the trade sanctions. The tariffs, which were proposed by the Commerce Department and are currently being considered by the U.S. International Trade Commission, target Canadian-made jets.
The new C Series partnership could conceivably get around the sanctions by delivering jets that are made in Alabama. What’s more, Airbus has an option to buy out Bombardier and the Quebec investment agency by 2023 — and company executives signaled that they intended to take that option.
The trade flap arose last year after Bombardier announced the sale of 75 single-aisle CS100 jets to Delta, with an option for 50 more jets. Boeing complained that Bombardier was being subsidized unfairly by the Canadian government, and that the Delta deal would have a negative effect on Boeing’s own sales. The Commerce Department agreed.
Boeing, which has been embroiled in a separate set of trade disputes with Airbus, voiced suspicions about the arrangement announced today.
“This looks like a questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the U.S. government,” Boeing said in a statement. “Our position remains that everyone should play by the same rules for free and fair trade to work.”
The Boeing-Bombardier battle already has had repercussions extending beyond the Delta purchase. The flap has cast a pall over talks revisiting the North American Free Trade Agreement. And if the dispute were to escalate, Canadian Prime Minister Justin Trudeau said his government might not go through with a multibillion-dollar purchase of Boeing F/A-18 Super Hornet fighter jets.
Canadian officials have pointed out that Bombardier’s C Series operation makes use of U.S. suppliers, supporting 23,000 jobs in U.S. locations including Washington state.
Delta disputes the claim that the Bombardier deal hurts Boeing’s sales, citing the fact that Boeing doesn’t sell jets with the 100- to 110-seat capacity that it was looking for. Boeing, however, says Bombardier’s sales tactics for C Series jets threaten the viability of the 737 MAX 7 in the 100- to 150-seat category.
The Airbus-Bombardier deal is still subject to regulatory approvals. The two companies say they expect the transaction to be complete by the second half of 2018.