Airbus tie-up with Bombardier is test for China’s ambitions

Bloomberg

Airbus SE’s agreement to buy a majority stake in Bombardier Inc.’s C Series passenger jet programme not only injects critical financial support and expertise into the project, but also puts China’s aircraft-selling ambitions to the test.
Potential buyers of the C Series aircraft have the comfort that Airbus, with its global presence, will provide support for the jet anywhere, an allure that the state owned Commercial Aircraft Corp. of China, or Comac, doesn’t have. The Chinese planemaker–yet to sign a major international airline as its customer–will have to redouble efforts to sell the C919 as it goes head-to-head in the most popular segment of single-aisle jets.
“Airbus’s investment in the C series program means more competition for Comac as the C Series is also a competitor of the C919,” said Corrine Png, chief executive officer of Crucial Perspective Pte. in Singapore. That’s “in addition to the much more established Airbus and Boeing Co. narrow body aircraft,” she said.
The European plane maker will take a 50.01 percent stake in a partnership controlling the C Series, a single-aisle plane typically seating 108 to 160 passengers that has left Montreal-based Bombardier short of cash after more than $2 billion in cost overruns. Bombardier discussed a potential sale of a stake in its C Series program with Chinese state-owned firms, which included Comac, before reaching a pact with Airbus, according to people familiar with the talks. Comac declined to comment on the Airbus deal and their media cell said they weren’t aware of any talks with Bombardier.
Airbus, which will provide sales and marketing as well as customer support for the aircraft, will more than double the value of the programme, Bombardier’s CEO Alain Bellemare said.
Comac, which tested its home-built, single-aisle C919 jet in May, has orders for 730 planes pending certification from regulators. In July, the company won an approval to start mass production of its 90-seat regional jet.
The development of the C919 as well as regional jets is part of the government’s “Made in China 2025” programme that identified aerospace among sectors that could accelerate the nation’s industrial advancement. The C919 will put Comac in direct competition in one of the most lucrative sectors of commercial aviation against Boeing’s 737 and Airbus’s A320 as well as Bombardier’s C Series.

Assembly Line
By adding the C Series to its lineup of larger planes, Toulouse, France-based Airbus gains a new product for its portfolio while gaining access to an advanced aircraft that cost Bombardier more than $6 billion to develop. Airbus will add another final assembly line for the aircraft at its factory in Mobile, Alabama, to serve US customers.
“The C Series programme is all certified,” said Nick Heymann, an analyst at William Blair & Co. “It’s performing better than expected, and now has one of the two largest manufacturers as a partner. This deal makes the C Series demonstrably the aircraft in that space.” With this move, Airbus could have more sway over Chinese suppliers of components to the C Series, said Yu Zhanfu, head of aerospace and defense for Greater China at Roland Berger Strategy Consultants in Beijing.
“Being a stakeholder in the
C Series, Airbus could drive a more aggressive sales push for the aircraft in China,” said Ji Yuan, deputy assistant director general at the Civil Aviation Administration of China. “Airbus has far stronger marketing capabilities in China than Bombardier and may leverage its sound relationship with clients in China to drive sales of the C Series.”