Airbus, Bombardier seek to partner on C Series

Cost savings anticipated by leveraging Airbus’ supply chain; brings C Series production to Alabama.

Airbus is strongly committed to Canada and its aerospace sector with Canadian suppliers extending their access to Airbus’ global supply chain
Airbus is strongly committed to Canada and its aerospace sector with Canadian suppliers extending their access to Airbus’ global supply chain
Airbus - Commercial Aircraft 17 October 2017 - Airbus and Bombardier C Series partnership 4

Airbus photo

Airbus SE and Bombardier Inc. are to become partners on Bombardier’s C Series aircraft program. The agreement brings together Airbus’ global reach and scale with Bombardier’s 100-to-150-seat jet aircraft family, positioning both partners to “fully unlock the value of the C Series platform and create significant new value for customers, suppliers, employees, and shareholders,” according to the press release.

Under the agreement, Airbus will provide procurement, sales and marketing, and customer support expertise to the C Series Aircraft Limited Partnership (CSALP), the entity that manufactures and sells the C Series. At closing, Airbus will acquire a 50.01% interest in CSALP. Bombardier and Investissement Québec (IQ) will own approximately 31% and 19% respectively.

CSALP’s headquarters and primary assembly line and related functions will remain in Québec, with the support of Airbus’ global reach and scale. Airbus’ global industrial footprint will expand with the Final Assembly Line in Canada and additional C Series production at Airbus’ manufacturing site in Alabama in the United States. This strengthening of the program and global cooperation will have positive effects on Québec and Canadian aerospace operations.

The single-aisle market is a key growth driver, representing 70% of the expected global future demand for aircraft. Ranging from 100 to 150 seats, the C Series is highly complementary to Airbus’ existing single aisle aircraft portfolio, which focuses on the higher end of the single-aisle business (150-240 seats). The sales, marketing, and support networks that Airbus brings into the venture are expected to strengthen and accelerate the C Series’ commercial momentum. Additionally, Airbus’ supply chain expertise is expected to generate significant C Series production cost savings.

The joint press release states, “Airbus is strongly committed to Canada and its aerospace sector with Canadian suppliers extending their access to Airbus’ global supply chain. This new C Series partnership is set to secure jobs in Canada for many years to come.”

“This is a win-win for everybody! The C Series, with its state-of-the-art design and great economics, is a great fit with our existing single-aisle aircraft family and rapidly extends our product offering into a fast-growing market sector. I have no doubt that our partnership with Bombardier will boost sales and the value of this program tremendously,” said Airbus Chief Executive Officer Tom Enders. “Not only will this partnership secure the C Series and its industrial operations in Canada, the U.K., and China, but we also bring new jobs to the U.S. Airbus will benefit from strengthening its product portfolio in the high-volume single-aisle market, offering superior value to our airline customers worldwide.”

“We are very pleased to welcome Airbus to the C Series program,” said Alain Bellemare, President and Chief Executive Officer of Bombardier Inc.  “Airbus is the perfect partner for us, Québec, and Canada. Their global scale, strong customer relationships, and operational expertise are key ingredients for unleashing the full value of the C Series. This partnership should more than double the value of the C Series program and ensures our remarkable game-changing aircraft realizes its full potential.”

“The arrival of Airbus as a strategic partner today will ensure the sustainability and growth of the C Series program, as well as consolidating the entire Québec aerospace cluster. In the current context, the partnership with Airbus is, for us, the best solution to ensure the maintenance and creation of jobs in this strategic sector of the Québec economy," said Québec’s Deputy Prime Minister, Minister of Economy, Science and Innovation and Minister responsible for Digital Strategy, Dominique Anglade.

The C Series program is operated by CSALP, in which Bombardier and IQ respectively hold approximately a 62% and a 38% interest presently. Airbus will enter into commercial agreements relating to sales and marketing support services for the C Series, management of procurement, which will include leading negotiations to improve CSALP level supplier agreements, and customer support. At closing, there will be no cash contribution by any of the partners, nor will CSALP assume any financial debt. The agreement also contemplates that Bombardier will continue with its current funding plan of CSALP and will fund, if required, the cash shortfalls of CSALP during the first year following the closing up to a maximum amount of US$350 million, and during the second and third years following the closing up to a maximum aggregate amount of US$350 million over both years, in consideration for non-voting participating shares of CSALP.

The Board of Directors of CSALP will initially consist of seven directors, four of whom will be proposed by Airbus, two of whom will be proposed by Bombardier, and one of whom will be proposed by IQ. Airbus will be entitled to name the Chairman of CSALP.

Subject to obtaining the required approval from the Toronto Stock Exchange, the transaction also provides for the issuance to Airbus, upon closing, of warrants exercisable to acquire approximately 5% of the aggregate issued and outstanding Class A Shares and Class B Shares of Bombardier at C$2.29 per share, for up to five years.

The transaction has been approved by the Boards of Directors of both Airbus and Bombardier, as well as the Cabinet of the Government of Québec. The transaction remains subject to regulatory approvals. Completion of the transaction is currently expected for the second half of 2018.