Assessing the Airbus-Bombardier deal

Oct. 17, 2017, © Leeham Co.: The Airbus-Bombardier transaction announced yesterday has implications well beyond the United States, which has been much of the focus of analysis post-announcement.

The analysis focused on the US is natural, given the Boeing trade complaint involving the CSeries sale to Delta Air Lines.

But it’s important to step back to see what this means for CSeries.

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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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Airbus buys majority stake in CSeries–details to come

Press Release

Airbus and Bombardier Announce C Series Partnership
 Airbus to acquire majority stake in the C Series Aircraft Limited Partnership
 Partnership brings together two complementary product lines, with 100-150 seat
market segment expected to represent more than 6,000 new aircraft over the next 20
years
 Combination of Airbus’ global reach and scale with Bombardier’s newest aircraft family
to create significant value for customers, suppliers, employees and shareholders
 Significant C Series production costs savings anticipated by leveraging Airbus’ supply
chain expertise
 Commitment to Québec: C Series Aircraft Limited Partnership headquarters and
primary assembly to remain in Québec, with the support of both companies’ global
supply chains
 Airbus’ global industrial footprint expands with the C Series Final Assembly Line in
Canada, resulting in a positive impact on operations in Québec and across the country
 Growing market for C Series results in second Final Assembly Line in Mobile,
Alabama, serving U.S. customers.

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Trump decertifies Iran nuke deal, throws Airbus, Boeing orders in doubt

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Introduction

Oct. 16, 2017, © Leeham Co.: President Donald Trump announced Friday he will decertify the Iran nuclear deal, throwing into doubt a host of related commercial deals, including huge aircraft orders.

Iran Air Airbus A330. Photo via Google.

Trump hasn’t gone so far as to withdraw from the pact, but he still threatens to do so unless Congress makes changes he wants.

Here in the US, focus is, of course, on the commitment by Iran for Boeing aircraft—none of which are firm contracts, but “commitments” to order.

Of less focus here, if any, is on the outstanding orders placed by Iran for Airbus and ATR aircraft, which are subject to US licensing.

Summary
  • 30 Boeing 777s, including 15 Classics are at stake.
  • 50 Boeing 737 MAXes to Iran Air and 30 to Iran Asesman are also at stake.
  • ATR has 11 aircraft scheduled for delivery in 2018.
  • Airbus sold 114 A320s/321s, A330s and A350s to Iran Air. A few white tails already have been delivered.

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Pontifications: Playing catch-up

Oct. 9, 2017, © Leeham Co.: Recent weeks have been dominated by the news of the Boeing-Bombardier trade complaint. More is to come before and after the end of the year.

It’s time to catch up on some other news.

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Bjorn’s Corner: Aircraft drag reduction

By Bjorn Fehrm

October 06, 2017, ©. Leeham Co: In the last several Corners, we wrote about research around laminar flow for aircraft. It’s research to lower the aircraft’s drag. Why is this important? How large are the different drag types and what can be done about them?

To find out, we will spend some Corners looking into the drag of an aircraft and what is done to optimize the drag for different aircraft types.

Figure 1. The “Blade” equipped A340-300, researching into lower drag for an airliner. Source: Airbus.

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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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Shakeout for Europe’s low-cost airlines

By Bjorn Fehrm

October 11, 2016, ©. Leeham Co: Alitalia, Air Berlin and now Monarch have all filed for insolvency since the start of 2017. These are all airlines with an emphasis on low cost flying, with an important leisure part. Alitalia and Air Berlin had histories as network carriers, which hasn’t helped.

What happened in summary; When the European low-cost market got rough, their cost levels weren’t tough enough.

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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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