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The French Connection

Airbus Bombardier management

the four musketeers. l-r: pierre baudoin (bombardier chairman), tom enders (airbus president & ceo), alain bellemare (bombardier president & ceo) and fabrice bregier (airbus coo & president commercial aircraft). pic/airbus

Apart from AirAsia, at least two Southeast Asian carriers are believed to have expressed interest in Bombardier’s CSeries planes after Airbus announced it would take 50.01% control of the troubled programme on October 17.

It is understood informal talks have started. Although details are sketchy, the carriers are exploring acquiring between 20 and 30 planes. So far in Asia Pacific, only Korean Air has placed orders, for 10 CS300 aircraft.

In August this year AirAsia co-founder and CEO Tony Fernandes visited Mirabel in Montreal and said his company was keen on both the CS100 and CS300 variants.

In spite of Bombardier’s widely reported funding problems with the CSeries, the aircraft itself has been well received by airlines and those who have flown in it. Among the wow factors include generous seat layout, a very quiet cabin and low fuel burn (at least 30% less than an Airbus or Boeing narrowbody plane, according to Bombardier).

CSeries aircraft are currently in service with Swiss and Air Baltic. Both carriers said the planes have performed better than expected.

Malaysia appears to be a perfect launching pad for the CSeries in Southeast Asia. Other than AirAsia, the CSeries had also attracted interest from smaller startups.

In March 2015 Malaysia’s prime minister witnessed a signing ceremony between Flymojo and Bombardier for up to 40 regional jets. Unfortunately, the planned acquisition did not materialize because of financial issues as well as delays and uncertainty surrounding the CSeries programme.

Regional jets are perfect for Southeast Asia, given its geography and economic growth. The planes, typically between 70- and 160-seaters, offer certain airlines opportunities to operate in sectors that are currently either not served or underserved.

The CS100 is typically configured with 108 to 133 seats while the CS300 comes with 160 seats (in a single configuration) or 130 in a two-class configuration. Endau Analytics understands a couple of airlines are already revving up their interest following Bombardier’s tie-up with Airbus.

What the Airbus acquisition means

The dynamics behind this marriage of convenience are quite obvious for both parties. Airbus pays nothing for a 50.01% interest in C Series Aircraft Limited Partnership (CSALP) while Bombardier and Investissement Quebec (IQ) own some 31% and 19%, respectively.

Airbus clearly sees a demand for the CSeries, even at the expense of its own (not so popular) A318 and A319 models. It also opens up a new dimension for the European manufacturer. For example, there is a possibility of developing a middle of the market (MoM) plane that rival Boeing has been bullish on by stretching the CS300.

For Bombardier, having Airbus as a stakeholder lends not only credibility and better sales and marketing reach, but would critically overcome the 300% import levy imposed by the US after Delta bought 75 CSeries aircraft Boeing alleged at “absurdly low” prices.

Politically, too, the deal seems to be kosher. It ensures 1,000 jobs in Northern Ireland, where the CSeries wings are made, are safe. Airbus already has a factory in Alabama, where future CSeries production will be added, thus circumventing the US imposition of tariffs.

Could this arrangement have been achieved if John Leahy, Airbus’ acerbic American chief salesman, isn’t retiring at the end of 2017? After all he had dismissed the CSeries aircraft as a “cute little airplane.”

Look at the photo above. Check out the bonhomie between Airbus’ Fabrice Bregier and Bombardier’s Alain Bellemare – it isn’t just about broadening business between two aerospace companies – it’s about the bond between two Francophones.

All this leaves Boeing in a not so very nice spot and it should be worried. The pendulum has swung to Toulouse.

Will Boeing try to seduce Brazil’s Embraer – the world’s third biggest aircraft maker – into some sort of partnership? Embraer has a large footprint in the US. In 2012 both companies signed an accord to work together on many areas, including airplane “efficiency, safety and productivity.”

Embraer hasn’t said much, other than saying this latest development underscores big opportunities in the 100-150-seat market. The folks in São Paulo will have to come up with a clever game plan. Soon.

 

 

 

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