Tensions Mount Over Bombardier's CSeries Deal With Airbus

11/13/17 07:53 AM EST
By Robert Wall 

DUBAI--A spat between aircraft makers over Bombardier Inc.'s new CSeries single-aisle plane is widening after the Canadian plane maker agreed to hand Airbus SE leadership of the project.

Both Boeing, which had the CSeries in its crosshairs even before its chief rival, Airbus, become involved, and Brazil's Embraer SA said this weekend they would sustain legal challenges over Bombardier's program. Embraer also signaled concern that Airbus's hand could add to market distortion.

The stakes are high, as plane makers assemble at the Dubai Air Show--the first industry-wide gathering since the Airbus-Boeing deal was announced in October.

Through the deal, Airbus would gain majority control of a joint venture building the CSeries, in what could be the biggest shake-up of the commercial jetliner business in 30 years. Airbus said it sees a market for around 6,000 planes and expects to win the lion's share of deals in the 100 to 150-seat segment.

Boeing has said it would challenge Bombardier's pricing of the CSeries in a deal with Delta Air Lines Inc. U.S. authorities have proposed a 300% import tariff on the plane after Boeing complained Bombardier sold the plane below cost.

Boeing Commercial Airplanes President Kevin McAlister said Saturday the issue was one of "clear price dumping."

Fred Cromer, Bombardier's president for commercial aircraft, said Boeing would struggle to demonstrate it was harmed, since the U.S. manufacturer doesn't offer a plane that competes with the 100-seat CS100 that Delta is buying.

"We think that [proving harm] is very challenging," Cromer said at the air show.

Bombardier has said it was looking to assemble its CSeries planes at an Airbus facility in Mobile, Alabama, to circumvent the tariffs if they stick.

Embraer commercial airplanes boss, John Slattery, said Airbus's deal to acquire the CSeries program wouldn't undermine Brazil's World Trade Organization challenge of the program for alleged subsidies provided by the Canadian government.

"The case will continue," he said in an interview at the air show.

Mr. Cromer said Bombardier was "fully compliant" with trade rules.

Mr. Slattery said Embraer was watching closely to check Airbus officials don't try to start selling the plane before regulators have given the green-light to the takeover expected late in 2018.

Airbus's backing is seen as a boost to the CSeries, which Bombardier had struggled to sell.

"Until antitrust immunity is granted, the Airbus marketing team cannot be involved in the aircraft. That will be something my team and I will be keeping a close eyes on," he said.

Mr. Cromer said Bombardier could work with Airbus in a limited way before antitrust approvals were in hand. The two companies can jointly plan how to build the CSeries assembly facility in Mobile. That would position them to start construction once regulatory approvals are in place and have the facility operational about a year later.

Under that schedule, CSeries deliveries to Delta may be delayed until the new facility is running. Mr. Cromer said Bombardier would have to shuffle some delivery positions in 2018 to other customers.

The aircraft maker forecasts 40 to 45 CSeries deliveries in 2018.

Since Bombardier announced the deal with Airbus, it said it had won a commitment for up to 61 more CSeries orders from a European customer. Mr. Cromer wouldn't identify the client, but said interest in the plane "continues to build."

Write to Robert Wall at robert.wall@wsj.com


(END) Dow Jones Newswires

November 13, 2017 07:53 ET (12:53 GMT)

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