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Airbus-Bombardier Deal Is All About Squeezing Boeing

We expect Boeing to fight this partnership and think it may seek closer ties with Embraer.

Securities In This Article
Bombardier Inc Registered Shs -B- Subord Vtg
Airbus SE
Boeing Co

After the market close Oct. 16,

This partnership puts further pressure on Boeing's 737 MAX. Boeing and Airbus lack competitive offerings in the lower end of the narrow-body market. The C Series provides Airbus with an all-new aircraft in the lower end of narrow-bodies that competes directly with the 737 MAX 7. Given the challenges Boeing faces at the higher end, where the A321neo is outselling the 737 MAX 9/10, we think the tie-up puts the squeeze on Boeing from both sides. Boeing will most likely argue against this deal to the competition authorities and might also seek closer ties with Embraer, which is present in the lower end of the market with its E2. The two already work together on Embraer’s KC-390 military transport, with Boeing supporting sales and marketing efforts.

We believe Airbus, which continues to expand globally, sees Bombardier as another growth path thanks to its North American presence and its fuselage work in China with Shenyang Aircraft. Airbus expects to eventually expand C Series production to its Mobile, Alabama, assembly line, and we think it will expand its relationship with Canadian and U.S. suppliers. Bombardier management was adamant that C Series aircraft rolling off Airbus’ Alabama production line would not be subject to the recently announced U.S. tariffs.

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About the Author

Chris Higgins

Senior Equity Analyst
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Chris Higgins, CFA, is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers aerospace and defense companies, airports, and airlines.

Before joining Morningstar in 2015, Higgins spent eight years working for Airbus Group in both the United States and Europe. While at Airbus Group, he held a variety of positions, ranging from corporate development to investor relations.

Higgins began career in strategy consulting, where he consulted leading U.S. and European aerospace and defense prime contractors. During his time in consulting, he led teams that solved business challenges ranging from merger and acquisition decisions to new product launches.

Higgins holds a bachelor’s degree in economics from Rhodes College, where he graduated as a member of Phi Beta Kappa, and a master’s degree in finance from The Henley Business School in the United Kingdom. He also holds the Chartered Financial Analyst® designation.

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