Bombardier

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The U.S. slapped a big 219% tariff on Bombardier’s (-7.49%) new jet.

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The U.S. approved duties of 300% on aircraft manufacturer Bombardier in response to a complaint by Boeing.

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Delta’s (+0.70%) CEO said the company would refuse to pay a 300% tariff on Bombardier jets.

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t’s time to chalk up a big W for Airbus (+4.83%), which just announced a partnership to build Bombardier’s (+15.68%) CSeries airplanes.

The details: Airbus will take control of the $5 billion project with a 50.01% stake, but won’t incur any of the upfront costs. Its main focus? Marketing and selling the planes. 

And the CSeries, small narrow-bodied aircraft, have been tough planes to sell.

Go on…

The CSeries took off for good when Delta bought 75 airplanes last year—a solid order for Bombardier. But the party didn’t last long. Boeing (-0.43%), a competitor, complained to U.S. trade authorities that the Canadian government was unfairly subsidizing its hometown hero, Bombardier (the #3 commercial jet maker globally). 

And the U.S. Commerce Department saw eye-to-eye with Boeing. The agency is planning to slap the CSeries with a bombshell 300% tariff in December…an import tax that could raise the price of the planes 4x in the U.S.

As you can imagine, airlines said “thanks, but no thanks”—planes already cost a wing and a tail (the Bombardier CS300 goes for a cool $89.5 million). That’s why Delta plans to dine and dash with its 75 jets. CEO Ed Bastian warned, “We will not pay those tariffs and that is clear.”

Enter Airbus

By taking over the production of the CSeries, Airbus is making Boeing regret that it ever opened its mouth in the first place. 

Here’s why:

• Airbus has a manufacturing facility in Alabama. Since production will take place on U.S. soil, the project can likely sidestep any tariff.
• The CSeries are cutting-edge planes in a growing market for smaller jets (where demand could reach 6,000 planes over 20 years).
• Airbus got a great price ($1) for its majority stake and got some pretty nice perks…Bombardier will absorb up to $700 million in additional costs.

So, while Airbus won this round of the fight for the $200 billion per year commercial aviation market, expect Boeing to be refueling for another go at its rival.

https://www.morningbrew.com/stories/airbus-dunks-boeing/