I only see Airbus's move for the C-Series as a way to annoy Boeing. Something tells me that as soon as Delta gets its frames delivered, Airbus will backout or push to shut down the series altogether. Why would Airbus support a program that competes with the A319/A320 range?

IMHO, this is a lazy, one-sided piece based on the (lazy, one-sided) opinion of a Wall Street aerospace analyst who, from what I can tell, has very actual aviation industry experience (he appears to be an engineer, which does not necessarily qualify him as a specialist analyst on aircraft manufacturing and the airline industry. I've never heard of him nor his company, so I've nothing to go on as to whether he is generally 'on-the-money' with his analysis or not (though I would note that his and Leeham's continual references to Bernstein as a standalone company are incredibly outdated given Alliance Capital and Sanford C Bernstein merged into AllianceBernstein in 2000).

He claims that the CSeries needs to sell for $30m a piece to be profitable - based on what assumption about sales? Everyone on a.net knows, I assume, that the more units an aircraft program sells, the less each unit needs to be sold for in order that the program be profitable. And, indeed, there is good reason to believe that at least some of the CSeries already ordered have achieved at least the $30m mark given, as ODwyerPW says, the list price for a CRJ900NextGen is north of $40m.

He claims that the B717 was an orphan because only one model was ever produced (seemingly ignoring the myriad DC-9 derivatives that went before it) and claims that its demise was due, in part, to the lack of any commonality with the B737 - but he fails to acknowledge that the CSeries has far greater interoperability (perhaps not commonality) with the A320 family on account of both being roughly the same overall configuration (in terms of the placement of wings and engines, indeed the somewhat related PW engines available on both, and the flightdeck (not least the sidestick)). He also fails to acknowledge the possibility that Airbus view the CSeries as a better optimised product for the market they might have hoped to stimulate with their own A319neo and that, therefore, the A319neo, rather than the CSeries, might be on the chopping block.

His assumptions are based on Airbus retaining, permanently, a 50.1% stake in CSALP and, here again, he has ignored that Airbus has secured options to increase its stake in CSALP to 100% from 2023. He fails to draw into his assumptions the claims by Airbus that it can reduce supply chain costs for the CSeries, claims which seem to strongly indicate Airbus's intention to keep the program active for some time.

Finally, the Leeham article claims that Airbus's latest forecasts (2014) for the 100-150 seat segment are for just over 4,100 units - however Airbus's latest prediction for that market is, indeed, contained as a highlight in their own media release on the CSALP deal and is for over 6,000 units. On that subject, one could argue that with today's relatively subdued fuel prices airlines would be naturally disinclined to purchase brand new aircraft in a segment where many airlines already have fully-depreciated previous generation aircraft (F100, B717, older A318/9, B736/7, EJet), and where the used market is relatively active with low purchase prices. However, there will come a point as fuel prices rise (which they are predicted to do) where airlines will naturally start to look more favourably at the not-insignificant fuel savings available with the CSeries and E2. And, of course, on that subject, some analysts believe that the partially-announced 31+30 CSeries order may, in fact, bring other airlines into the new market by displaying confidence (given it is supposedly a new customer).

I, like ODwyerPW and others, don't believe for one second that the CSeries program is going anywhere soon.

This is the opinion of one analyst. Remember that some analysts are paid to do propaganda. People plant information in the news. I am sure other analysts have different opinions.

einsteinboricua wrote:

I only see Airbus's move for the C-Series as a way to annoy Boeing. Something tells me that as soon as Delta gets its frames delivered, Airbus will backout or push to shut down the series altogether. Why would Airbus support a program that competes with the A319/A320 range?

I'll briefly sum up what others have already stated earlier in this thread.

• Sales of the A319NEO are already very weak. I think Airbus is happier to accept 50% of profits from a CSeries rather than sell A319NEO's at fire sale prices to compete with it.
• The CSeries offers the opportunity to potentially upsize the A320 line, adding an A322, and still allow Airbus to cover the lower end of the narrowbody market. It gives them an easy path towards competing against a Boeing MOM, without sacrificing all profit below A320 size. They could also develop the CS500. Thus, they would offer two narrowbody families, the CS100/300/500, and the A319/320/321/322. It seems like a 3-size family is the magic number.

As to if/when an A322 and CS500 would happen, I think that depends on what Boeing does. If Boeing were to announce a MOM, I think we'd see both an A322 and CS500 announced fairly quickly, in response. Worst of all for Boeing, is that Airbus would be faster to market, creating derivatives versus a new clean-sheet.

As to annoying Boeing… it seems like an awful lot of effort, getting a US CSeries FAL going, just to deliver Delta's order, just for Airbus to thumb their noses at Boeing. Don't you think?

DWC wrote:

Jomar777 wrote:

Could, at this stage either counter each of your arguments or even support them even further but the truth is that it is SIMPLY TOO EARLY TO EVALUATE. The deal was announced but not yet even ratified (it will probably be).
Airbus so far got no risk on their own since they did not spend a cent over than the US$ 1.00 they did pay.
This can go either way depending of Airbus success (and willingness - which is unknown at present despite to what they did declare at the time of the announcement of the deal).
What I would really say is that it is very cheap call people that discord of your views as incompetents. This is far of the truth as it gets.

Yes & no. If you unbundle everything, logic can take any argument & say what you want.
It is the consistency of it all & my experience in industrial coherence that makes me say that.
Admittedly, it is too soon to have a proof, time will tell. If future proves me wrong ( and many other analysts ), then so be it.
If not, remember this conversation & mark my words : there is a broader way at looking at things & conducting business, actually the one used by China, Asian tigers & the UAE to develop faster & leapfrog their neighbours : they are more competent.
Besides, comparing this with the Boeing 717 is comparing apples & oranges & thus shows incompetence imho.

Regardless, as you correctly point out, it is too soon. You may be right and Airbus might make a lot of money with the C-Series or it may turn out to be otherwise. Not only you but the community and also analysts are quite split on this one for reasons which at present do seem feasible either way.
In future, obviously some will be right but we should not define those who backed the wrong idea as incompetent.

In one point I clearly agree with you: there's no way to really compare what happened when Boeing acquired McDonnell Douglas to what happened with the C-Series program now. There are some similarities but overall it is, as you say, apples and oranges.

As it was already pointed out, Boeing was much more interested in MD's Military Portfolio (e.g. the F15 and F18 which are still somehow being produced). The commercial side just sort of came together and they preferred to shutdown that division a while after rather than divest it towards a potential competitor.

Airbus approach to the C-Series will certainly be different and, if they manage to solve the problems related to the program (pricing, production, etc...) there's o way that they will bin the project.

Jomar777 wrote:

...if they (Airbus) manage to solve the problems related to the program (pricing, production, etc...) there's o way that they will bin the project.

That should be quite easy to solve - if such problems exists really; it's more a lack of $ with BBD than anything else.

The GTF difficulties will eventually get solved (the CSeries version is not affected as much).

It's more about if Airbus will have sufficient financial incentives to sell CS100/300s to block 737s / E2s sales (obviously yes), but also in lieu of some potential unprofitable 319 NEOs sales (unprofitable as it would prevent additional higher profit A320/321 NEOs sales).

ExMilitaryEng wrote:

It's more about if Airbus will have sufficient financial incentives to sell CS100/300s to block 737s / E2s sales (obviously yes), but also in lieu of some potential unprofitable 319 NEOs sales (unprofitable as it would prevent additional higher profit A320/321 NEOs sales).

IMHO it's mostly about the amount of demand for airplanes the size of CS100/CS300 that aren't members of the A3xxx/B737 families.

And to a lesser degree it's about deliveries, because you don't get paid till you deliver.

http://aviationweek.com/commercial-avia ... ine-delays tells us that BBD is going to only ship 20-22 aircraft from the planned 30-35 this year and is projecting only hitting the low end of guidance next year.

Basically next year BBD is going to struggle to make the same number of narrowbodies in a year that A or B individually make in a month.

Interestingly, Airbus is trying to get in on Canada's fighter jet replacement program - and seemingly would have the aircraft assembled by Bombardier in Canada. So there are a lot of moving parts here. Canada already has ordered patrol aircraft from Airbus. I would tend to see this as a deepening relationship. Sure, specific elements might change over time, but I suspect there are a lot of cards to be played in the next few years.

ExMilitaryEng wrote:

It's more about if Airbus will have sufficient financial incentives to sell CS100/300s to block 737s / E2s sales (obviously yes), but also in lieu of some potential unprofitable 319 NEOs sales (unprofitable as it would prevent additional higher profit A320/321 NEOs sales).

It it is also whether Airbus has sufficient financial incentive to push the CS300 (I'm ignoring the CS100 because that is going to be niche even under Airbus's tutelage) versus potentially being able to upsell to the A320.

From Revelation: "AW tells us that BBD is going to only ship 20-22 aircraft from the planned 30-35 this year and is projecting only hitting the low end of guidance next year."

And you know very well that most of it is due to the lower number of GTF shipments (PW is paying some $ to BBD to compensate for the resulting couple of "white tails").

I agree that very soon, BBD will have to upgrade it's FAL foot print in order to cope with the expected faster pace of sales.

ExMilitaryEng wrote:

From Revelation: "AW tells us that BBD is going to only ship 20-22 aircraft from the planned 30-35 this year and is projecting only hitting the low end of guidance next year."

And you know very well that most of it is due to the lower number of GTF shipments (PW is paying some $ to BBD is the resulting couple of "white tails" that resulted from it).

I agree that very soon, BBD will have to upgrade it's FAL foot print in order to cope with the expected faster pace of sales.

I do know the PW issue very well, but ramp up is always a very demanding time for a business, and that's my point.

Truth is, we'll never know what BBD's ramp up would have been like without the PW issues.

aerolimani wrote:

As to annoying Boeing… it seems like an awful lot of effort, getting a US CSeries FAL going, just to deliver Delta's order, just for Airbus to thumb their noses at Boeing. Don't you think?

If it means a giant airline will make extract heavy concessions from Boeing to be back on their good side, then it's a nice ploy by Airbus. They get the benefit of helping an airline avoid a tariff while being able to cash in that favor in the future for an order. And it also tells other airlines that, through them, they can get the CSeries without tariffs (i.e. potential 737 orders being switched to CSeries).

Seems the sudden interest of Airbus with the C-Series is too much to be just a mere coincidence, especially when back in 2015, Airbus had already declined to take a majority stake in the program.

Revelation wrote:

Truth is, we'll never know what BBD's ramp up would have been like without the PW issues.

I got to agree with you on that one.

I overheard of some suppliers issues, plus the barely sufficient current FAL, not yet optimal (that's only halfway completed as they took some unused CRJ program space, saving some capital expenditure).

I also read that they might move the whole Mirabel CRJ FAL back to Dorval (where it used to be, many years ago) to make even more room for the CSeries.

IF the CSeries was a desirable program, it would have been able to make it on its own without illegal government subsidies. It has not proven that capability. Having Airbus onboard does little to change that. This has a very good possibility of being smoke and mirrors on a company and program that just died.

CX747 wrote:

IF the CSeries was a desirable program, it would have been able to make it on its own

Post hoc ergo propter hoc? There are many variables involved in that. But hey, you can simplify it as much as you want until it matches your twisted logic.

CX747 wrote:

without illegal government subsidies.

Don't state biased opinions as facts.

CX747 wrote:

It has not proven that capability.

Current operators and incoming orders extremely disagree.

CX747 wrote:

Having Airbus onboard does little to change that.

It changes everything, from the providers to marketing, pricing future support and know-how.

CX747 wrote:

This has a very good possibility of being smoke and mirrors on a company and program that just died.

0% possibilities.

einsteinboricua wrote:

aerolimani wrote:

As to annoying Boeing… it seems like an awful lot of effort, getting a US CSeries FAL going, just to deliver Delta's order, just for Airbus to thumb their noses at Boeing. Don't you think?

If it means a giant airline will make extract heavy concessions from Boeing to be back on their good side, then it's a nice ploy by Airbus. They get the benefit of helping an airline avoid a tariff while being able to cash in that favor in the future for an order. And it also tells other airlines that, through them, they can get the CSeries without tariffs (i.e. potential 737 orders being switched to CSeries).

Seems the sudden interest of Airbus with the C-Series is too much to be just a mere coincidence, especially when back in 2015, Airbus had already declined to take a majority stake in the program.

Agreed. Now I see what you're getting at.

Revelation wrote:

A very hot take from https://leehamnews.com/2017/11/07/analy ... s-program/

The Bombardier CSeries may go the way of the McDonnell Douglas MD-95, a Wall Street aerospace analyst predicts: that is, the program is likely to remain unprofitable and be shut down.

And:

He believes that like Boeing, Airbus won’t be able to cut costs because suppliers already see a difficult path to profits.

Harned believes the CSeries needs to sell for about $30m to be profitable. Airlines want prices in the low $20m range, he said.

Harned also cast doubt on the current skyline quality (something LNC has noted many times), with the prospect of cancellations.
...
Harned sees the Airbus deal as a mechanism to eliminate a competitor and benefit from learning from the advanced technology in the airplane. But even at a $30m sales prices, this will account for only about 2% of sales, he projects, an inconsequential revenue producer for Airbus.

So Airbus signs the deal to get access to the tech, but over time sees poor profitability and cancellations so it shuts down the program.

So much for Leeham being Airbus fan boys!

Everyone let’s not forget, fuel prices have been climb as of late. If this trend continues, we may see a return to a mid 2000 ish environment. Should this be the case, you better believe that airlines will offer low 30s mil for the aircraft.

1900Driver wrote:

Revelation wrote:

A very hot take from https://leehamnews.com/2017/11/07/analy ... s-program/

The Bombardier CSeries may go the way of the McDonnell Douglas MD-95, a Wall Street aerospace analyst predicts: that is, the program is likely to remain unprofitable and be shut down.

And:

He believes that like Boeing, Airbus won’t be able to cut costs because suppliers already see a difficult path to profits.

Harned believes the CSeries needs to sell for about $30m to be profitable. Airlines want prices in the low $20m range, he said.

Harned also cast doubt on the current skyline quality (something LNC has noted many times), with the prospect of cancellations.
...
Harned sees the Airbus deal as a mechanism to eliminate a competitor and benefit from learning from the advanced technology in the airplane. But even at a $30m sales prices, this will account for only about 2% of sales, he projects, an inconsequential revenue producer for Airbus.

So Airbus signs the deal to get access to the tech, but over time sees poor profitability and cancellations so it shuts down the program.

So much for Leeham being Airbus fan boys!

Everyone let’s not forget, fuel prices have been climb as of late. If this trend continues, we may see a return to a mid 2000 ish environment. Should this be the case, you better believe that airlines will offer low 30s mil for the aircraft.

Based on orders my firm has received over the past month, expect a big spike in US shale production after the first of the year.

WaywardMemphian wrote:

1900Driver wrote:

Revelation wrote:

A very hot take from https://leehamnews.com/2017/11/07/analy ... s-program/


And:


So Airbus signs the deal to get access to the tech, but over time sees poor profitability and cancellations so it shuts down the program.

So much for Leeham being Airbus fan boys!

Everyone let’s not forget, fuel prices have been climb as of late. If this trend continues, we may see a return to a mid 2000 ish environment. Should this be the case, you better believe that airlines will offer low 30s mil for the aircraft.

Based on orders my firm has received over the past month, expect a big spike in US shale production after the first of the year.

That may be the case, but global demand is increasing steadily. Opec and non Opec producers will likely continue the cuts. As well, how long is the reserve life of each well in the Permian & eagleford? Do shale producers have the cash to increase capex spending like last year?

I doubt low fuel prices will endure much longer.. though shale production maybe the limiting factor. Despite that, the cseries is well positioned for higher fuel prices.

The vast majority of the posts so far are completely illogical.

You guys are most likely being used as pawns to drum up fear that C series is doomed. This is simply to reduce the price that Airbus will have to pay.

Why would Airbus try and turn the C series into a highly profitable program right before they want to buy the second half of it?

Has anyone here worked out the actual market value of the C series program?

Obviously the yearly profit of the program goes a long way to determine its market value. The value goes up even more if the profits will continue for decades.

Airbus most likely see's the C series slotting in below a rewinged A321 for the next 30+ years. Airbus will want to own 100% of the program. Airbus should go out of their way to make the C series look unprofitable in the short term. They'll then be able to buy the second half of the program for a bargain.

This would involve not getting suppliers to reduce costs, but promise they will reduce it after Airbus owns the full program. Leaking fake news to the media about a full cancellation would also improve Airbus position.

RJMAZ wrote:

Has anyone here worked out the actual market value of the C series program?

Airbus did that for us—it’s $1. Which is a symbolic price for worth nothing.

And Airbus gets the right to demand the original owner spend $700 million dollars over the next three years, without Airbus picking up its half of the tab.

From RJMAZ: "Airbus should go out of their way to make the C series look unprofitable in the short term. They'll then be able to buy the second half of the program for a bargain"

Let's put it this way: the other 49.99% of ownership might see it differently, and might have a say on that one.

I would not be surprised that a clause exists (or will exist) to ensure that Airbus delivers on its part of the bargain. Really, that's was the whole point of getting Airbus onboard, nothing else.

ExMilitaryEng wrote:

From RJMAZ: "Airbus should go out of their way to make the C series look unprofitable in the short term. They'll then be able to buy the second half of the program for a bargain"

Let's put it this way: the other 49.99% of ownership might see it differently, and might have a say on that one.

I would not be surprised that a clause exists (or will exist) to ensure that Airbus delivers on its part of the bargain.

Airbus was given not just the majority of the shares but also the majority of the Board of Directors.

They can pretty much do whatever they feel is in their own best interest.

Personally I can't really see how one could minimize investment over the next seven years, buy on the cheap and then pump in money and end up with a valuable program, but I'm no master of business strategy.

Clearly BBD felt that their best strategy was giving away half of the program in the hopes that in seven years the whole program would be worth >2x what it would be worth without Airbus, but then again BBD has (ahem) not shown to be masters of business strategy.

So you don't believe that a clause exists that would ensure Airbus delivers on its commitments (supply chain cost savings etc). You know, that was the ONLY reason we got Airbus onboard.

I guess BBD and the Quebec gvt are really stupid then

Maybe they will read this tread and they will add that missing clause...

ExMilitaryEng wrote:

I guess BBD and the Quebec gvt are really stupid then

How do you explain investing $5.6B and then having to give away total control and half the program value away for $1 without including stupidity in the explanation?

Revelation wrote:

ExMilitaryEng wrote:

I guess BBD and the Quebec gvt are really stupid then

How do you explain investing $5.6B and then having to give away total control and half the program value away for $1 without including stupidity in the explanation?

You are definitely know about the predatory actions of Boeing (737-700 at $22M) and also Airbus to get BBD out of the market, and then those 300% duties. That explains the current situation very well.

Despite all the above, they still managed to certify that airplane and bring it to service while achieving / beating all specs promises.

Despite also paying more for its supplies, having no real bargaining power with those same suppliers, and everyone believing they would eventually bankrupt.

Anyways, I don't believe there is an absence of safeguards to ensure that Airbus delivers on its commitments.

Airbus is not Boeing, they have an history of partnership between original manufacturers, and transnational partnership.

Flighty wrote:

Everybody agrees that the C-series is a good aircraft. This is why Airbus bought it and is planning on shutting it down. They want to retard the development of global competitors as much as possible. Once the market is fully retarded, Airbus and Boeing will have achieved their goal together.

This. Why push and sell a plane that they can barely make money with? Especially if by selling that plane it takes away a sale of their 320 derivative that makes gobs of money. I see this just like WN buying FL. Time will tell.

ExMilitaryEng wrote:

Revelation wrote:

ExMilitaryEng wrote:

I guess BBD and the Quebec gvt are really stupid then

How do you explain investing $5.6B and then having to give away total control and half the program value away for $1 without including stupidity in the explanation?

You are definitely know about the predatory actions of Boeing (737-700 at $22M) and also Airbus to get BBD out of the market, and then those 300% duties. That explains the current situation very well.

Despite all the above, they still managed to certify that airplane and bring it to service while achieving / beating all specs promises.

Despite also paying more for its supplies, having no real bargaining power with those same suppliers, and everyone believing they would eventually bankrupt.

The A and B responses were 100% predictable especially since BBD has been in commercial aviation for decades, yet BBD still dove in head first.

Investing in a business that cannot succeed is IMHO one way to define stupidity.

Instead of Shutting the door on the program, I see it as an opportunity to REPLACE the A318/19 lackluster line.
The C series could be the A318/19 replacement leaving the "cash cow" A320/21 line all by itself.... why change what is not broken.

Obviously, they did not face that kind of predatory behavior with their 90 sweaters. Nor Embraer with their E190s.

With the CSeries, they got closer to the duopoly territory, but not many would have predicted such intense predatory reaction for a 135 seaters.

Anyways, if there are no clauses that ensures Airbus delivers on its commitments, that deal won't get signed.

Selling to the Chinese would then be better as it would fetch more $, while still keeping the FAL open a couple more years.

sebring wrote:

Interestingly, Airbus is trying to get in on Canada's fighter jet replacement program - and seemingly would have the aircraft assembled by Bombardier in Canada. So there are a lot of moving parts here. Canada already has ordered patrol aircraft from Airbus. I would tend to see this as a deepening relationship. Sure, specific elements might change over time, but I suspect there are a lot of cards to be played in the next few years.

I assumed that this might be on the table when Airbus called Canada "the first member country outside of Europe" where did you get the info?
That is some interesting news

ExMilitaryEng wrote:

Obviously, they did not face that kind of predatory behavior with their 90 sweaters. Nor Embraer with their E190s.

With the CSeries, they got closer to the duopoly territory, but not many would have predicted such intense predatory reaction for a 135 seaters.

Anyways, if there are no clauses that ensures Airbus delivers on its commitments, that deal won't get signed.

Selling to the Chinese would then be better as it would fetch more $, while still keeping the FAL open a couple more years.

All that has been stated above is correct! Figured I would comment on it, because the naysayers definitely can't

I don’t think so. It is too good of a plane. The CSeries will take care of the 100 to 150 passenger range. Airbus will change there planes using CSeries as a model. This plane will be the most advanced single asle plane in the world. Airbus will product the 150 to 250 passenger model.

I don’t think so. It is too good of a plane. The CSeries will take care of the 100 to 150 passenger range. Airbus will change there planes using CSeries as a model. This plane will be the most advanced single asle plane in the world. Airbus will product the 150 to 250 passenger model.

PPVRA wrote:

Airbus did that for us—it’s $1. Which is a symbolic price for worth nothing.

And Airbus gets the right to demand the original owner spend $700 million dollars over the next three years, without Airbus picking up its half of the tab.

$1 but with MANY strings attached.

The designs, tooling and supplier network would easily be worth a billion. It cost Bombardier nearly $6billion to develop up to this point. The 737MAX was $2billion to develop and that was mainly new engines.

Best case scenario in 7 years time the program could be making $500million profit per year. That's 100+ aircraft per year from two assembly lines and with all cost savings implemented by Airbus. That money would be paying back the government loans and bombardiers development costs. Airbus would have to pay billions to buy the second half.

Worst case scenario the aircraft are still being sold at or below cost price. The government and bombardier would be loosing money every year. Airbus could then buy the second half for $1.

ExMilitaryEng wrote:

So you don't believe that a clause exists that would ensure Airbus delivers on its commitments (supply chain cost savings etc). You know, that was the ONLY reason we got Airbus onboard.

I can't see how they could predict future production costs or future sale prices. That is up to the airlines and suppliers, so you can't put that in a contract. Airbus could simply say that Airlines aren't willing to pay above cost price for an aircraft like the C series.

ExMilitaryEng wrote:

Maybe they will read this tread and they will add that missing clause...

Yes and I request some commission off Bombardier and the Canadian government for helping protect them from such an strategic move by Airbus.

It is so obvious to me but it has been completely missed by everyone in this thread.

Revelation wrote:

Personally I can't really see how one could minimize investment over the next seven years, buy on the cheap and then pump in money and end up with a valuable program, but I'm no master of business strategy.

Easy.

If Airbus got the second half for $1 they would happily pump in billions to make it a long term success. That would come in the way of initially selling well below cost and launch the CS500. I'm talking 1000+ orders in a few years. Airbus then opens a third assembly line in Europe or Asia and the production cost per jet will come right down. The majority of these orders will come at the expense of 737 sales.

The A320 family is bigger, heavier and longer ranged than the 737. So a typical 737 customer would find C series more attractive option.

Revelation wrote:

Clearly BBD felt that their best strategy was giving away half of the program in the hopes that in seven years the whole program would be worth >2x what it would be worth without Airbus, but then again BBD has (ahem) not shown to be masters of business strategy.

That was clearly their plan. But Airbus could now simply devalue it further and get the second half for free.

TVNWZ wrote:

Flighty wrote:

Everybody agrees that the C-series is a good aircraft. This is why Airbus bought it and is planning on shutting it down. They want to retard the development of global competitors as much as possible. Once the market is fully retarded, Airbus and Boeing will have achieved their goal together.

This. Why push and sell a plane that they can barely make money with? Especially if by selling that plane it takes away a sale of their 320 derivative that makes gobs of money. I see this just like WN buying FL. Time will tell.

Sorry, you what? Are you trying to say that the A319neo is making gobs of money? With its 51 orders, 1 aircraft so far built (and that a test aircraft) and no sign that any deliveries will occur in the foreseeable future? I assume you realise the A319neo won't make a cent (not that aircraft program accounting really works this way anyway, but for the sake of argument) until such time as one is delivered to a customer? I assume you also realise that every time the A319neo test aircraft flies (not to mention the cost of building it in the first place) is a sunk cost unless and until an A319neo is delivered to a customer? And I assume you remember that WN, in announcing it was buying FL, stated the express purpose of merging FL into WN and operating the merged entity under a single brand and AOC (unlike Airbus which, in announcing it would take the controlling interest of the CSALP, stated the express purpose of offering the CSeries and A320neo families concurrently, including in the same RFPs)?

Now, I'm not a Wall Street aerospace analyst, but it seems pretty clear to me that Airbus would be better (and, in all likelihood, plans) to: (a) quietly let the A319neo fizzle out; (b) replace it in their product line-up with the CS300 with the CS100 there to counter the upper-end of the E2 line-up; and (c) offer the existing A319neo customers a switch to CS300 or A320neo.

As to those saying Airbus would want to keep the CSeries unprofitable so that the valuation on the remaining 49.9% of CSALP remains low, consider the counter-arguments that: (a) there is no incentive for them to take the remaining 49.9% if they actively avoid selling the CSeries in the meantime, thus the valuation of the 49.9% is of no consequence to Airbus; (b) in the meantime, they can have 50.1% of any profit the program makes between settlement and when they are eligible to take full ownership; (c) profitability will probably not be achieved until just before Airbus is able to take full ownership, so the valuation probably wouldn't be too greatly affected anyway; and (d) the 'promise of future revenue/profitability' element of the valuation, assuming Airbus took up its option on the remaining 49.9%, would be offset to a greater or lesser extent by Airbus realising 100% of profit from the program (as well as any profit the CSeries might contribute to other Airbus programs).

DeltaB717 wrote:

IMHO, this is a lazy, one-sided piece based on the (lazy, one-sided) opinion of a Wall Street aerospace analyst who, from what I can tell, has very actual aviation industry experience (he appears to be an engineer, which does not necessarily qualify him as a specialist analyst on aircraft manufacturing and the airline industry. I've never heard of him nor his company, so I've nothing to go on as to whether he is generally 'on-the-money' with his analysis or not (though I would note that his and Leeham's continual references to Bernstein as a standalone company are incredibly outdated given Alliance Capital and Sanford C Bernstein merged into AllianceBernstein in 2000).

He's been busy in hard physics in the early/mid 80ties. Then his publishing trail peters out.
IMU he then turned to "impedance matching" in military procurement.
Not an "available to all" paid shill like forex Loren Thompson and his vigilante band from the Lexington Institute.

Bernstein Research is a pretty visible name in the Wall Street (not only aerospace) analyst domain.
All those analysts are invariable more Wall Street savvy than tech competent.

I just read in Aviation week that Airbus was going to iimply economy of scale in their supplier dealings, But as of Now? Nobody even knows what that might be.. The suppliers aren't giving up "SQUAT" so Airbus will be negotaiting everything other than Raw Materials.
Airbus might still gain some economy of scale but this venture could still bite them in the BUTT..

RJMAZ wrote:

But Airbus could now simply devalue it further and get the second half for free.

Why is it that some cannot think beyond redistributive, overall below zero summ games of "win from loss" ?

"foisting off less fitting products on customers by killing the better product"

"holding something down to get the second half for free as well."

What in a culture makes this drive to ever begrudge the other side
and turn everything into an uncreative looting activity?

WIederling wrote:

RJMAZ wrote:

But Airbus could now simply devalue it further and get the second half for free.

Why is it that some cannot think beyond redistributive, overall below zero summ games of "win from loss" ?

"foisting off less fitting products on customers by killing the better product"

"holding something down to get the second half for free as well."

What in a culture makes this drive to ever begrudge the other side
and turn everything into an uncreative looting activity?

It's short-term, quarterly results, shareholder-driven thinking. It's what the USA does. 7 years? That's 28 sets of quarterly results from now!

It's hard to believe all these ridiculous suggestions that Airbus should suppress the CSeries so they can but it cheap. If there's a chance of the CSeries being worth anything 7 years from now, then it needs to be nurtured now. To have any value in 7 years, it needs to have a large installed user base. Technology advances, time moves on, and other competitors will emerge.

einsteinboricua wrote:

aerolimani wrote:

As to annoying Boeing… it seems like an awful lot of effort, getting a US CSeries FAL going, just to deliver Delta's order, just for Airbus to thumb their noses at Boeing. Don't you think?

If it means a giant airline will make extract heavy concessions from Boeing to be back on their good side, then it's a nice ploy by Airbus. They get the benefit of helping an airline avoid a tariff while being able to cash in that favor in the future for an order. And it also tells other airlines that, through them, they can get the CSeries without tariffs (i.e. potential 737 orders being switched to CSeries).

Seems the sudden interest of Airbus with the C-Series is too much to be just a mere coincidence, especially when back in 2015, Airbus had already declined to take a majority stake in the program.

Except... this deal was being brokered *before* the shock litigation instigated by Boeing!

Unless Airbus was somehow tipped off months ago that Boeing was going to try this trick - that would have been some impressively quick thinking and response by Airbus in that case.

aerolimani wrote:

WIederling wrote:

RJMAZ wrote:

But Airbus could now simply devalue it further and get the second half for free.

Why is it that some cannot think beyond redistributive, overall below zero summ games of "win from loss" ?

"foisting off less fitting products on customers by killing the better product"

"holding something down to get the second half for free as well."

What in a culture makes this drive to ever begrudge the other side
and turn everything into an uncreative looting activity?

It's short-term, quarterly results, shareholder-driven thinking. It's what the USA does. 7 years? That's 28 sets of quarterly results from now!

It's hard to believe all these ridiculous suggestions that Airbus should suppress the CSeries so they can but it cheap. If there's a chance of the CSeries being worth anything 7 years from now, then it needs to be nurtured now. To have any value in 7 years, it needs to have a large installed user base. Technology advances, time moves on, and other competitors will emerge.

I agree, the cseries is the only aircraft in its size at this time. Therefore it has no real competition. Airbus must grow the program now. By doing so they will have the cominality advantage first in that size.

WIederling wrote:

RJMAZ wrote:

But Airbus could now simply devalue it further and get the second half for free.

Why is it that some cannot think beyond redistributive, overall below zero summ games of "win from loss" ?

"foisting off less fitting products on customers by killing the better product"

"holding something down to get the second half for free as well."

What in a culture makes this drive to ever begrudge the other side
and turn everything into an uncreative looting activity?

For some people it's always us-versus-them, black-and-white, win-or-lose. All anger and tribalism.

It elected a certain president...

RJMAZ wrote:

(about performance clauses) I can't see how they could predict future production costs or future sale prices. That is up to the airlines and suppliers, so you can't put that in a contract. Airbus could simply say that Airlines aren't willing to pay above cost price for an aircraft like the C series.

Part of my job is reviewing performance clauses, and assess its level of achievement.

The complexity of those clauses can vary, but most of the time, they still remain highly effective in steering contracts toward the desired goal.

Airbus did an extensive analysis of the synergies (and costs savings) that can be achieved in this partnership. Most of it can be quantified, rated and translated into performance indicators.

Those savings/synergies were the whole point of bringing Airbus onboard. It's obvious that safeguards / clauses will be embedded to ensure a win-win partnership.

If it's not possible, that contract will just not be signed, and the program will eventually be sold to the Chinese for more $ upfront. Even under that scenario, the Mirabel FAL could remain open for quite a while (it would take a while before a second Chinese FAL can take over 100% of the production).

First off, most deals in business (99%+) are win-win. The idea that for one party to be a winner the other must be a looser is bad business. May I point out the multiple bankruptcies of the primary proponent of the win/lose school of business?

Second, it seems like a lot of people here are looking at the CSeries-AB deal through the win/lose lens. Yes, there was one party in a significantly reduced negotiating position but that doesn’t make BBD an automatic loser in the deal. BBD made a swing for the fences in the CSeries and came up short resource wise. But had they been a bit less ambitious in pushing the technology and investing resources they may have been stuck with an unremarkable plane that didn’t need the investment from Quebec. I’d argue that they would be in a much worse place had they played it safe. Even lower sales and no interest from AB.

Third, any family of airplane has a base model that is then shrunk and stretched to make the various models. Allowing the CSeries to occupy the lower end of the AB lineup gives the designers the ability to build a larger base model for the next A320 size plane with fewer compromises in the other models in the family, especially when it comes to the larger model. AB now has a back door into the MoM.

Forth, Boeing missed a huge opportunity in deciding that the CSeries is competition to the 50+ year old type certificate on the 737. In an alternate world Boeing could have been the major player partnering with BBD on the CSeries and would have had access to a modern cockpit that could have served as the basis and head start for the 737 replacement/MoM, something Boeing desperately needs much more than AB.

In summary, there is no guarantee that this marriage will be successful but I see more pointing toward success that ruin.

ExMilitaryEng wrote:

Those savings/synergies were the whole point of bringing Airbus onboard. It's obvious that safeguards / clauses will be embedded to ensure a win-win partnership.

I'm trying to understand exactly what things Airbus will be bringing onboard so we can speak to performance/non-performance.

The presser ( http://www.airbus.com/newsroom/press-re ... ement.html ) says things like:

Airbus will provide procurement, sales and marketing, and customer support expertise to the C Series Aircraft Limited Partnership (CSALP)

And:

additional C Series production at Airbus’ manufacturing site in Alabama, U.S.

And:

access to Airbus’ global supply chain

Beyond this, it's not clear what Airbus has to provide, other than the four board members and its Chairman.

We could say that there must be more to it, but if it is, this press release might be used against the companies in future stock holder actions, so I'd say it needs to be representative of the deal.

So, I think the premise that Airbus could chose to use its majority stock holding and board positions to limit the eventual purchase price and/or drive towards a shutdown is still a possibility.

I believe BBD and the Quebec government is guaranteed a minimum price for its remaining shares (it has a put option), and that it can force Airbus to buy its shares. So if Airbus drives it into the ground, BBD would just exercise that right and get some money back. So while Airbus is putting no money in today, they are on the hook for a reasonable chunk if it goes very badly.

But I doubt it will go badly, because this gives Airbus a huge leg up in responding to whatever Boeing settles on for the 797. The Cseries is also not doing anything crazy that would fundamentaly make it more expensive than a A320, other volume.

Revelation wrote:

I'm trying to understand exactly what things Airbus will be bringing onboard so we can speak to performance/non-performance.
The presser ( http://www.airbus.com/newsroom/press-re ... ement.html ) says things like:

Airbus will provide procurement, sales and marketing, and customer support expertise to the C Series Aircraft Limited Partnership (CSALP)

And:

additional C Series production at Airbus’ manufacturing site in Alabama, U.S.

And:

access to Airbus’ global supply chain

Beyond this, it's not clear what Airbus has to provide, other than the four board members and its Chairman.
We could say that there must be more to it, but if it is, this press release might be used against the companies in future stock holder actions, so I'd say it needs to be representative of the deal.
So, I think the premise that Airbus could chose to use its majority stock holding and board positions to limit the eventual purchase price and/or drive towards a shutdown is still a possibility.

The "Airbus will provide procurement, sales and marketing, and customer support expertise to the CSALP + the possible Mobile FAL" is definitely proper for PR and regulatory purposes. Obviously further details exists and are being finalised in contracting terms. In due time, more details will be provided to the shareholders (and the public).

As you know, that's EXACTLY the way partnerships or takeovers are initially announced. There are no points in going into details that might be modified before contract closing. We might not be privy to those details just yet, but the stakeholders (BBD and the Quebec gvt) for sure already know way more, even at this early stage.

Again, there are no raisons to believe it won't be laid out as a win - win partnership. (You do realise that way more complex contracts have been executed in the past, right? I've seen some within my own work duties).

If a win - win contractual framework is not achievable, the contract will just not be signed, period. A Chinese sale would eventually occur, for more $ upfront, and that would involve a lot more technology transfers than this Airbus partnership.