MONTREAL (Reuters) - Airbus SE takes a majority stake in Bombardier Inc’s CSeries jet program for $1, in a game-changing aerospace deal that puts pressure on rivals Boeing Co and Embraer.
BOMBARDIER - The deal resolves several headaches for the Canadian plane and train maker by proving a sales network for the CSeries program, reducing costs and helping to resolve a trade dispute with Boeing through a new Airbus assembly line for the jets in the United States.
Bombardier stock shot up 22 percent in Toronto on Tuesday.
AIRBUS - The European planemaker paid nothing to secure a 50.01 percent stake in a certified plane that cost $6 billion to develop. The deal will help Airbus save on production costs by improving operational and supply chain lines, while expanding its offering of narrowbody jets to put added pressure on rival Boeing.
UK GOVERNMENT - Bombardier is the largest manufacturing employer in Northern Ireland and the deal gives a boost to British Prime Minister Theresa May, whose minority Conservative Party government is in a coalition with Northern Ireland’s Democratic Unionist Party (DUP). With the CSeries under pressure from Boeing, May had waded into the U.S. trade debate and asked U.S. President Donald Trump to intervene in order to save British jobs.
CANADIAN GOVERNMENT - The deal with Airbus keeps Bombardier’s corporate head office in Montreal, gives the CSeries a fresh lifeline, and provides job guarantees in Quebec, a province crucial to the Liberal government’s prospects in the 2019 federal elections.
A potential winner who may be able to trumpet new U.S. manufacturing jobs in a Republican stronghold.
BOEING - The tie-up gives Airbus and Bombardier an edge over Boeing in the narrow-body market, and provides Airbus with a line that competes with Boeing’s 737 MAX. The CSeries may be produced at Airbus’ assembly line in Alabama for U.S. airlines, helping Bombardier avoid punitive U.S. tariffs threatened by a trade dispute with Boeing.
EMBRAER SA - The Brazilian plane-maker’s stock slid almost 6 percent on Tuesday. Embraer’s E190-E2 jet enters service next year and now faces a more formidable rival in the CSeries. Embraer, however, could contemplate its own alliance with Boeing.
Shares in Embraer SA posted their biggest intraday tumble in more than 14 months on Tuesday.
CHINA - Chinese state industry, which is developing its own jets, lost out on a deal with Bombardier despite holding several talks with the company over a stake in the CSeries. The deal would have given China access to Bombardier’s technology, while the Canadian planemaker would have gained access to the country’s fast-growing aviation markets.
Reporting By Allison Lampert; Editing by Nick Zieminski