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Partners Ratify $300M Air Assembly Line

Top brass from two international aircraft companies flew in to Mobile in February to affirm a big deal for Alabama.

ABOVE Alain Bellemare, president and CEO of Bombardier (left), and Allan McArtor, chairman emeritus of Airbus Americas, welcomed Airbus employees and local media to view the CS-300.
 

Key executives from Airbus Americas and Bombardier Inc. flew into Mobile in late February to show off the CS-300 aircraft they plan to build here and their plans for a new $300 million final assembly line — provided the project can clear the remaining regulatory hurdles.

“We hope to see the deal close in the second half of this year,” said Jeff Knittel, chairman and CEO of Airbus Americas.

If regulators approve the deal, the two firms anticipate an increase of 400 to 600 jobs in Mobile, Knittel added.

The plans were first announced last October, within weeks after the U.S. Department of Commerce slapped a 300 percent tariff on the Canadian-built planes.

The tariff was the last step in a complex trade battle between Bombardier, Euro air giant Airbus and U.S. aircraft stalwart Boeing Co.

The story starts in Canada. Bombardier introduced a new little plane to fill the smaller end of the commercial jet market. The plane was designed from the ground up to be so fuel efficient that airline companies could afford to fly it with a passenger-friendly seating configuration.

And the plane’s success was critical to Bombardier, where times have been tough.

Costs were higher than expected, the project was taking longer than planned, engines were delayed and sales were off — all leading to a $417 million loss in 2016, another $377 EBIT loss in 2017 and yet another bleak prospect for this year.

The Quebec government provided $372 million in interest-free loans to keep its plane maker aloft.

But Bombardier had to sell some of the planes. There were a few orders, but not enough. What looked like the saving grace came in late 2016, with a big sale to Atlanta-based Delta Air Lines.

That sale prompted a trade complaint from rival aircraft maker Boeing, objecting specifically because of the Quebec government bailout funds.

Trade complaints about aircraft sales are common.

John Walton, writing for Australian Aviation, described it this way:  “a trade complaint that, initially, seemed like all the others that end up all sound and fury, but signifying nothing. A little launch aid here, a little investment incentive there, a big discount for early or large orders over there: it’s all part of the cut and thrust of commercial aircraft manufacturing, and is frankly nothing new to commercial aviation.”

This time, however, Boeing won a big victory. New protectionist policies under the Trump Administration led to imposition of a massive tariff — roughly 300 percent.

That made the price tag too big for Delta, and the sale was put on hold. “Delta CEO Ed Bastain has made it clear that his airline wants the planes but will not pay any tariffs,” wrote Benjamin Zhang in Business Insider.

Within weeks, Bombardier and Airbus announced plans to work together. Airbus took a controlling interest in the new plane with plans to build it in the U.S.

The move made heads spin among industry observers.

Australian Aviation writer John Walton recalled in January how Airbus sales chief John Leahy viewed the Bombardier craft last year and described it as “a cute little airplane.” Even that recently, Walton continues, “few people would have imagined that the European airframer would take over the Canadian aircraft program, essentially for free, in a move that shook the world of commercial aviation like few others.”

Writing in Forbes, Loren Thompson painted the other side of the deal’s picture, saying, “Here’s why Boeing isn’t worried at all.

“The first thing to understand about Boeing’s reaction is that it could have had the same deal,” Thompson wrote. “When Bombardier was skirting insolvency in 2015 due to bad management and soft demand for its products, the company invited a number of suitors to look over the business, including Boeing. Boeing didn’t like what it saw. Neither did Airbus, nor did prospective Chinese investors. That’s why Quebec’s provincial government had to spend a billion dollars bailing out the company to keep the troubled C-Series program going.”

Currently, Airbus has slightly more than half interest in the C-Series planes, Bombardier retains 37 percent and the remainder stays with the Quebec government, for infusing the company with cash during its financial plight.

Boeing, meanwhile, is working on similar plans with Brazilian firm Embraer, which also builds small commercial jets.

Unveiling Plans in Mobile

In Mobile, aircraft company officials focused on their plans, rather than any of the factors that might have provoked those plans.

Chairman emeritus Allan McArtor, who was the face of Airbus as the international firm moved into Mobile six years ago, said the partnership of Airbus and Bombardier “is another example of the solid commitment of Airbus to manufacturing in the United States and in particular, in Mobile, Alabama.

“This is our industrial home; this is where we come to grow,” McArtor said.

Knittel added that the plan is to build four Bombardier C-Series per month in a new final assembly line adjacent to the Airbus facility, and possibly increase Airbus A320 family production from four per month to six or more.

Alain Bellemare, president and CEO of Bombardier, said the C-Series aircraft represents a new generation of single-aisle aircraft, with anticipated sales of 6,000 or more over the next 20 years.

Lightly addressing challenges from rival Boeing, Bellemare said that more than 50 percent of the Bombardier aircraft components are made in the U.S. already. And all officials said they expect even more suppliers to move to the Mobile Aeroplex in support of the new craft.

“The commercial magnet of Brookley Field would be doubled,” McArtor said.

The C-Series plane is a good companion to the Airbus A320 family, all officials said.

The C-Series, with 100 to 150 seats, can be used when an airline moves into a new market. As the market matures and demand increases, they can move up to the bigger Airbus single-aisle options. McArtor said the two firms expect their customer airlines will want both varieties, not just one or the other, so they expect a competitive advantage from having both options.

It all sounds great in Mobile, but as Stephen Udvar-Hazy of Air Lease Corp. told Australian Aviation’s Walton: “It’s still an engagement, not a marriage.”

Meet the C-Series Bombardier

The C-Series aircraft has been designed for passenger comfort and operating efficiency.

From the flight deck with larger graphic displays and a side stick that gives pilots more space to the human-sized lavatories and overhead bins that hold three carry-ons plus three laptops the aircraft is roomier.

People are bigger than they used to be — on average 25 pounds bigger — so seats are wider (and the middle seat is wider than the aisle and window seats). Windows are half again the size of most competitors and the aisle is 20 inches wide, allowing two people to pass each other.

Although airline companies can order any configuration of seats they choose, including ones that would undermine passenger comfort, Bombardier officials believe that the fuel efficiency will make it practical to offer the plane in its comfy configuration.

Bombardier calculates fuel use at about 2 liters per passenger per 100 kilometers, at the very low end of the spectrum.

Fuel savings are achieved with aerodynamic design, lightweight components, fuel-efficient engines and redesigned elements, such as electric brakes instead of heavier hydraulic versions.

And if you’re interested, Bloomberg pegs the list price at $89.5 million, but notes that if you buy enough, you can probably get a discount.

Nedra Bloom is copy editor for Business Alabama and Mike Kittrell is a freelance contributor. Both are based in Mobile.

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