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eisenbach
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UPDATED: Bombardier Sells Remaining Stake in A220 Program

Fri Feb 07, 2020 9:02 pm

As many of my fellow Anetters thought, Airbus is interested in getting all the shares of the CS/A220 program. According to The Wall Street Journal article, they are in final negotiations for the 34% share of Bombardier. Quebec is trying to hold their 16% share.

This move came maybe earlier as thought by some (me included)!
Does this mean, Airbus sees a bright future in the A220 program?

Link: https://www.wsj.com/articles/airbus-in- ... 1581104861
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:05 pm

That's excellent news.

I'm sure it's a good sign for the program.

Also it's probably a sign it's getting a pretty good deal on the stake, since it always has the option of not buying the stake and squeezing BBD harder.

For BBD it's like what Richard Aboulafia said, it's caching in on an insurance policy by taking a suicide pill.
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TObound
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:10 pm

Quebec won't sell. Just as I predicted.....

They would for the right price. But IQ is not a distressed seller like Bombardier. What a gift for Airbus.
 
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eisenbach
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:18 pm

TObound wrote:
Quebec won't sell. Just as I predicted.....

They would for the right price. But IQ is not a distressed seller like Bombardier. What a gift for Airbus.



I know Bombardier is not in the best financial shape ... do you think, that Bombardier pushed for Airbus to buy their stakes? This would be not the best negotiation position!
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:20 pm

TObound wrote:
What a gift for Airbus.


I do wonder how differently things might have turned out if Boeing hadn’t failed in their attempt to cut the legs out from under the C-Series. I’m sure Airbus will be laughing all the way to the bank.
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:30 pm

As expected.

next move: presenting the A220-500
 
TObound
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:30 pm

eisenbach wrote:
TObound wrote:
Quebec won't sell. Just as I predicted.....

They would for the right price. But IQ is not a distressed seller like Bombardier. What a gift for Airbus.



I know Bombardier is not in the best financial shape ... do you think, that Bombardier pushed for Airbus to buy their stakes? This would be not the best negotiation position!


Gotta do what they have to do. It's not exactly a secret that Bombardier is loaded up with debt and is selling different divisions. If Bombardier doesn't like the offer, they can walk.

scbriml wrote:
TObound wrote:
What a gift for Airbus.


I do wonder how differently things might have turned out if Boeing hadn’t failed in their attempt to cut the legs out from under the C-Series. I’m sure Airbus will be laughing all the way to the bank.


I wish Boeing had bought them. I am guessing Embraer would have stayed independent then. Sure, they couldn't have predicted the Max fiasco back then. But they also knew that the Max was still a long in the tooth 737. They should have recognized the opportunity they had to take a family with an all new design and modern cockpit that they could then build newer airplanes around.....
 
WayexTDI
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:44 pm

TObound wrote:
Quebec won't sell. Just as I predicted.....

They would for the right price. But IQ is not a distressed seller like Bombardier. What a gift for Airbus.

If (or more exactly, when) Airbus owes the 34% that Bombardier currently holds, they'll have 84% of the Program; so, it most likely means (give or take), 84% of the profit, 84% of the cost sharing and... 84% of the votes (which in fact would equate to 100%). It seems Investissements Quebec will have to pay 16% of the cost with no say in the decision making; not bad for Airbus, eh?
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:51 pm

TObound wrote:
scbriml wrote:
TObound wrote:
What a gift for Airbus.


I do wonder how differently things might have turned out if Boeing hadn’t failed in their attempt to cut the legs out from under the C-Series. I’m sure Airbus will be laughing all the way to the bank.


I wish Boeing had bought them. I am guessing Embraer would have stayed independent then. Sure, they couldn't have predicted the Max fiasco back then. But they also knew that the Max was still a long in the tooth 737. They should have recognized the opportunity they had to take a family with an all new design and modern cockpit that they could then build newer airplanes around.....

But it was so much easier for Boeing to go cry to the US government. It backfired on them, extremely badly.
In a sense, it led to maintaining the duopoly, but not as balanced as before on the narrowbody end:
- on one hand, you have Airbus with the (still) modern A320 Family (modernized into the neo) and a brand new design (the CSeries, now known as A220) that appears to meet (and exceed) expectations;
- on the other hand, you have Boeing with the (end of the line) 737 (and the fiasco that ultimately became the MAX) and a freshened up aircraft (the E-Jet and E2) that fails to really sell.
Double down on Airbus...
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:52 pm

I do wonder how differently things might have turned out if Boeing hadn’t failed in their attempt to cut the legs out from under the C-Series. I’m sure Airbus will be laughing all the way to the bank.[/quote]

It was Boeings stupidity. Boeings attempt to block the USA market by lobbying for a huge tarriff on an aircraft market it had no presence in must be one of the worst moves ever in the aviation world. Boeing did not and does not make a small passenger aircraft to compete. Its actions though crippled Bombardier who had produced the most modern of passenger aircraft far superior to the 737 but not close to the same size very nearly got bought by the Chinese who would have been handed a huge lead. Luckily Airbus pulled a masterstroke and got a bargain. Boeing just keeps making very bad management decisions. If Boeing hadn't pulled that trick there is a good chance that Bombardier would have slowly disappeared.
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:53 pm

Will it be another dollar?
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 9:57 pm

426Shadow wrote:
Typical or A.net goons, can't even get thru one page without someone mentioning Boeing, which this has absolutely nothing to do with.

Please explain how Boeing has ZERO involvement as to what happened to the CSeries/A220...
They were offered to buy it, they refused.
They tried to kill it, they lost.
They pushed BBD into AIB's hand.

Again, how can you discuss the BBD CSeries/AIB A220 program and CSALP without mentioning Boeing?
 
TObound
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:00 pm

WayexTDI wrote:
TObound wrote:
Quebec won't sell. Just as I predicted.....

They would for the right price. But IQ is not a distressed seller like Bombardier. What a gift for Airbus.

If (or more exactly, when) Airbus owes the 34% that Bombardier currently holds, they'll have 84% of the Program; so, it most likely means (give or take), 84% of the profit, 84% of the cost sharing and... 84% of the votes (which in fact would equate to 100%). It seems Investissements Quebec will have to pay 16% of the cost with no say in the decision making; not bad for Airbus, eh?


Airbus has enough voting shares today that they have this control right now. They don't need to buy anybody's stake to change control.
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:07 pm

WayexTDI wrote:
Again, how can you discuss the BBD CSeries/AIB A220 program and CSALP without mentioning Boeing?

By discussing how much this might cost Airbus, what airbus can do with more control, and why BBD wants to sell now rather the history of how Airbus got half the program?
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:08 pm

TObound wrote:
WayexTDI wrote:
TObound wrote:
Quebec won't sell. Just as I predicted.....

They would for the right price. But IQ is not a distressed seller like Bombardier. What a gift for Airbus.

If (or more exactly, when) Airbus owes the 34% that Bombardier currently holds, they'll have 84% of the Program; so, it most likely means (give or take), 84% of the profit, 84% of the cost sharing and... 84% of the votes (which in fact would equate to 100%). It seems Investissements Quebec will have to pay 16% of the cost with no say in the decision making; not bad for Airbus, eh?


Airbus has enough voting shares today that they have this control right now. They don't need to buy anybody's stake to change control.

That's what I thought, but I wasn't sure.
It was a great deal for them: they make the decisions, and the others pay their share without being able to say a word...
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:14 pm

goosebayguy wrote:

It was Boeings stupidity. Boeings attempt to block the USA market by lobbying for a huge tarriff on an aircraft market it had no presence in must be one of the worst moves ever in the aviation world. Boeing did not and does not make a small passenger aircraft to compete. Its actions though crippled Bombardier who had produced the most modern of passenger aircraft far superior to the 737 but not close to the same size very nearly got bought by the Chinese who would have been handed a huge lead. Luckily Airbus pulled a masterstroke and got a bargain. Boeing just keeps making very bad management decisions. If Boeing hadn't pulled that trick there is a good chance that Bombardier would have slowly disappeared.


The CSeries where indeed a threat to the 737. The 737 has one advantage compared to the A320, it's lighter and (as I heard) uses less fuel on shorter missions. Thus, the CSeries came from the wrong corner.

With this background fighting the CSerieas as a No. 1 priority was a logical decision by Boeing. As Boeing has a close relationship to the US government (as Airbus has to the major EU states), it was for them maybe the easiest way to play the tariff game using some strange US laws.

Never the less, I think Boeing regrets their strategy now. Maybe, it would have been easier for them to just letting Bombardier selling their planes to Delta and watching them struggling with daily support logistics and maybe slow sales numbers. But who knows, if that strategy would have been better???

Never the less, Airbus is in a good position now. I just hope, that they do not get bigheaded and arrogant now.
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:15 pm

WayexTDI wrote:
TObound wrote:
Quebec won't sell. Just as I predicted.....

They would for the right price. But IQ is not a distressed seller like Bombardier. What a gift for Airbus.

If (or more exactly, when) Airbus owes the 34% that Bombardier currently holds, they'll have 84% of the Program; so, it most likely means (give or take), 84% of the profit, 84% of the cost sharing and... 84% of the votes (which in fact would equate to 100%). It seems Investissements Quebec will have to pay 16% of the cost with no say in the decision making; not bad for Airbus, eh?

Quebec has already stated, they will not invest and once they have already not done. In such a case, regarding the amount they have not invested, their participation will shrink and the participation of the others will raise. This is the reason, why Airbus already owns 50.2% or so.They have started once with just above 50%.
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:24 pm

eisenbach wrote:
goosebayguy wrote:

It was Boeings stupidity. Boeings attempt to block the USA market by lobbying for a huge tarriff on an aircraft market it had no presence in must be one of the worst moves ever in the aviation world. Boeing did not and does not make a small passenger aircraft to compete. Its actions though crippled Bombardier who had produced the most modern of passenger aircraft far superior to the 737 but not close to the same size very nearly got bought by the Chinese who would have been handed a huge lead. Luckily Airbus pulled a masterstroke and got a bargain. Boeing just keeps making very bad management decisions. If Boeing hadn't pulled that trick there is a good chance that Bombardier would have slowly disappeared.


The CSeries where indeed a threat to the 737. The 737 has one advantage compared to the A320, it's lighter and (as I heard) uses less fuel on shorter missions. Thus, the CSeries came from the wrong corner.

With this background fighting the CSerieas as a No. 1 priority was a logical decision by Boeing. As Boeing has a close relationship to the US government (as Airbus has to the major EU states), it was for them maybe the easiest way to play the tariff game using some strange US laws.

Never the less, I think Boeing regrets their strategy now. Maybe, it would have been easier for them to just letting Bombardier selling their planes to Delta and watching them struggling with daily support logistics and maybe slow sales numbers. But who knows, if that strategy would have been better???

Never the less, Airbus is in a good position now. I just hope, that they do not get bigheaded and arrogant now.


Boeing looked at the books and saw a program that probably needed $1-2 billion in support to really ramp up and would have competed with the MAX 7. Their strategic mistake was thinking nobody else would be interested in the program. They just couldn't imagine Airbus throwing the 319NEO under the bus which is kind of surprising because they should know what the delivery slots on the NEO backlog are worth.

I remember the shocked reaction that Airbus has bought in. They really believed nobody would buy in. All while stories were in the press about the Canadian government didn't want a Chinese buy in and subsequent IP sale to China. The rumour that the Chinese might buy in should have scared them straight and should have the bought the realization that Airbus might just consider it.

Water under the bridge. But wow if there was to be evidence of management's lack of foresight.
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:24 pm

eisenbach wrote:
Does this mean, Airbus sees a bright future in the A220 program?


The only sign here is that Bombardier wasn't joking when it said it wanted to offload its stake. Airbus doesn't have much choice here. Bombardier wasn't going to be able to pay for the future losses. If they're not going to pay the future losses for the so-far failed program, Airbus might as well own the revenue side of the ledger as well.

It really is classic A.net in that buying a loss-leader is spun into a great deal.

WayexTDI wrote:
But it was so much easier for Boeing to go cry to the US government. It backfired on them, extremely badly.


Childish language aside, not at all accurate. It worked out for Boeing's benefit, but so far likely not as much as they were hoping. Bombardier was caught dumping jets in the U.S. That's not cool and should be universally condemned (it's not of course because you have to align yourself with Boeing). More A220 orders were put into question. Is the expensive and inefficient 2nd FAL in Mobile built without the tariff threat? If not, which seems to be the case, it was a big win for Boeing as it helped cripple Bombardier's airliner dreams and has subjected Airbus to higher program costs. It's called competition, and since Bombardier couldn't sell the jets the correct way, they deserved to pay for that. Now Airbus is paying for it. Boeing is so far the winner.
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:26 pm

If Airbus ends up owning 84% and IQ the remaining 16%, will Airbus be entitled to all profits from the program going forward as I believe IQ is not compelled to invest further in the development of the A220?
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:35 pm

MSPNWA wrote:
eisenbach wrote:
Does this mean, Airbus sees a bright future in the A220 program?


The only sign here is that Bombardier wasn't joking when it said it wanted to offload its stake. Airbus doesn't have much choice here. Bombardier wasn't going to be able to pay for the future losses. If they're not going to pay the future losses for the so-far failed program, Airbus might as well own the revenue side of the ledger as well.

It really is classic A.net in that buying a loss-leader is spun into a great deal.

WayexTDI wrote:
But it was so much easier for Boeing to go cry to the US government. It backfired on them, extremely badly.


Childish language aside, not at all accurate. It worked out for Boeing's benefit, but so far likely not as much as they were hoping. Bombardier was caught dumping jets in the U.S. That's not cool and should be universally condemned (it's not of course because you have to align yourself with Boeing). More A220 orders were put into question. Is the expensive and inefficient 2nd FAL in Mobile built without the tariff threat? If not, which seems to be the case, it was a big win for Boeing as it helped cripple Bombardier's airliner dreams and has subjected Airbus to higher program costs. It's called competition, and since Bombardier couldn't sell the jets the correct way, they deserved to pay for that. Now Airbus is paying for it. Boeing is so far the winner.

Two things airbus has the right to buy the program at fair market value in 2025 so they could absolutely squeeze bombardier for a few more years, and every new program makes a loss on the first units especially one that launches without an incredibly strong backlog you have to take the pain to build up enough of an aftermarket for suppliers to consider your product and for leasing companies to feel its not a huge financial risk.
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:42 pm

Here is the plan.

1. Transform the partnership into a limited liability corporation
2. Airbus acquired BBD's part at 500 million dollars
3. The new company *Airbus Canada Inc." increases its capital by creating new shares offered at NYSE and TSE.

The dilution of capital puts Airbus' stake at 45℅, Investissement Quebec at 10℅ and finally 45% public/institution investors.

The new autonomous company will start with 3 billion dollars of cash to ramp up production.
 
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eisenbach
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:46 pm

MSPNWA wrote:
eisenbach wrote:
Does this mean, Airbus sees a bright future in the A220 program?


The only sign here is that Bombardier wasn't joking when it said it wanted to offload its stake. Airbus doesn't have much choice here. Bombardier wasn't going to be able to pay for the future losses. If they're not going to pay the future losses for the so-far failed program, Airbus might as well own the revenue side of the ledger as well.

It really is classic A.net in that buying a loss-leader is spun into a great deal.

WayexTDI wrote:
But it was so much easier for Boeing to go cry to the US government. It backfired on them, extremely badly.


Childish language aside, not at all accurate. It worked out for Boeing's benefit, but so far likely not as much as they were hoping. Bombardier was caught dumping jets in the U.S. That's not cool and should be universally condemned (it's not of course because you have to align yourself with Boeing). More A220 orders were put into question. Is the expensive and inefficient 2nd FAL in Mobile built without the tariff threat? If not, which seems to be the case, it was a big win for Boeing as it helped cripple Bombardier's airliner dreams and has subjected Airbus to higher program costs. It's called competition, and since Bombardier couldn't sell the jets the correct way, they deserved to pay for that. Now Airbus is paying for it. Boeing is so far the winner.


Thanks for your valuable insights and thoughts, I appreciate it.

The only thing I don't understand is, why should someone be condemned, when he wants to sell products to a low price or even with loss (with the goal to increase market share)? I find this law very strange, especially as the US is not a communist/socialist country :-). This destroys free marked & innovation and will always help companies with strong political ties.
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:46 pm

VV wrote:
Here is the plan.

1. Transform the partnership into a limited liability corporation
2. Airbus acquired BBD's part at 500 million dollars
3. The new company *Airbus Canada Inc." increases its capital by creating new shares offered at NYSE and TSE.

The dilution of capital puts Airbus' stake at 45℅, Investissement Quebec at 10℅ and finally 45% public/institution investors.

The new autonomous company will start with 3 billion dollars of cash to ramp up production.

Why keep it a separate company? if your buying it out you might as well buy of IQ then merge it into airbus proper.
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:48 pm

TObound wrote:
Gotta do what they have to do. It's not exactly a secret that Bombardier is loaded up with debt and is selling different divisions. If Bombardier doesn't like the offer, they can walk.


Not forever, BBD can't delay. Here's a comment on purchase options made when the deal was announced in 2017:

According to terms of the deal, Airbus had the option to buy out the CSeries program in 7.5 years, and the Quebec government in 2023.

https://business.financialpost.com/tran ... eries-jets

Here's a longer exposition of Airbus' buy-out rights in both BBD and IQ stakes, said to be taken from the 2017 press release:

Airbus will benefit from call rights in respect of all of Bombardier’s interest in CSALP at fair market value, with the amount for non-voting participating shares used by Bombardier capped at the invested amount plus accrued but unpaid dividends, including a call right exercisable no earlier than 7.5 years following the closing, except in the event of certain changes in the control of Bombardier, in which case the right is accelerated. Bombardier will benefit from a corresponding put right whereby it could require that Airbus acquire its interest at fair market value after the expiry of the same period. IQ’s interest is redeemable at fair market value by CSALP, under certain conditions, starting in 2023. IQ will also benefit from tag along rights in connection with a sale by Bombardier of its interest in the partnership.

https://seekingalpha.com/article/432155 ... ad-remains

Airbus can have the whole bowl of poutine if it wants.
Last edited by MIflyer12 on Fri Feb 07, 2020 10:57 pm, edited 1 time in total.
 
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eisenbach
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:51 pm

dstblj52 wrote:
Two things airbus has the right to buy the program at fair market value in 2025 so they could absolutely squeeze bombardier for a few more years, and every new program makes a loss on the first units especially one that launches without an incredibly strong backlog you have to take the pain to build up enough of an aftermarket for suppliers to consider your product and for leasing companies to feel its not a huge financial risk.


This is exactly what puzzles me! Why would Airbus want to buy NOW the stakes.

A) Is it a sign, that Airbus expect to get a profit out of the program sooner as expected?

OR

B) Is Bombardier in such a bad state, that the need the cash as soon as possible?
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:52 pm

dstblj52 wrote:
VV wrote:
Here is the plan.

1. Transform the partnership into a limited liability corporation
2. Airbus acquired BBD's part at 500 million dollars
3. The new company *Airbus Canada Inc." increases its capital by creating new shares offered at NYSE and TSE.

The dilution of capital puts Airbus' stake at 45℅, Investissement Quebec at 10℅ and finally 45% public/institution investors.

The new autonomous company will start with 3 billion dollars of cash to ramp up production.

Why keep it a separate company? if your buying it out you might as well buy of IQ then merge it into airbus proper.


1. Because you do not want to be responsible of any possible future liability for an aircraft you didn't even launch.
2. You get the dividends every quarter as cash if the company is making profit.
3. If the company increases in value you can sell your stake with hefty profits..
 
WayexTDI
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 10:57 pm

MSPNWA wrote:
WayexTDI wrote:
But it was so much easier for Boeing to go cry to the US government. It backfired on them, extremely badly.


Childish language aside, not at all accurate. It worked out for Boeing's benefit, but so far likely not as much as they were hoping. Bombardier was caught dumping jets in the U.S. That's not cool and should be universally condemned (it's not of course because you have to align yourself with Boeing). More A220 orders were put into question. Is the expensive and inefficient 2nd FAL in Mobile built without the tariff threat? If not, which seems to be the case, it was a big win for Boeing as it helped cripple Bombardier's airliner dreams and has subjected Airbus to higher program costs. It's called competition, and since Bombardier couldn't sell the jets the correct way, they deserved to pay for that. Now Airbus is paying for it. Boeing is so far the winner.

Airbus got 50.01% of the program for free (sorry, I think it was 1 euro).
If they didn't see a future for the plane, they could have just shut it down then and there; with no money invested or lost.
Instead, they viewed the value the program could bring to Airbus and decided to invest to make said program even better; so far, Airbus is laughing at Boeing's incompetence.

Now, you want to talk about an aircraft manufacturer dumping its jets? How about Boeing with the UAL 73G deal? Wasn't that dumping?
Because it does not comply to the definition of dumping (since it didn't come from a foreign entity), it doesn't mean that what Boeing did in this deal didn't have the same effect: sell your product at an unsustainable cost (or even below cost) to undercut a competitor.

Listen, I understand you're disappointed it didn't turn out the way you wanted, and that DL loves the plane and ordered more; but just admit that Airbus got a great deal out of it. It could have been Boeing, in which case you'd sing a different tone.
 
MSPNWA
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 11:09 pm

dstblj52 wrote:
Two things airbus has the right to buy the program at fair market value in 2025 so they could absolutely squeeze bombardier for a few more years, and every new program makes a loss on the first units especially one that launches without an incredibly strong backlog you have to take the pain to build up enough of an aftermarket for suppliers to consider your product and for leasing companies to feel its not a huge financial risk.


1) Airbus is not in the position of power to squeeze Bombardier. In general, in a relationship the one with less to lose has the advantage. Bombardier has little to lose at this point. They're deeply in debt. They're trying to avoid bankruptcy. They have no juice left in the lemon for Airbus to squeeze. It's like a bank that has lent to a person who is broke and can't pay their loan. The borrower has the power. That's why banks will accept pennies on the dollar in a settlement. Something is better than nothing. Bombardier can't keep sinking money into this program in the hope of future profits. And it seems apparent that Airbus knows this. Airbus will have to accept something less than they had originally agreed to. Otherwise they face getting much less than that.

2) This isn't a case of the first few frames produced at a loss. We're over 100 delivered and 16% of the booked orders, and both parties are still talking years (plural) of losses to come. So not only are the losses going to continue, we're not even close to talking about potential profits making up for the losses and turning into a wise investment. As much as this deal can be spun into Airbus seeing a bright future, this can be spun into Bombardier seeing it as bleak.
 
trex8
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 11:17 pm

Why does IQ have to invest anything ? There are public companies with major shareholders - governments, institutional investors, retirement plans etc etc with similar stakes to IQs share, they don't need to put any money in the pot if investment is needed?
 
RalXWB
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 11:25 pm

MSPNWA wrote:
eisenbach wrote:
Does this mean, Airbus sees a bright future in the A220 program?


The only sign here is that Bombardier wasn't joking when it said it wanted to offload its stake. Airbus doesn't have much choice here. Bombardier wasn't going to be able to pay for the future losses. If they're not going to pay the future losses for the so-far failed program, Airbus might as well own the revenue side of the ledger as well.

It really is classic A.net in that buying a loss-leader is spun into a great deal.

WayexTDI wrote:

A failed program? You are right, only 600 Sold so far. Boeing is the winner? If it makes you feel better.
But it was so much easier for Boeing to go cry to the US government. It backfired on them, extremely badly.


Childish language aside, not at all accurate. It worked out for Boeing's benefit, but so far likely not as much as they were hoping. Bombardier was caught dumping jets in the U.S. That's not cool and should be universally condemned (it's not of course because you have to align yourself with Boeing). More A220 orders were put into question. Is the expensive and inefficient 2nd FAL in Mobile built without the tariff threat? If not, which seems to be the case, it was a big win for Boeing as it helped cripple Bombardier's airliner dreams and has subjected Airbus to higher program costs. It's called competition, and since Bombardier couldn't sell the jets the correct way, they deserved to pay for that. Now Airbus is paying for it. Boeing is so far the winner.


A failed program? You are right, only 600 sold so far.
Boeing is the winner? If it makes you feel better.
 
MIflyer12
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 11:29 pm

trex8 wrote:
Why does IQ have to invest anything ? There are public companies with major shareholders - governments, institutional investors, retirement plans etc etc with similar stakes to IQs share, they don't need to put any money in the pot if investment is needed?


I believe it's established by the terms of the legal entity C Series Aircraft Limited Partnership that is jointly owned by Airbus, BBD, and IQ. BBD is stuck financing shortfalls (to a cap) but after that demands are pro-rated by ownership. See the last lines here:

At closing, there will be no cash contribution by any of the partners, nor will CSALP assume any financial debt. It also contemplates that Bombardier will continue with its current funding plan of CSALP and will fund, if required, the cash shortfalls of CSALP during the first year following the closing up to a maximum amount of US$350 million, and during the second and third years following the closing up to a maximum aggregate amount of US$350 million over both years, in consideration for non-voting participating shares of CSALP with cumulative annual dividends of 2%, with any excess shortfall during such periods to be shared proportionately amongst Class A shareholders. Emphasis mine.
 
MIflyer12
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 11:31 pm

RalXWB wrote:
A failed program? You are right, only 600 Sold so far. Boeing is the winner? If it makes you feel better.


The program isn't making money nearly four years after the (3 years late) first delivery, and BBD has announced that further investments are needed and margins are lower than expected. Programs that don't make money, yes, are loser programs, irrespective of backlog.

We're going to see just how big a loser it is for BBD's $6+ Billion in development costs when BBD or IQ sell and the market value of their shares is made known.
Last edited by MIflyer12 on Fri Feb 07, 2020 11:34 pm, edited 1 time in total.
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 11:33 pm

MSPNWA wrote:
dstblj52 wrote:
Two things airbus has the right to buy the program at fair market value in 2025 so they could absolutely squeeze bombardier for a few more years, and every new program makes a loss on the first units especially one that launches without an incredibly strong backlog you have to take the pain to build up enough of an aftermarket for suppliers to consider your product and for leasing companies to feel its not a huge financial risk.


1) Airbus is not in the position of power to squeeze Bombardier. In general, in a relationship the one with less to lose has the advantage. Bombardier has little to lose at this point. They're deeply in debt. They're trying to avoid bankruptcy. They have no juice left in the lemon for Airbus to squeeze. It's like a bank that has lent to a person who is broke and can't pay their loan. The borrower has the power. That's why banks will accept pennies on the dollar in a settlement. Something is better than nothing. Bombardier can't keep sinking money into this program in the hope of future profits. And it seems apparent that Airbus knows this. Airbus will have to accept something less than they had originally agreed to. Otherwise they face getting much less than that.

2) This isn't a case of the first few frames produced at a loss. We're over 100 delivered and 16% of the booked orders, and both parties are still talking years (plural) of losses to come. So not only are the losses going to continue, we're not even close to talking about potential profits making up for the losses and turning into a wise investment. As much as this deal can be spun into Airbus seeing a bright future, this can be spun into Bombardier seeing it as bleak.

Then Bombardier better pay up if they have nothing to lose.

Hint, Bombardier goes into default. Owes Airbus instead of getting paid.

IQ has protected shares that are exempt. They will be ok.

Either Bombardier borrows a couple billion, they sell, or they owe.

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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 11:35 pm

trex8 wrote:
Why does IQ have to invest anything ? There are public companies with major shareholders - governments, institutional investors, retirement plans etc etc with similar stakes to IQs share, they don't need to put any money in the pot if investment is needed?

You are correct, others seem to be confused because BBD committed to putting in money to the partnership as a part of the initial agreement.

After this agreement, IQ is just an investor in the joint venture.

The joint venture can get funding in all the traditional ways: go to capital markets, sell more shares, ask investors to invest more, etc.

The initial partnership agreement had some verbiage about certain rights if the stakes change.

We should learn a lot more in the near future.
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Antarius
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 11:42 pm

eisenbach wrote:
dstblj52 wrote:
Two things airbus has the right to buy the program at fair market value in 2025 so they could absolutely squeeze bombardier for a few more years, and every new program makes a loss on the first units especially one that launches without an incredibly strong backlog you have to take the pain to build up enough of an aftermarket for suppliers to consider your product and for leasing companies to feel its not a huge financial risk.


This is exactly what puzzles me! Why would Airbus want to buy NOW the stakes.

A) Is it a sign, that Airbus expect to get a profit out of the program sooner as expected?

OR

B) Is Bombardier in such a bad state, that the need the cash as soon as possible?


The latter most likely. My read of the news is that BBD is trying to sell, not that Airbus is the one driving the sale.

Airbus clearly sees value in the A220. However, it looks like bombardier is in bad shape and looking to sell and Airbus would rather own it as opposed to someone else.
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MSPNWA
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Fri Feb 07, 2020 11:54 pm

WayexTDI wrote:
Airbus got 50.01% of the program for free (sorry, I think it was 1 euro).
If they didn't see a future for the plane, they could have just shut it down then and there; with no money invested or lost.
Instead, they viewed the value the program could bring to Airbus and decided to invest to make said program even better; so far, Airbus is laughing at Boeing's incompetence.

Now, you want to talk about an aircraft manufacturer dumping its jets? How about Boeing with the UAL 73G deal? Wasn't that dumping?
Because it does not comply to the definition of dumping (since it didn't come from a foreign entity), it doesn't mean that what Boeing did in this deal didn't have the same effect: sell your product at an unsustainable cost (or even below cost) to undercut a competitor.

Listen, I understand you're disappointed it didn't turn out the way you wanted, and that DL loves the plane and ordered more; but just admit that Airbus got a great deal out of it. It could have been Boeing, in which case you'd sing a different tone.


Ever bought something, even really cheap, and in the end it didn't turn out like you had hoped? Ever simply make a bad purchase? I see a belief at work here that as long as something was bought cheaply and/or is still retained in ownership, it must be a good deal. It's not reality. You're simply guessing at things, such as Airbus's thoughts on the matter.

Dumping is only an international trade scenario. Your attempt to extrapolate that to a domestic purchase (that was also widely viewed as not below cost) isn't valid and is grasping at straws to justify a unethical practice by Bombardier.

They only good answer to the question of whether this has been a good deal for Airbus is "we don't know". We're not to an answer yet. Those saying that it unequivocally is or isn't aren't thinking through it.

Now that you've turned this discussion into a personal matter, I accept your white flag. You must not be able to debate on the facts.
 
MSPNWA
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 12:01 am

lightsaber wrote:
Then Bombardier better pay up if they have nothing to lose.

Hint, Bombardier goes into default. Owes Airbus instead of getting paid.

IQ has protected shares that are exempt. They will be ok.

Either Bombardier borrows a couple billion, they sell, or they owe.


Getting paid? Where is Bombardier getting paid for the A220?

They owe Airbus already.
 
Skywatcher
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 1:37 am

I suspect that Airbus has far better knowledge of the economics of the A-220 program than any of us. Like any investment it is the future projections of profitability and enterprise cost sharing that really count. The true value of this aircraft is the next 20+ years of cost (including efficiency/overhead sharing with other Airbus entities) and revenue projections. That value is not shared with us unfortunately. The very complex number crunching has greatly advanced since the initial deal for sure.
Probably Airbus will pick up Bombardier's future capital investment obligations in return for their 34% ownership stake. Quebec (IQ) will hang in for the long haul and possibly end up with a pretty good return.
This is a very long term game with massive bucks involved.
Would you rather own a share of the A-220 or Boeing stock at this point?
 
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Francoflier
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 3:08 am

MSPNWA wrote:
Ever bought something, even really cheap, and in the end it didn't turn out like you had hoped? Ever simply make a bad purchase? I see a belief at work here that as long as something was bought cheaply and/or is still retained in ownership, it must be a good deal. It's not reality. You're simply guessing at things, such as Airbus's thoughts on the matter.


Given that this is a brand new aircraft and part of a program which bears sales and support RoI prospects over several decades and that it has sold over 600 copies already, I'd really love to know how you could possibly qualify this as a 'bad purchase'. Not to mention that this allows Airbus, in time, to have the lower end of the narrowbody segment covered while they focus on an A321 sized replacement to counter the NSA/NMA.

The A220 will be fine and will make Airbus money. I, like many others here, am in awe over the opportunism and clairvoyance that Airbus displayed with that move. That Boeing scrambled to make a deal with Embraer shortly afterwards suggests they know they might have been thrown on the back foot as well.
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MSPNWA
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 4:31 am

Francoflier wrote:
Given that this is a brand new aircraft and part of a program which bears sales and support RoI prospects over several decades and that it has sold over 600 copies already, I'd really love to know how you could possibly qualify this as a 'bad purchase'. Not to mention that this allows Airbus, in time, to have the lower end of the narrowbody segment covered while they focus on an A321 sized replacement to counter the NSA/NMA.

The A220 will be fine and will make Airbus money. I, like many others here, am in awe over the opportunism and clairvoyance that Airbus displayed with that move. That Boeing scrambled to make a deal with Embraer shortly afterwards suggests they know they might have been thrown on the back foot as well.


You're wildly missing the context and putting words in my mouth. The questions I was asking WayexTDI were about personal life events. In the same post I also stated that we don't know an answer yet to whether or not Airbus got a good deal, clearly opposed to what you claim I said.

Your beliefs on the A220 are wishful guesses, not supported by the facts today.
 
Nick614
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 5:20 am

Maybe Airbus wants to move all the production to Alabama sooner rather than later.
 
RickNRoll
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 5:52 am

It's called killing competition.
 
Gremlinzzzz
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 5:57 am

MSPNWA wrote:
eisenbach wrote:
Does this mean, Airbus sees a bright future in the A220 program?


The only sign here is that Bombardier wasn't joking when it said it wanted to offload its stake. Airbus doesn't have much choice here. Bombardier wasn't going to be able to pay for the future losses. If they're not going to pay the future losses for the so-far failed program, Airbus might as well own the revenue side of the ledger as well.

It really is classic A.net in that buying a loss-leader is spun into a great deal.

WayexTDI wrote:
But it was so much easier for Boeing to go cry to the US government. It backfired on them, extremely badly.


Childish language aside, not at all accurate. It worked out for Boeing's benefit, but so far likely not as much as they were hoping. Bombardier was caught dumping jets in the U.S. That's not cool and should be universally condemned (it's not of course because you have to align yourself with Boeing). More A220 orders were put into question. Is the expensive and inefficient 2nd FAL in Mobile built without the tariff threat? If not, which seems to be the case, it was a big win for Boeing as it helped cripple Bombardier's airliner dreams and has subjected Airbus to higher program costs. It's called competition, and since Bombardier couldn't sell the jets the correct way, they deserved to pay for that. Now Airbus is paying for it. Boeing is so far the winner.
All of this would make sense if Boeing was not trying to buy a stake in Embraer to somewhat have a challenger to the A220.
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 6:05 am

MSPNWA wrote:
In the same post I also stated that we don't know an answer yet to whether or not Airbus got a good deal, clearly opposed to what you claim I said.


MSPNWA wrote:
Now Airbus is paying for it. Boeing is so far the winner.



Look, your fairly strong pro-B, anti-A bias is well known to any of the regulars here. It perspires through all your posts on the topic and shapes your opinions.
That's fine, I'll stick to my opinion, and you can certainly have yours.

As for the long term prospects of the A220 and Airbus' deal with BBD, I'm personally not worried for them (not that I have any stake or interest in it), and given the investment they are pouring into it, neither is Airbus. Not to mention the strategic value of the deal.

BBD, on the other hand, is the biggest loser here. They simply didn't have the hips to carry this investment through until it made money. Their debt is simply too much to wait until the program is profitable enough to pay it back. It makes sense that they would sell. I'm just not sure how much of a leverage they have here as I can't really see any other potential buyer.

Quebec will keep their share and use it to lobby for as much of the labor to remain there as possible.
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eisenbach
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 7:51 am

MSPNWA wrote:

Dumping is only an international trade scenario. Your attempt to extrapolate that to a domestic purchase (that was also widely viewed as not below cost) isn't valid and is grasping at straws to justify a unethical practice by Bombardier.


This is what puzzles me ... why should it be unethical? And why is it only unethical when a foreign corporation is doing it, but not an US company?

In Europe we have a lot of foreign companies (even outside the EU) selling products and services to very low prices, or trying to get marked share by selling below costs. It's a pure business decision and financial risk of the respective corporation. It's called competition and free marked.

I am now old enough having experienced the implication of communism and protected markets in Europe and other continents ... and protecting industries or a marked didn't help much and mostly the people inside the country were suffering by high prices and less innovative products.

Therefore I find this US law very, very strange :-). But we cannot change that, and you cannot blame Boeing, using this law for hurting the competition ;-).
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 1:10 pm

MSPNWA wrote:

Dumping is only an international trade scenario. Your attempt to extrapolate that to a domestic purchase (that was also widely viewed as not below cost) isn't valid and is grasping at straws to justify a unethical practice by Bombardier.



Do you think Boeing should be fined by all foreign governments to whose countries B787s were sold?

Great that governments allow negative equity. Great that banks lend to such companies.

About Quebec as an investor: They are not interested in the investment. They are interested in jobs and want to have somebody on the board for insider view.
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JetBuddy
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 3:09 pm

That's one more incentive, and one more step on the road towards more investments in production and possibly an A220-500.
 
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 4:49 pm

The 220 is a good plane, we all know that. Whether or not it will be a great seller is still, excuse the phrase, up in the air.
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lightsaber
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Re: WSJ: Airbus in Advanced Talks to Acquire Bombardier Stake in A220 Program

Sat Feb 08, 2020 5:14 pm

frmrCapCadet wrote:
The 220 is a good plane, we all know that. Whether or not it will be a great seller is still, excuse the phrase, up in the air.

This is one step in improving the business case for Airbus. Airbus has access to cheap cash. What they do not have is a business case with 51% of the profit. With 85%+, they will.

IQ has a non-dilutable share, per my understanding. So that complicates ROI decisions.

As to selling, we finally have ALC, with possible orders from SAS, Qantas, and others. I discount any Asia orders due to the virus (discuss rest of virus off thread).

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