Bombardier share price up on Airbus deal news

It could also help Bombardier avoid heavy USA duties that had helped push the Canadian company near bankruptcy.

Airbus has struck a deal with Bombardier to acquire a majority stake in the struggling C Series airliner program, in a move that redefines the competitive landscape between Bombardier and rival Boeing.

Boeing described the partnership as a "questionable deal between two heavily state-subsidized competitors to skirt the recent findings of the US government".

Currently, Airbus' smallest aircraft is the A320 family.

In reality, the terms of the deal mean Bombardier could pay Airbus to take over by agreeing to underwrite $700 million of risks related to cost overruns in coming years. "Customers were very favorably impressed" with the C Series "but they were anxious about ending up with an orphan jet".

"In the current context, the partnership with Airbus is, for us, the best solution to ensure the maintenance and creation of jobs in this strategic sector of the Quebec economy", she stated in a news release. He added it will allow Airbus to expand activities in China and "strengthen our global industrial footprint".

The deal will give Airbus a 50.01 percent interest in CSeries Aircraft Limited Partnership (CSALP).

Boeing Co said on Tuesday that Bombardier Inc's CSeries jets could still be hit with high USA import duties, even if they are assembled in Alabama through an industry-changing deal with Airbus.

The Commerce Department announced it would impose an 80 percent duty on top of duties of almost 220 percent. That was the Win for Boeing.

Airbus - in a long-running trade battle with Boeing Co. - argues that the USA company receives illegal tax breaks that act like subsidies and hurt competition.

The Canadian-owned company is due to begin delivering an order of up to 125 new jets to Atlanta-based Delta next year. With the United States Government focused on bringing jobs back to its manufacturing industry, the partnership may also be a win for the U.S.

Airbus will also enter into commercial agreements relating to (i) sales and marketing support services for the C Series, (ii) management of procurement, which will include leading negotiations to improve CSALP level supplier agreements, and (iii) customer support. The niche size and questions about Bombardier's ability to compete against bigger rivals had cast a shadow over sales.

When announcing the deal, Airbus chief executive officer Tom Enders said it's too early to speculate on whether the plane will form the basis for the company's next short-haul offering, while acknowledging that it is likely to take cues from areas such as the Canadian model's cockpit design and advanced aeronautics.

Airbus has offered to shift final assembly of the C-Series jets to Mobile, Alabama.

Bombardier CEO Alain Bellemare said Airbus is the ideal partner. Bombardier employs more than 4,000 people at its Belfast factories.

If the deal does satisfy USA authorities, then it should work to safeguard the 1,000 Belfast-based jobs now in jeopardy.

However, Ross Murdoch of union GMB warned that "This deal is liable to further scrutiny from the US administration that may see it as an attempt to dodge their trade tariffs".

The Airbus acquisition will be subject to Canadian government review.

That aircraft would serve a "very different market" than the C Series, said Mike Sinnett, Boeing's product-development head.

Bombardier Inc. will own approximately 31 percent, formerly 62 percent, and Canadian investment group Investissement Quebec (IQ) will own 19 percent, formerly 38 percent.