There may not be any line of airplane that has been in the news since inception like Bombardier’s (TSX: BBD.B) CSeries. The commercial planes have been a plagued by production delays and cost overruns that led to a $1-billion bailout from the Canadian government, hit with a 300 percent tariff from the U.S. government and subject of a complaint from rival Boeing (NYSE: BA) that the Canadian train and plane maker received illegal subsidies and is selling planes in the U.S. at prices unreasonably cheap prices.
Other than that (sigh), it’s been blue skies for the nascent CSeries.
On Friday, European airplane maker Airbus (OTC ADR: EADSY) came to the rescue, acquiring a majority stake in the embattled CSeries program, a move viewed by some as a way for Bombardier to skirt around legalities involved in Boeing’s fair trade complaint. For Airbus, it’s a full-circle move after declining to invest in the program two years ago before the CSeries had been put into service.
Boeing finds the deal coincidental to happen at this time.
In the deal, Netherlands-based Airbus is taking a 50.01% interest in the program for $1. Obviously, it’s not a monetary payout, but what Bombardier does get in return is the financial and marketing might of Airbus to try and breath some life into new orders by restoring confidence in the plane’s future. The move also marks Airbus’s entry into the regional jet business and could give them a competitive edge over Boeing in the commercial plane market.
The plan involves building some of the CSeries jets at Airbus’s assembly plant in Mobile, Alabama. This makes the planes domestic and allows Bombardier to avoid the hefty tariff, a move Boeing finds questionable at best and tilting the playing field against it.
Shares of BBD.B surged as high as $2.97, marking their highest level since February 2015, but have cooled back to $.270 as the closing bell approaches for a gain of 14.4% so far on the day. Shares of Boeing slipped 0.5% to $258.38, while Airbus ADRs gained 4.6% to $23.79.
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