Bombardier offers majority stake in C Series to Airbus

[peekay4]

@Una Due Tfc

As mentioned above, ATR is a 50-50 JV between Airbus and Alenia -- but it is a separate company from Airbus.

Alenia itself is a major supplier to the Bombardier (they make the CSeries tail section). So they already have a lot in stake in the CSeries. Not very widely reported, last year Alenia played hardball by suing Bombardier for loss of income due the CSeries continuing delays.

@_Phoenix

No one is going to go on record that they're selling at a loss...

But FWIW, here's a point-by-point narrative for speculation:

1. Airbus can undercut the CSeries by offering the A319/320/neo at "very deep discounts" (read: loss) as part of a "package" deal with other aircraft.
2. (By "very deep discount", let's say, 66% off Airbus published list price)
3. Bombardier's "previous management" insisted selling the CSeries at a typical 50% discount, since the profit margin is already tight at this level
4. That means the discounted price of a CS300 might be more than a discounted A320
5. The "previous management" couldn't make sales at these prices and were let go.
6. "New management" was brought in and given a mandate to be "more flexible" with pricing, to meet 300 firm orders sales target
7. "New management" still couldn't sell the CSeries at this "super-thin" margin. They had no takers at Le Bourget and closed zero sales to date.
8. Republic has had a change in strategy and may not take delivery of their 40 firm orders. They've bought E175s and have dumped their Q400s to Flybe.
9. I guess more clarity and maybe formal announcement after Republic's union voting happening now.
10. IFC (Ilyushin) might not take delivery of their 32 firm orders, since the ruble has tanked
11. IFC also has difficulties getting financing other than from the Chinese due to sanctions on Russia
12. Suddenly Bombardier potentially has to sign (40+32) = 72 new firm orders just to tread water. Remember, they've signed zero sales so far on super-thin margins.
13. And that's before this failed deal with Airbus which has everyone spooked. No one wants to risk buying an "orphaned" aircraft.
14. And meanwhile the price of oil has dropped to $50/barrel making the CSeries ROI difficult
15. Given all this, as the article posted above by twochai mentions, now it looks like Bombardier will need to offer the CSeries at "steep discounts" (read: at a loss)

Best option for Bombardier might be to enter "performance" contracts.

I.e., they would sell at a loss, but if the CSeries performance is as advertised, saving the airline money vs. competitor's projections (from better operational efficiency, fuel savings, reduced maintenance, etc.), Bombardier would get a percentage of that savings. Hopefully over the contract period they would at least break even, but this additional money isn't guaranteed.