An Airbus Bombardier partnership may have saved the Irish plane manufacturer. We reported previously that the US has slapped a 300% import duty on the Bombardier C-Series passenger jet. The order and price was accepted by US customer, Delta Airlines. US firm Boeing complained that Bombardier was give unfair financial assistance from the UK and Canada.
This duty would have made the Irish plane uneconomical, and left the field open for the US Boeing to fill the gap. Many look upon this as being blatant protectionism by Donald Trump who ordered the increase. It was initially 220%, and then increased to 300%. The result was expected to be significant unemployment among the 1,000 employees involved in the Belfast factory, purpose-built to manufacture the wings of the aircraft.
Many feel that having accepted the Bombardier quote, Delta Airline would be morally obliged to continue the order. However, American plane builder Boeing complained that Canadian company Bombardier has been given unfair financial assistance by the Canadian and UK governments.
The deal gives Airbus a 50.1% stake in Bombardier. This helps the Bombardier remain in existence: the 300% import tax would likely have led to its demise. Donald Trump and the US in general have not made many friends in Belfast – or elsewhere in Ireland and the UK. The deal gives Airbus right to purchase full control of Bombardier in 2023 should it wish to.
Airbus is now able to use its power to procure orders while Bombardier will continue to manufacture the aircraft. Airbus was able to get agreement to this deal without having to hand over any cash. This is indicative of the effect the import tax has on the company.
So how does Airbus believe it can avoid this extremely punitive 300% import tax? By having the parts made in Ireland, and the assembly carried out in the USA. Airbus has a plant in Alabama it can use to assemble the aircraft. However, it may not be plain sailing. The US government and authorities may take the view that this move is intended to avoid paying import tax. Known as ‘circumvention’, this move may still not satisfy US import laws.
Time will tell. Airbus and Bombardier believe that the new arrangement will get the order around the import laws Boeing disagrees! This may turn into a political situation rather than a business issue. As part of the UK, the Belfast plant may have more clout than its Canadian owner. Any ‘protectionism’ displayed by US authorities in this matter could be reciprocated.