In a shocker of an announcement this evening, Airbus and Bombardier announced that Bombardier’s C-Series will be built in Airbus’ Alabama facility.
In a partnership dubbed ‘C-Series Aircraft Limited Partnership’, a second final assembly line for the C-Series operated by Airbus will compliment the existing production taking place in Quebec. Airbus will also market the aircraft on behalf of Bombardier.
In their comments, Airbus stated that it is a perfect combination of their global reach and Bombardier’s cutting edge technology for short and medium haul aircraft. Airbus will have a 50.1% stake in the operation, with Bombardier’s share being approximately 31 percent and Investissement Quebec getting the other 19%.
This comes at an interesting time for Bombardier whose US-based customers (primarily Delta) were facing stiff 300% tariffs for any Bombardier aircraft that they would purchase as a result of a Boeing complaint filed with Washington DC claiming unfair subsidies for Bombardier from the Canadian government.
With this announcement, it appears that everyone including President Trump and his position as it relates to NAFTA along with Bombardier and Airbus will be able to claim victory from their respective perspectives.
Bombardier and Airbus both denied that politics had anything to do with this, but I find that hard to believe especially when you consider the timing of this announcement and how quickly the partnership was assembled.
In what was basically a poorly kept secret until just a few days ago when Carsten Spohr suggested that Lufthansa would be interested in Alitalia, Lufthansa today confirmed it has submitted its proposal.
In it, Lufthansa is offering upwards of 500mm Euro to buy Alitalia out of bankruptcy. The 500mm offer is asking for all of Alitalia’s aircraft, employees and airport slots around the world. However, LH said it would have to let 6,000 of the 12,000 Alitalia employees go should it be successful in acquiring the Italian national carrier.
Will it happen? Most likely not.
Though at first blush the LH offer is compelling and agrees to take on all of Altalia which is something that the Italians want to happen vs. Alitalia being blown up into bits and acquired by multiple suitors, it is expected that the group handling the administration of Alitalia will decline the bid. That has been made obvious by the fact that a November 5, 2017 deadline set by Rome to find a suitor for Alitalia has been extended to April 30, 2018. This extension does not inspire confidence that Lufthansa’s bid is being taken seriously.
I believe the proposal will fall on deaf ears in Rome since it suggests that 6000 Alitalia employees will lose their jobs, and with the Italian Gov’t in control of the sale such a deal would be bad politics considering that Italy itself is in a state of flux with its ruling parties and can ill afford to upset their constituency. The proposal also suggests that short and medium haul routes would be gutted from the timetable.
Speaking of politics, there is no love loss whatsoever between Rome and Berlin thanks to the EU’s (primarily Germany) handling of most things on the continent. The migrant crisis is front and center in Rome and Italy feels it is being asked (unfairly) to bear the burden of Merkel & Company’s failed experiment, but I digress. So it would most likely pain Italy and Italians to see Germany of all countries (or an agent of it) come in to try and rescue Alitalia. As the say goes, “thanks but no thanks”. Italians are a prideful people and this just doesn’t seem like something they will sign off on.
In addition to the Lufthansa offer, EasyJet has also submitted a bid demonstrating its interest. However their bid is asking for only parts of Alitalia and as I mentioned earlier, Rome wants this to be an ‘all or none’ deal. There are also 3 to 4 private equity firms that have expressed interest in Alitalia but their details have not been made very obvious as yet.
While the process of finding a buyer continues, Rome has agreed to throw good money after bad and has announced that it has given Alitalia another 300mm Euro to continue operations. This after the Italian government floated Alitalia a 600mm Euro loan earlier this year to help finance the debacle. I’m sure that Italians are pleased that they’ve spent nearly 1 Billion Euro just this year alone to keep the birds in the air.
Apparently there’s no end in sight to this soap opera…..
Lufthansa yesterday closed on a transaction that allowed it to acquire 20 Air Berlin aircraft, Air Berlin’s ‘NIKI’ subsidiary as well as AB’s LG Walter operations. The deal amounted to $210 million Euro (approx. $250mm USD).
In return, Lufthansa agreed to protect all jobs that were affected specifically by this deal. In other words, LGW and NIKI employees do not need to fear for their jobs.
In his comments, LH Boss Carsten Spohr indicated that Lufthansa would infuse over $1 Billion Euro into the Air Berlin acquisitions which will cover updates and upgrades to the aircraft, as well as future aircraft acquisitions for LH’s LCC Eurowings, which is where all the Air Berlin assets will be assigned to going forward.
Several large parts of Air Berlin have yet to be sold. It appears that Easy Jet and Thomas Cook / Condor will also benefit from the liquidation of Air Berlin, though no specific deals have been announced. Ryanair has apparently been blocked out of any chance to benefit from the Air Berlin garage sale.
During this recent shopping spree, Spohr also suggested that Lufthansa would very much be interested in Alitalia. Though he firmly denied any interest in acquiring the struggling carrier in it’s current form (which is basically as bad as Air Berlin’s condition), he did suggest that Lufthansa would be very interested in helping the Italian gov’t create a ‘New’ Alitalia. I thinking ‘Lufthalia’??