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Airbus calls off talks with Bombardier on C-Series Jet project
The ongoing talks between Airbus and Bombardier have ended incomplete as the former called off discussions soon after they became public.
Both companies agreed that talks took place on the troubled project on C-Series jet. The abruptly ended talks were latest blow to the Canadian aviation major Bombardier with declining options for it to compete in the smaller passenger jet space.
After the unexpected call off by Airbus, Bombardier is expected to observe some strategic pause and restart the efforts to make its objective of competing in the global aircraft market. Other options for Bombardier include approaching Boeing or Chinese investors.
The costs involved in developing C Series rose to $5.4billion. The soaring development costs put more pressure on Bombardier causing it to delay further.
Bombardier was expecting a tie up with Airbus. As part of the proposed agreement, Airbus would help Bombardier complete the development of troubled aircraft. For this, Bombardier would offer a controlling stake in the program.
This would also end to Bombardier's own initiative to get into lower end of the global aircraft market, which is totally dominated by Airbus and Boeing.
Bombardier may also consider the option of selling stakes in rail and business jet units. It can also approach Boeing. But, Boeing has good relations with Brazilian aviation company Embraer, which is a rival company to Bombardier.
Considering the closer relations with Embraer, Boeing may not be interested in any offer from Bombardier, predict aviation analysts.
Airbus is the main competitor to C Series manufacturers. Bombardier is said to have made an offer to Airbus to rescue the troubled C Series jet manufacturing in joint venture (JV) between them. Bombardier has decided to continue its efforts to get a potential partner to take the C Series jet program off.
The C Series jets are expected to end duopoly in the narrow-body jet market space, which is totally dominated by A320 of Airbus and Boeing 737s. It has already received 243 orders as against its target of 300 at the time of the announcement of entry into this space with C-Series jets.
Bombardier has been facing cash crunch and is finding it difficult to operationalize its C Series je project on its own. On the other hand, the company's profits are also declining continuously. Bombardiers is pinning its hopes on C-Series jet project to reignite growth.
Bombardier has already mobilized $3billion in debt and equity and decided to offload small stake in train-equipment business to improve the balance sheet.
The deal, if successful, is expected to give much elbow room to Bombardier in completing the C Series jet project. For Airbus also, it will stake in revenues from C Series jets without any upfront costs on it.
Bombardier is also tried to talk with other players. Any deal that gets C Series jet for Bombardier will turn the Canadian aviation major. Bombardier's stock soared 15 percent on Toronto Stock Exchange to C$1.77. Shares were trading three times lower of the value in July 2008 when Bombardier launched its C Series jet.
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