Having been snubbed by Airbus, Bombardier all but certainly sees an urgent need to accelerate talks with other potential investors, including Comac, about its CSeries programme.

Bombardier and Comac have been in conversations from before 2011, when they first inked an agreement to develop commonality between the CSeries and the in-development C919 narrowbody.

Even then, sources say, there was the vision that Comac could eventually invest in the Canadian airframer, but that this would be a decision for Chinese government, and largely out of Comac’s hands.

Progress on any tie-up between the pair has been slow. Comac these days is preoccupied with getting its ARJ21 regional jet into service, getting the C919 airborne, and engaging with Russia on a widebody development. Nonetheless, sources note that Comac has never formally rejected Bombardier’s proposals.

“We have always been talking to Bombardier, but the talks have moved forward quite slowly. This is complicated because eventually it is a government decision,” says a senior executive at Comac.

He adds that mergers and acquisitions are also “a very complicated process” in China, especially when it involves the government. The two parties are however still keeping in close contact, with frequent cross visits between Shanghai and Montreal.

Fading allure

As the years passed, however, Bombardier has become less alluring to Comac owing to two factors: Bombardier’s CSeries travails and the recent deal between Comac and Boeing to jointly operate a 737 completion and delivery centre in China. The engineering, certification and after service knowledge Bombardier could previously offer Comac can now come from other avenues.

“Everything is politics in China so it was easier for someone senior to go to the government and explain why working with Bombardier makes sense. It is the third largest manufacturer globally, a credible organisation with a fantastic track record in delivering planes, but that story doesn’t hold today,” says Torbjorn Karlsson, former VP of sales for Asia Pacific at Bombardier Commercial Aircraft.

“At the same time, the Chinese industry is moving forward… Comac is gaining confidence every year that they’ve been delayed while Bombardier has been losing credibility every year.”

While Bombardier might be a good fit for Comac considering the CSeries nicely fills the gap between the Chinese manufacturer’s ARJ21 and C919 programmes, Chinese companies are still far more inclined to acquire a company and have full say, rather than merely propping it up. Bombardier, however, probably isn’t willing (yet) to give up its commercial business completely.

Sources add that Bombardier has not only approached Airbus and Comac to take a majority stake in the CSeries, but is also looking at a more comprehensive investment into its commercial aerospace division. This includes talks with ATR, which Airbus is a shareholder of, about its Q400 programme.

Karlsson believes that a tie-up with Airbus is ideal, since it would allow the ATR 72 to stay as a low-cost product. Bombardier and ATR can also come together to develop a 90-100 seat turboprop. The CSeries will meanwhile serve the market just above the turboprop, while Airbus’ products cover everything else.

This vision sees ATR and Bombardier merging to develop a bigger product, at a time when ATR is at the top of its game.

“Airbus to me is strategically the best option for Bombardier. It has a larger network of customers… reduces competition that is irrational, immediately increasing profitability, and it also removes the biggest naysayer in the market,” says Karlsson.

But still a lot to offer

Qiu Yong, managing director at Three Oaks Aviation Consultancy and an expert with Chinese programmes, disagrees. His sees Bombardier as “redundant” for Airbus, while Comac still sees value in the engineering skills, manufacturing procedures and industry standards that Bombardier can bring to the table.

Besides bringing cash to Bombardier, Comac would also open up the China market for the Canadian company.

“Bombardier should continue pursuing Comac. This will be its best strategy,” says Qiu.

At this point, Bombardier is also no doubt in talks with private equity investors, since it has been desperate enough to approach Airbus. Quebec has signaled that it is open to foreign investment to Bombardier, and that it is also ready to help the manufacturer with its CSeries programme.

Richard Aboulafia of the Teal Group, however, expects a more dramatic end with the CSeries to be cancelled. He contends that Bombardier lacks the resources to make the programme a commercial success on its own and without a partner in the foreseeable future.

“It might linger on for a year or two of initial production, but without an exit strategy this would merely serve to worsen Bombardier’s losses and jeopardise the company’s other units, particularly the essential business jet division.”

Source: Cirium Dashboard