Delta Expects to Buy U.S.-Built CSeries Jets -- Update

By Susan Carey and Doug Cameron 

ATLANTA -- Delta Air Lines Inc. said Wednesday that it planned to take Bombardier Inc. new CSeries jetliners built at an Airbus SE facility in Alabama, though didn't provide a timeline for the first delivery.

Bombardier and Airbus this week announced a planned joint venture that would include building some jets at the European company's plant in Mobile, Ala., in an effort to avoid proposed tariffs levied by U.S. trade officials on the Canadian plane maker.

Delta was due to receive the first of its 75 CSeries jets next spring, and last week Chief Executive Ed Bastian said they could be delayed because of the trade spat between the U.S. and Canada over Bombardier.

Mr. Bastian didn't provide further guidance on timing at an event on Wednesday. Delta is prepared to wait as long as two years for the jets to ensure they are assembled in Mobile and don't attract tariffs, according to people involved in the negotiations.

Airbus builds four of its A320 model jets a month at the Mobile facility, which opened in 2015.

Local officials said they were unaware of the plan to build Bombardier jets there until just before this week's announcement.

Troy Wayman, vice president for economic development at the Mobile Chamber of Commerce, said Airbus would likely have to construct a new facility at the site to assemble the CSeries.

Mr. Wayman said officials could likely agree on a package of incentives for Airbus in less than six months.

Airbus and Bombardier don't expect to complete their planned deal until the second half of next year, and people involved in the talks said it could take more than a year to construct facilities to assemble CSeries jets in Mobile.

Mr. Bastian said it isn't clear when the Airbus-Bombardier pact would secure regulatory approval or how long it would take to establish a new assembly line in Mobile.

A final decision on whether to expand the Mobile plant hinges on the outcome of the probe by U.S. trade officials. They have proposed tariffs that would potentially quadruple the price of CSeries planes for U.S. buyers after upholding a complaint from Boeing Co. that the Canadian aircraft maker benefited from unfair government subsidies.

A U.S. trade panel is due to rule in February on whether Boeing suffered any harm. The tariffs would kick in if harm is found.

Boeing said that even CSeries jets assembled in Mobile would be subject to tariffs on imported parts. Bombardier and Delta both reject that argument.

"Boeing can make its own decisions," Mr. Bastian said. But it is "hard to see how Boeing is harmed" when it doesn't have a plane in the 100- to 150-seat category.

He said Delta had no role in the planned joint venture between Airbus and Bombardier, which started with talks between executives from the two plane makers at the Paris Airshow in June, according to people involved in the discussions.

"We have a great relationship with Boeing," Mr. Bastian said, adding that the trade spat wouldn't prevent Delta from buying more jets from the U.S. aerospace giant.

Delta is studying Airbus and Boeing jetliners to replace older models from both plane makers. Mr. Bastian expects a decision over the next six to 12 months.

He said both the Airbus A320neo family and the Boeing 737 Max products are very strong. He declined to say how many planes will be ordered.

Mr. Bastian said the CSeries jets will help Delta allow it to bring some flights now operated by commuter airline partners in-house, and build up routes from its smaller hubs, including New York's La Guardia Airport.

He said Delta wasn't a party to the Airbus-Bombardier deal reached earlier this week, and said he expects a full briefing by the parties in the coming days.

Write to Susan Carey at [e-mail] and Doug Cameron at [e-mail]

(END) Dow Jones Newswires

October 18, 2017 12:08 ET (16:08 GMT)

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