October 19, 2017 / 8:53 PM / 3 months ago

Airbus CSeries deal unlikely to spur quick boost in sales: Air Lease CEO

MONTREAL (Reuters) - Airbus SE’s deal with Bombardier (BBDb.TO) boosts confidence in the CSeries jet program but may not spur many new sales until it is finalized and a U.S. trade dispute is resolved, the head of a major aircraft leasing firm said on Thursday.

Airbus (AIR.PA) on Monday agreed to take a majority stake in the CSeries program, securing the plane’s future and giving the Canadian firm a possible way out of a damaging trade dispute with Boeing (BA.N) and U.S. regulators.

The lightweight, carbon-composite jet, which cost $6 billion to develop, has won performance accolades but failed to secure a sale in 18 months.

“People are feeling better about the CSeries but it’s all on the expectation that Airbus concludes the transaction,” said John Plueger, the chief executive officer of Air Lease Corp (AL.N).

The deal is subject to Canadian government approval.

Bombardier is counting on the agreement to help trim costs and boost CSeries sales.

Its strategy to remove the “cloud” of uncertainty that has weighed on CSeries orders, is dependent in part on making jets for American customers like Delta Air Lines (DAL.N) at Airbus’s Alabama production facility, instead of in Canada where Bombardier is based. That could avoid potentially punitive duties stemming from its dispute with Boeing over alleged unfair trade practices.

“That cloud is still there until the transaction concludes.(but) that cloud is perhaps not as dark or as ominous,” Plueger said.

    He declined to say whether Air Lease Corp, which has total assets of $15 billion, would now consider buying the CSeries. But he noted that leasing companies would likely hold off until the CSeries had enough orders to ensure strong resale value for the plane.

    “Part of the life and blood measurement of any airplane is how deep is the operator base,” Plueger said in a phone interview from New York.

    Plueger also said the deal with Airbus may drive Boeing to take another look at the 100 to 149 seat space and at least contemplate an alliance with an existing planemaker, to ratchet up competition. Brazil’s Embraer (EMBR3.SA) which competes with Bombardier in the smaller regional jets market, is one strong possibility, he said.

    “The question is does Boeing rethink Embraer?” Plueger asked. “It will depend upon their assessment of how much additional market presence this brings to Airbus.”

    Reporting by Allison Lampert; Editing by Tom Brown

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