Airbus and the government of Quebec have agreed to invest another $1.2 billion in the A220 program. But why is this necessary at this point?
Many readers will know that the plane that we now call the Airbus A220, was originally the Bombardier CSeries. And as we have covered in previous articles, there was some controversy early in the program. Boeing accused Bombardier of receiving illegal financial support, and price dumping. Courts in the United States later agreed that neither accusation was true. For more on this, go HERE.
It was true that the program had received some support, however. And today, the government of Quebec still has a 25% stake in the Airbus A220 program. The purpose of the CSeries was (and the A220’s purpose still is) to join distant regional airports. Many such small airports are dotted around Canada, justifying the government’s interest in the aircraft.
Quebec And The Future Of The Airbus A220
However, despite its great efficiency and great success, the A220 is still a loss-making program. Previously, the plan was for Airbus to buy the 25% stake of the Quebec government in the A220 in 2026. But current projections show that the aircraft will not become profitable before 2025. So if Airbus bought out Quebec a year later, the government would not get a return on its A220 investment.
So under the new agreement, Quebec will hold on to its stake until 2030. But the government will also invest another $300 million into the program. Airbus will make a $900 million investment, which corresponds to its own 75% stake. Some in Quebec have criticized the government for continuing to invest in the Airbus A220.
But with the new timeline, the government believes that it can recuperate its investment. The program also maintains 2,500 jobs in the province. At the moment, Airbus assembles the A220 on two sites: in Mirabel, Canada, and in Mobile, Alabama. But much of the manufacturing and processing, for both finish assembly lines (FALs), still takes place in Canada.
Supply Chain and Production Challenges
Meanwhile, with Quebec staying on board for a bit longer, Airbus focuses its streamlining efforts on various aspects of the A220. The supply chain side of things is an area where Airbus has some more bargaining power than Bombardier did. But there are some practical limits to this. And this also has to do with how engine and other suppliers can ramp up for other programs (A320), post-pandemic.
Airbus is also looking at the way Bombardier originally organized the aircraft’s assembly. For instance, the manufacturer is now pre-assembling some component parts of the fuselage with wiring and/or insulation, to save time further down the line. But the main factor that would enable Airbus and Quebec to make a profit with the A220, is production volume.
The A220-300, in particular, stands to take a good chunk of the demand for the A319 (perhaps even the A320) and Boeing’s 737-7. But while Airbus assembles over 40 A320-family aircraft per month, it can only assemble 5 A220s in the same period. And this has to change, while Airbus grapples with production increases in its other products.
With its origins in Quebec as the Bombardier CSeries, the Airbus A220 is a North American aircraft, with a North American supply chain. There is a lot of demand for this efficient aircraft. So it will be interesting to see how Airbus handles this balancing act. It has already put a supply chain expert in charge of the programme, as we saw.