Airbus turmoil overshadows bid to rescue Bombardier’s CSeries program

Above, an Airbus A320neo aircraft and a Bombardier CSeries aircraft are pictured during a news conference to announce a partnership between Airbus and Bombardier on the C Series aircraft program near Toulouse, France. (Reuters)
Updated 22 October 2017
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Airbus turmoil overshadows bid to rescue Bombardier’s CSeries program

PARIS: Airbus’s coup in buying a $6 billion Canadian jetliner project for a dollar stunned investors and took the spotlight off a growing ethics row last week, but internal disarray has raised questions over how smoothly it can implement the deal.
The European planemaker secured the deal for Bombardier’s CSeries program by pledging to throw its marketing might behind the loss-making jets, just as the Airbus sales machine reels from falling sales and internal and external corruption investigations.
Chief Executive Tom Enders has urged staff to keep calm in the face of French reports describing payments to intermediaries and growing concern over fallout from the investigations.
But the mood at the group’s Toulouse offices remains grim.
“Bombardier asked for an ambulance and Airbus sent a hearse,” said one person with close ties to the company.
French media attention on the growing scandal helped to camouflage talks to buy the CSeries. Rumors circulated in late August that Enders and a colleague were visiting Paris to meet investigators. In fact, they were holding the first of several secret dinner meetings with Bombardier.
But the same affair, which first came to light in 2016, has begun to cloud sales momentum. In the first nine months of the year Airbus accounted for only 35 percent of global jet sales in its head-to-head battle with US rival Boeing.
The Airbus sales operation is demoralized and in disarray, multiple aerospace and airline industry sources said, with some blaming Enders for turning the company against itself.
Two people said the situation is so tense that some employees have begun to shy away from selling in problematic countries, rather than risk being drawn into the investigation.
Soon-to-retire sales chief John Leahy has been asked to stay until the end of the year to help steady the operation, but his successor has not been officially confirmed, adding a sense of vacuum that has also sapped morale.
Leahy designated his deputy Kiran Rao as his successor earlier this year but the chaos engulfing Airbus means now is not considered the right time for major new announcements.
A spokesman for Airbus, which has long predicted a slower year after an order boom, dismissed reports of instability.
“We have a great sales team ... but it is fully understood that they cannot repeat records every year; and the year is not over,” he said.
Enders has strongly defended his decision in 2016 to report flawed paperwork to UK authorities, which prompted UK and French investigations focusing on a system of sales agents run by a separate Paris department that has since been disbanded.
Airbus says no evidence of corruption has been uncovered, but Enders has pledged to continue the overhaul of sales practices historically shared between Toulouse and Paris.
A source close to Bombardier acknowledged disruption at Airbus but predicted things would settle down by the time the deal for Airbus to sell the CSeries closes next year.
At that point Airbus will face a second challenge in marketing the CSeries, which for years it dismissed as a weak upstart. Now it must offer the aircraft side by side with the older A320.
Airbus plans to refresh the A320 further after adding new engines and this will bring it closer to the smaller CSeries in performance, two people close to the plans said. It may also make some CSeries features more compatible with its own A320s.
That comes on top of plans to enhance the larger A321neo in response to Boeing’s launch of a new mid-market plane, which industry sources expect to happen next year.


Oil jumps as market tightens, more gains seen

Updated 24 September 2018
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Oil jumps as market tightens, more gains seen

  • Brent crude hit its highest since May at $80.47 per barrel
  • Commodity traders Trafigura and Mercuria said that Brent could rise to $90 per barrel by Christmas

LONDON: Oil prices rose 2 percent on Monday as US sanctions restricted Iranian crude exports, tightening global supply, with some traders forecasting a spike in crude to as much as $100 per barrel.
Brent crude hit its highest since May at $80.47 per barrel, up $1.63 or more than 2 percent, before easing back slightly to around $80.40 by 0730 GMT. US light crude was $1.18 higher at $71.96.
US commercial crude oil inventories are at their lowest since early 2015 and although US oil production is near a record high of 11 million barrels per day (bpd), subdued US drilling activity points toward a slowdown in output.
Commodity traders Trafigura and Mercuria said on Monday that Brent could rise to $90 per barrel by Christmas and pass $100 in early 2019, as markets tighten once US sanctions against Iran are fully implemented from November.
J.P. Morgan says US sanctions on Iran could lead to a loss of 1.5 million bpd, while Mercuria warned that as much as 2 million bpd could be knocked out of the market.
The Organization of the Petroleum Exporting Countries as well as top producer Russia are discussing raising output to counter falling supply from Iran, although no decision has been made public yet.
OPEC leader Saudi Arabia and its biggest oil-producer ally outside the group, Russia, on Sunday ruled out any immediate extra increase in output, effectively rebuffing a call by US President Donald Trump for action to cool the market.
“I do not influence prices,” Saudi Energy Minister Khalid Al-Falih told reporters as OPEC and non-OPEC energy ministers gathered in Algiers for a meeting that ended with no formal recommendation for any additional supply boost.
A source familiar with OPEC discussions told Reuters on Friday that OPEC and other producers have been discussing the possibility of raising output by 500,000 bpd.
“We expect that those OPEC countries with available spare capacity, led by Saudi Arabia, will increase output but not completely offset the drop in Iranian barrels,” said Edward Bell, commodity analyst at Emirates NBD bank.
JP Morgan said in its latest market outlook, published on Friday, that “a spike to $90 per barrel is likely” for oil prices in the coming months due to the Iran sanctions.
Struggling with high crude prices and a weak rupee, Indian refiners are preparing to cut back crude imports.