Two US Carriers Come Out in Support of Bombardier

[Guest]

U.S. airlines come out in favour of Bombardier in dispute with Boeing

Two U.S.-based airlines urge U.S. authorities to reject Boeing's complaint about Bombardier receiving subsidies to develop the C Series.

 

Presse Canadienne

Published on: September 7, 2017 | Last Updated: September 7, 2017 6:19 PM EDT

Two U.S.-based airlines have asked U.S. authorities to reject Boeing's complaint about Bombardier. Ryan Remiorz / Canadian Press

Two U.S.-based airlines have decided to make themselves heard in the dispute between Boeing and Bombardier by asking U.S. authorities to reject the complaint from the Chicago-based giant.

According to Spirit Airlines and Sun Country Airlines, Boeing’s punitive duties on C Series sales in the United States are a barrier to innovation and competition in the civil aviation industry.

The two low-cost carriers shared their arguments by sending separate letters to the U.S. International Trade Commission and the Commerce Department last month.

“Spirit believes (Boeing’s complaint) is an inappropriate way to block the entry of Bombardier’s C Series into the U.S. market,” wrote its chief financial officer Edward Christie.

For the moment, the 112 aircraft operated by the Miramar, Florida carrier are Airbus. This did not prevent the company from extolling the effectiveness of the C Series, which is in keeping with Spirit’s objective of reducing expenses and lowering ticket prices.

Christie wrote that if Spirit were to buy aircraft capable of carrying 100 to 140 passengers, Airbus and Boeing would not be considered, as the airplane makers do not offer aircraft of this size.

“If Boeing’s complaint prevails, Spirit will be deprived of access (to a program) that would provide significant benefits to U.S. travellers,” read his letter.

In his Jude Bricker of Sun Country Airlines — which operates 22 Boeing aircraft — uses some of the same arguments.

Bricker, president and CEO of the Minnesota-based carrier, added that airlines need access to a wide range of single-aisle aircraft — such as the C Series.

“We believe that American travellers have the right to access the benefits of all (aircraft types), whether they are from Boeing, Airbus, Bombardier, Embraer or any other aircraft manufacturer,” he wrote.

According to Bricker, the punitive measures claimed by Boeing would amount to a “tax for American travellers” and could result in an increase in the price of certain tickets.

The Department of Commerce is expected to announce Sept. 25 whether or not it will impose punitive measures against Bombardier.

Affirming that the Quebec aircraft manufacturer received unfair subsidies to develop the C Series, Boeing applied for a countervailing duty of at least 79.41 per cent and an anti-dumping duty of 79.82 per cent on sales of this commercial aircraft south of the border.

By email, Boeing indicated that it did not wish to comment on letters sent to U.S. authorities by Spirit and Sun Country.

Bryan Tucker, a spokesman for Bombardier, said it was “not surprising to see airlines show up to promote competition.”

The tone of this trade dispute rose a notch this week after the president of the international division of Boeing said that the company had no intention to withdraw its complaint.

Shortly thereafter, Prime Minister Justin Trudeau lambasted Boeing in an appeal to the Governor of Missouri, the state where the U.S. aeronautical giant builds its Super Hornet fighters. Ottawa threatened to abandon its multi-billion-dollar interim buying plan for 18 Super Hornet combat aircraft.

At the end of August, six Senators and members of the House of Representatives of the states of Kansas and West Virginia had written to American authorities to remind them not to neglect the economic impact of the Quebec aircraft manufacturer south of border.

[dagger]

So in today's CSeries new, Boeing has broken off talks with the Canadian government over a possible CSeries settlement. 

The US has approved F 18 Super Hornet sales to Canada - that are now on hold.

And Bombardier is out with some real performance specs - compared to the pre-production numbers, fuel burn improvement for the CS100 is in the vicinity of 0.5% and for the CS300, almost 3% (which is rather astounding). AC must be really happy with this news. Amounts to $800,000 in fuel savings per plane over the projected life of the plane, at current fuel prices.

 

 

[Super 80]

1 hour ago, dagger said:

So in today's CSeries new, Boeing has broken off talks with the Canadian government over a possible CSeries settlement.

I think that happened a while ago. This should be mildly amusing.

[Guest]

One interesting point to me is that Boeing never bid on the aircraft for Delta but are now attacking Bombardier for apparently pricing them too low.  Strange in that Boeing didn't / doesn't have plane to even come close to the Bombardier aircraft which is why I guess they never bid.  Talk about dog in the manger attitude.  

When the Avro Arrow was scrapped, it was Boeing who supplied us with the Bomac missile substitute and didn't a lot of the highly skilled engineers etc go to work for Boeing?  You have to wonder if they are hoping to reap the benefit of a Bombardier staff reduction etc. 

Another voice is heard:

Unifor to meet with Boeing on Bombardier dispute

WASHINGTON, D.C., Sept. 12, 2017 /CNW/ - Unifor National President Jerry Dias is meeting this afternoon with Boeing officials to discuss its trade complaint involving Bombardier's C Series planes.

"The workers are caught in the crossfire as this ongoing dispute continues to put thousands of jobs at risk," said Dias. "I'm here to meet with Boeing to encourage the company to drop its case and seek a resolution with Bombardier."

Bombardier is one of Canada's largest employers with more than 24,000 workers across Canada, with an estimated 40,000 spin-off jobs at its suppliers. Boeing has filed a petition with the US International Trade Commission and the US Department of Commerce alleging that Bombardier is unfairly subsidized by the Canadian and Quebec governments, a claim that Bombardier fiercely denies.

WHAT:	Unifor to meet with Boeing regarding Bombardier dispute
WHERE:	Washington, D.C.
WHEN:	Tuesday September 12, 2017 3:00 p.m. Eastern
WHO:	Jerry Dias, Unifor National President

[dagger]

13 minutes ago, Malcolm said:

One interesting point to me is that Boeing never bid on the aircraft for Delta but are now attacking Bombardier for apparently pricing them too low.  Strange in that Boeing didn't / doesn't have plane to even come close to the Bombardier aircraft which is why I guess they never bid.  Talk about dog in the manger attitude.  

When the Avro Arrow was scrapped, it was Boeing who supplied us with the Bomac missile substitute and didn't a lot of the highly skilled engineers etc go to work for Boeing?  You have to wonder if they are hoping to reap the benefit of a Bombardier staff reduction etc. 

 

The consensus of aviation analysts is that the Boeing complaint has no foundation but the US govt will apply duties anyway, because a lot of trade protectionism is BS. The view is that Boeing feels it made a mistake not cutting off Airbus when it was a new venture, and that the CSeries is a threat - not the CS100 or even the CS300, but the possible stretch to a CS500.

[Guest]

1 hour ago, dagger said:

The consensus of aviation analysts is that the Boeing complaint has no foundation but the US govt will apply duties anyway, because a lot of trade protectionism is BS. The view is that Boeing feels it made a mistake not cutting off Airbus when it was a new venture, and that the CSeries is a threat - not the CS100 or even the CS300, but the possible stretch to a CS500.

I agree but thank God we have Justin to negotiate with the US on our behalf, maybe he can add this to our NAFTA demands and get rid of the the other items he added to the wish list. 

[dagger]

41 minutes ago, Malcolm said:

I agree but thank God we have Justin to negotiate with the US on our behalf, maybe he can add this to our NAFTA demands and get rid of the the other items he added to the wish list. 

I doubt this gets on the NAFTA list, probably heading to the WTO where any duties will likely get thrown out. Since the WTO just gave Boeing a big win on its Washington State subsidies. But Prime Minister May of the UK has taken up the case in behalf of North Ireland, and so this is going to become a bigger issue still. As for the other items on the wish list, they were added specifically for the Democrats, who may control the House as of January 2019. These negotiations will probably still be going on in 2019, and the Liberals have created a vision of a progressive trade deal tailored to the current policy of the Democratic leadership. Or the talks were never supposed to reach a new agreement, Trump will try to withdraw the US from NAFTA and a year from now, Congress and the White House will be before the US Supreme Court arguing that only Congress can withdraw the US from a trade agreement.

[DEFCON]

" the Democrats, who may control the House as of January 2019."

The people may have had enough of the Dems too by that date. It's just as likely the US has reached a tipping point where frustration with corrupt governments will lead to the selection of the third option, the independent politician.

 

 

 

[Maverick]

I believe that Boeing and Airbus now both realize that they made the same mistake that Boeing made at the time of Airbus' infancy in leaving a gaping hole in the market. 

Much as I hate the management at Bombardier they've created a great aircraft t that could lay the boots to both the B-737 and A-320 product lines and they know it. 

Whether Trudeau has the people in place to protect this remains to be seen. 

I also believe that an order for a fighter built in Europe would be another shot across the bow to the US. 

[Guest]

According to this opinion, Boeing has absolutely no case.

Opinion: Why Boeing’s Charge of Bombardier ‘Dumping’ Doesn’t Add Up

Why Boeing’s attack on Bombardier smacks of politics

May 5, 2017Anthony L Velocci, Jr. | Aviation Week & Space Technology

If there were a poster child for the Trump administration’s nationalist economic agenda, it probably would be Boeing. In fact, Boeing as much as created such a poster when it recently placed a full-page advertisement in three prominent newspapers. 

The ad pictures the president speaking from a lectern strategically positioned in front of a Boeing 787 during a February visit to the company’s 787-10 assembly plant in Charleston, South Carolina, “to celebrate jobs.” Just 48 hr. before the ad appeared, Boeing formally asked the U.S. Commerce Department to protest what it alleged is “dumping” of Bombardier aircraft in the U.S. 

Third-party observers will be forgiven if they sense more than a hint of political opportunism here. As one of the most prominent subject experts in the commercial aerospace industry put it: “This is a company that ought to win the brown-nose-of-the-year award.” But that’s not the worst of it. Let’s start by examining Boeing’s dumping charge. 

A fundamental reality is that every airframe manufacturer sells new aircraft at a loss to gain market acceptance. Boeing’s multibillion-dollar sale of 787s to Air Canada is a case in point. The company lost huge sums of money on each of the first 393 787s it built—many of which were sold to customers outside the U.S.—including the first 16 aircraft it sold to Air Canada, according to Boeing financial records. In fact, an argument could be made that Air Canada’s 787s were bought not just below the cost to build them but also below market value. The airline sold two and then leased them back, resulting in a $19 million profit on each sale. 

All told, Boeing lost $305.23 million on the 16 aircraft delivered to Air Canada, although deferred production losses on the program as a whole are much greater, peaking at nearly $29 billion in the first quarter of 2016. Only recently did the program turn profitable on a recurring basis, according to Boeing financial data. 

For its part, Boeing stands by its charge that Bombardier is selling into the U.S. market at a price millions lower than what it is charging in the Canadian market. “Boeing doesn’t do that,” a company official said. “There’s a difference between offering discounts and selling at a loss.” Boeing also points out that it incurred substantial unforeseen expenses during the development and early production phases of the 787 program but was confident of turning the corner to profitability. 

Then there is the countervailing duty Boeing wants the Commerce Department to impose because it argues that C Series jets “compete directly with American-made B737-700 and 737 MAX 7 jets.” This, too, is as disingenuous as Boeing’s complaint that Delta Air Linesbought jets below Bombardier’s cost of production. In fact, the model that Bombardier sold to Delta was the CS100, which competes with exactly nothing that Boeing builds—and which contains very substantial U.S. content.

The C Series program was rescued by a $1 billion investment from the Quebec government. Still, the notion that Bombardier is the only beneficiary of various forms of government support is ludicrous. Mindful of the importance of aerospace as a strategic industry due to its contribution to job creation and innovation in general, governments around the world have long provided either direct or indirect support for leading aerospace companies. 

In Boeing’s case, the World Trade Organization in 2011 established that the company received $3-4 billion in local, state and federal aid in support of every one of its current commercial programs. Boeing’s position: “As an unsubsidized commercial enterprise, Boeing has a business plan for all of our airplane programs that anticipates and fully expects a profit.”

The reaction to Boeing’s petition against Bombardier across much of the aerospace industry has been sharply negative. While company executives may dismiss such criticism, the bigger issue is the possible cost of picking this particular fight, which seems to make no sense whatsoever. For example, Delta is preparing to issue a request for proposals for a large order for Airbus 320neo and Boeing 737MAX models. Some industry observers believe Boeing’s petition may diminish its bargaining leverage. And what of the appearance of such blatant hypocrisy that could tarnish Boeing’s otherwise sterling reputation?

Given the rancid political environment in the U.S., it is possible that Boeing’s claims might actually find a receptive audience, at least preliminarily. Regardless of the U.S. International Trade Commission’s final ruling, however, there is a pervasive sense—and deservedly so—that Boeing has made a tactical if not a strategic blunder. Being a tough, tenacious competitor is admirable. Sadly, what is happening here does not rise to that level. 

Anthony L. Velocci, Jr., was editor-in-chief of Aviation Week & Space Technology from 2004-12. The views expressed are not necessarily those of Aviation Week.

[dagger]

Scott Hamilton of LeeHam will tell you the same. Boeing's case is 100% BS, more a fear of the mythical CS500, than any concern about the CS100 or CS300. But being concerned about the CS500 means making sure Bombardier fails with the smaller planes. 

[dagger]

On 2017-09-12 at 7:41 PM, Malcolm said:

I agree but thank God we have Justin to negotiate with the US on our behalf, maybe he can add this to our NAFTA demands and get rid of the the other items he added to the wish list. 

With Trump cozying up to the Democrats, those issues that were added are precisely what a Democratic Congress would need to justify a renewed trade agreement. That's why they were added. They are throwaway issues for this Congressional term, and if a deal is struck before the 2018 elections, they won't be part of it except a bit of labour and environment aimed at the lowest Mexican standards. But if talks drag, and the Democrats are essential for approving a new deal in 2019 and beyond. Certainly, putting climate change and labour rights into a new deal dovetails perfectly with what the Democratic leadership in Congress is advocating. You can't add these things to the talks after the fact, you have to have them on the table at the start of the process. A progressive trade deal would be a new concept that the Democrats would use to distinguish their stand on trade from that of the past.

[dagger]

51 minutes ago, Malcolm said:

According to this opinion, Boeing has absolutely no case.

 

They have no case but that won't stop the US from recommended preliminary anti dumping duties. 

 

Here's Scott's newest article on the case - he thinks it's BS, too - outlining likely next steps.

 

https://leehamnews.com/2017/09/18/pontifications-next-steps-boeing-bombardier-trade-complaint/#more-24751

[dagger]

Sept. 18, 2017, © Leeham Co.: The US Department of Commerce is due next Monday to hand down its preliminary decision on whether to impose tariffs on Bombardier’s C Series sold to Delta Air Lines.

The price dumping complaint, filed by Boeing earlier this year, cleared the US International Trade Commission on a 5-0 vote. The ITC found probable cause (my words) to proceed with the complaint. From there, investigation shifted to the DOC.

The details are complex and need not be recapped here. What is important are the next steps, assuming—as widely expected—DOC sides with Boeing.

 

The politics

Two weeks ago, it was revealed Boeing walked away from negotiations with the Canadian government to resolve the issue. Last week, it was revealed UK Prime Minister Theresa May talked with President Donald Trump about the complaint. More discussions are to follow.

It may be noteworthy, if accurate, that Boeing may be coming back to the table. See the last paragraph in this Sept. 12 article from The Global and Mail.

One industry observer wrote that the UK is coming to the table too little, too late. This is a totally uninformed position. LNC has known since July something was up with the UK, which is a purchaser of Boeing military goods. In fact, it was announced at the Paris Air Show agreed to purchase 50 Apache helicopters.

I don’t know the current status of this deal, but just raising the issue, as did the Ulster Unionist Party of Northern Ireland, has all kinds of implications. It was suggested to me in July that the UK (and May specifically) was gearing up and the UK could potentially cancel Boeing contracts or otherwise act.

Why is the involvement of the Ulster Unionist Party important?

The C Series wings are produced at Bombardier’s Northern Ireland factory and it is the biggest employer in this perpetually depressed area. These are also high-paying jobs.

More to the point, May barely survived a June snap election. She remained in office through forming a coalition government. The swing political party? The Ulster Unionist Party.

If May is unsuccessful in getting Boeing, somehow, to drop this complaint, could the Ulster party bolt, in which case the May government collapses? Does Boeing want to be responsible for this? Does Donald Trump want to lose a kindred spirit?

The scenarios are ripe for the imagination.

Next Steps

Irrespective of the politics, here are the possibilities of what’s next, on the assumption that no settlement is reached in the next week and Commerce rules in Boeing’s favor next Monday.

• Tariffs are imposed on a per-airplane delivered basis. The tariffs will be escrowed while appeals are pending. The first airplane is scheduled for delivery in April.
• An appeal of the DOC decision may be made to US Federal District Court in Washington (DC). But, somewhat exquisitely, this isn’t the only place.
• An appeal could be filed with the US Court of International Trade. According to this article in Forbes, the CIT is a much tougher place to win a complaint than the US ITC or Commerce.
• The government of Canada can appeal the decision to (of all places) NAFTA. A review board is made up of (get this) Mexico, Canada and the US. Thanks to President Trump threatening to pull out of NAFTA and otherwise insulting Mexicans, Mexico, its president, Canada and dismissively its premier, some people are chortling over the prospect of NAFTA adjudicating an appeal.
• If this weren’t bad enough, the DOC decision can be appealed to (drum roll) the World Trade Organization. US tariffs are higher than those allowed by the WTO, of which the US is a member. If, by the time the appeal wound through the WTO, and if it were upheld, the WTO could reduce the tariffs imposed by Commerce. As we all know from the Airbus-Boeing proceedings, it can take years and years for a final outcome at the WTO.
• The next phase is to assess the “injury” to Boeing. The timeline is next year.

Withdrawing from NAFTA

Trump vowed to withdraw from NAFTA, or at least renegotiate its terms. He can sign an executive order withdrawing from NAFTA. Withdrawal would moot an appeal to NAFTA, but there is a line of thinking that Congress must ratify the withdrawal because of treaty obligations. Whether Congress would go along is questionable. In the meantime, NAFTA continues.

This case is far from over if a settlement of some kind isn’t reached. If it continues, it will remain fodder for the media (and enrichment for the lawyers) for years to come.