Will Boeing Give a Damn?

[GDR]

Oct 9, 2017 Danny Lam | Aviation Week & Space Technolog

 

The trade dispute sparked by Boeing’s charges that Bombardier is dumping C Series aircraft at unfair prices is marked by loud rhetoric on both sides of the U.S.-Canada border. Ottawa’s Liberal government has threatened Boeing’s defense business in Canada and enlisted UK Prime Minister Theresa May to lobby U.S. President Donald Trump. But Canada’s attempts to derail the petitions filed by Boeing with the U.S. Commerce Department and International Trade Commission have had no effect so far. The reason: The true target is not really Canada, but China and its aircraft industry.

U.S. Trade Representative Robert Lighthizer charges that Beijing’s efforts to subsidize and create national champions and force technology transfers distorts markets throughout the world and is an “unprecedented” threat to the global trading system. Take aviation. By 2036, China is projected to be the No. 1 or No. 2 market in commercial aviation, a sector long dominated by Airbus and Boeing. Its national champion is Comac, which manufactures the ARJ21 regional jet and C919 narrow-body and is developing—with Russia—the CR929 widebody. Beijing’s “Made in China 2025” plan sets aggressive targets for its aircraft industry, tasking Comac with taking more than 10% of the domestic market for mainline commercial aircraft.

 

Credit: Bombardier

 

That goal is backed by mercantilist policies and substantial government subsidies. Beijing has tried to break into markets before. China has poured tens of billions of dollars into cracking the semiconductor oligopoly controlled by U.S., Japanese, South Korean and Taiwanese companies. But so far it has not been successful in securing state-of-the-art integrated-circuit manufacturing technology because the industry has worked collaboratively to frustrate Chinese mercantilist ambitions. This has prevented the semiconductor market from suffering the fate of solar photovoltaics, or steel, where the market has been gutted by excess capacity from hundreds of new Chinese businesses.

Bombardier’s China strategy amounts to aiding and abetting Chinese mercantilism in commercial aviation, with predictable consequences for the global aerospace industry. The company entered into an agreement with Comac in 2012 to explore synergies between the C Series and C919, with the goal of challenging the Airbus-Boeing duopoly. Nothing concrete came out of that, and Bombardier nearly went bankrupt in 2015 before receiving investments from Canadian provincial and federal entities of at least $3 billion.

In May 2017, the Financial Times reported that Comac and Bombardier held talks about Chinese entities buying a stake in Bombardier Commercial Aircraft or the C Series, quoting an unnamed source as saying, “everything is on the table.” That included Chinese access to Bombardier’s technologies and its marketing, distribution and support infrastructure. This potential collaboration with China is, in my opinion, the principal but unspoken reason behind Boeing’s trade complaint.  

As a Canadian company, Bombardier is entitled to preferences under the North American Free Trade Act (NAFTA) that sharply restrict U.S. trade actions so long as the product qualifies as NAFTA-origin. Indeed, Canada’s entitlement to arbitration under NAFTA’s Section 19 may be its last resort in the C Series dispute short of taking its case to the World Trade Organization. Not surprisingly, the U.S. wants to eliminate Chapter 19 in the renegotiation of NAFTA now underway.

So long as components add up to 50% of transaction value or 60% of net cost, a product qualifies for NAFTA preference. What if Chinese aerospace companies gained access to those same NAFTA preferences?

In its defense against Boeing’s claims, Bombardier says more than 50% of Canadian-assembled C Series aircraft come from the U.S., including its engines and avionics. The wing comes from Bombardier’s plant in Northern Ireland, but much of the fuselage already comes from SACC in China. It is conceivable that Bombardier could incorporate NAFTA-qualified engines, avionics and subsystems, but complete the final assembly in China—and have an aircraft that still qualifies as NAFTA-origin under the current rules.

Similarly, Chinese-built aircraft branded “Bombardier” could be sold from Canada while bypassing all tariffs against a China-based manufacturer. And Bombardier technology could enable Comac to build a successor to the C919 that would be truly competitive with Airbus and Boeing offerings in China. In other words, with Chinese investment, Comac-Bombardier could rapidly stand up as a capable competitor to the Airbus-Boeing duopoly in the North American and Chinese markets.

Boeing’s complaints about C Series subsidies are getting the media attention, but Bombardier’s willingness to transfer technologies and knowhow to China is at the heart of this trade dispute.  

Danny Lam is a research associate at the University of Waterloo in Ontario. His research includes work on China, NAFTA and defense issues. The views expressed are not necessarily those of Aviation Week. 

[Maverick]

I have no idea how valid these numbers are but I can't see them being too far out of line.

 

Still more on this I wrote earlier today... Boeing Wrongly Tries to Make a Point or is Trying to...

Just how much business does Boeing get from Canadians (who pay taxes and airline fares)?

How many new engineering jobs has Boeing created in the past 10 years in Canada?

How many cooperative program does Boeing have with Canadian universities and colleges?

How much business Boeing receives from Canada?

• Westjet 787 x 20 = $5.4 billion
• Air Canada 737 Max x 61 = $6.5 billion
• Westjet 737 Max x 63 = $6.3 billion
• WestJet 737 NG x 120 = $10+ billion?
• AC 777 x 32 = $6+ billion?
• AC 787 x 37 = $6+ billion?
• RCAF CC-177 x 4+1 = $2 billion?
• RCAF CH-147 x 15 = $2.2 billion including support
• ...

Total $44.2 billion ?? plus parts?

WestJet Airlines Ltd. plans to order as many as 20 Boeing Co. 787-9 Dreamliners valued at $5.4 billion https://www.thestar.com/business/2017/05/02/westjet-orders-up-to-20-boeing-dreamliners-for-long-distance-routes.html

• Air Canada orders 61 Boeing 737 MAX jets for up to $6.5 billion
  http://www.cbc.ca/news/business/air-canada-orders-61-boeing-737-max-jets-1.2460560
• WestJet may consider wide-body fleet expansion after deal to buy Boeing 737 MAX planes
  http://business.financialpost.com/transportation/westjet-airlines-ltd-pens-deal-to-buy-65-of-boeings-new-737-max-planes
• Air Canada 787 and 777 orders (18 & 14) 
  https://web.archive.org/web/20091007204352/http://www.boeing.com/news/releases/2005/q4/nr_051109g.html

Don't let yourself being fooled by what Boeing says... They have just "No Reason" to complaint about the Bombardier CSeries sold to Delta Airlines...

Sylvain Faust

http://www.fliegerfaust.com/how-much-business-boeing-gets-from-canada-ah-2495623156.html

[Tango Foxtrot]

Or perhaps they are going to turn the table around and say, " You buy a whole herd of Super F18s, and a whole lot of what ever we say, and all this goes away!" "Sure has been fun doing business with you guys !" "Thanks for getting involved !"............

 

 

[Super 80]

If Boeing said buy the F-18E, KC-767, P-8 and the last C-17 white tail and all this goes away Ottawa would probably jump at that deal.

Although I suspect the deal will be made between Bombardier and Trump and not with Boeing.

[Fido]

2 hours ago, Maverick said:

I have no idea how valid these numbers are but I can't see them being too far out of line.

Try and find out how 'Canadian' each company is:

What are the employment figures (aerospace only) for each.

They are very hard to find.

[Maverick]

Opinion: Could U.S. Trade Rulings Put Chill On Aircraft Financing?

Will U.S. rulings unravel years of trade advances in commercial aviation?

Oct 12, 2017Richard Aboulafia | Aviation Week & Space Technology

 

Bombardier’s C Series has had a rough few weeks. The U.S. Commerce Department in September ruled that the 75-aircraft CS100 sale to Delta Air Lines was subsidized enough to warrant a 220% countervailing duty on all C Series jets imported into the U.S. Then, in early October, Commerce also ruled that an additional 80% anti-dumping duty was warranted.

Boeing, which initiated this trade complaint earlier this year, now faces negative consequences in the Canadian and UK defense markets. It also faces negative consequences from U.S. airlines, not only Delta, but also Spirit Airlines, JetBlue Airways and others. But the greatest potential self-inflicted damage to Boeing might result from changes in global jetliner trade rules.

First, the jetliner market’s strong growth in recent decades has been aided by a remarkable multilateral treaty created in 1980, the Agreement on Trade in Civil Aircraft (ATCA).  Originally a component of the General Agreement On Tariffs And Trade (GATT) and now part of the World Trade Organization (WTO), ATCA aimed to eliminate “all customs duties and other charges of any kind” on commercial jetliners. This 10-page document has greatly reduced trade barriers between signatories, giving airlines freedom to select their jets. ATCA is why Air France has scores of Boeing 777s and why Airbus has a strong U.S. customer base. The accord has encouraged innovation and technology development, since airframers need to compete globally rather than rely on protected home markets.

Credit: Larry W. Smith/Getty Images

ATCA does allow for trade complaints, but in a multilateral context. Boeing’s Commerce Department complaint is a unilateral one and is part of a broader political trend.

The Commerce ruling represents an extension of an “America First” trade agenda. The Trump administration is increasingly relying on unilateral trade actions instead of multilateral negotiations. According to Chad Bown of the Peterson Institute for International Economics, if the administration follows through on all of its proposed trade actions, the share of U.S. imports subject to unilateral restrictions would rise to 7.4% of the total from 3.8% in 2016. 

Commerce’s C Series ruling might be rendered moot by February, when the U.S. International Trade Commission (ITC) is set to rule on whether Boeing was actually damaged by Bombardier’s actions. But many believe the level of Commerce’s duties is as politicized as the trade complaint itself. The combined duties are nearly twice Boeing’s request of combined 160% countervailing/anti-dumping duties. Assuming Boeing is correct and Delta paid $20 million per jet, there is now a $60 million duty on each aircraft. That comes to $4.5 billion in duties for this deal, a seemingly arbitrary number.

For jetliner markets, there are two likely consequences of the C Series case. First, since other countries will see it as a political outcome, they will retaliate, either through multilateral institutions such as the WTO or through their own national barriers.

Since it is relatively easy to “prove” that a jet was subsidized (by one country’s criteria, without any multilateral adjudication) pretty much anyone would be able to keep competing jets out of their home markets. In this way, decades of progress toward free trade in jetliners could be undone in a few years.

The U.S., and in particular Boeing, enjoy an enormous surplus in commercial aerospace trade. Over 80% of Boeing jetliners go to export end users. The 737-7, the only Boeing jet that competes in any way with the C Series, has been ordered by three customers. Ironically, two are Canadian. Canada will be able to use its own unilateral trade actions to kill a competing plane.

Alternatively, Canada could take the high road and go through the WTO, which may then find that the Commerce duties violated ATCA, thereby authorizing Canada to retaliate.

Second, ATCA and other multilateral trade agreements, such as the Capetown Convention, have played a strong role in promoting the rise of third-party financing, which in turn plays a role in the majority of jetliner purchases.

The Commerce ruling means that for the first time, a jetliner owned by a lessor or other financier could not be sold or leased into a key market without onerous duties. Since this unilateral trade action could be followed by similar actions with other jets and in other countries, there is likely to be a chill in jetliner finance markets, with additional risk premiums attached to finance deals.

It is hard to see how this possible change in jetliner finance terms would be to Boeing’s advantage. Then again, it is hard to see how any of the negative second-order effects from Boeing’s complaint would not greatly outweigh any protection it would get from a small perceived competitor. 

 

http://aviationweek.com/commercial-aviation/opinion-could-us-trade-rulings-put-chill-aircraft-financing?NL=AW-05&Issue=AW-05_20171013_AW-05_548&sfvc4enews=42&cl=article_3&utm_rid=CPEN1000002756667&utm_campaign=12053&utm_medium=email&elq2=8dcb9792ad044aa5bd5bb28640b7e4a2

[JL]

Apparently Boeing does give a damn. Saw a TV commercial last night that showed how much Canada means to Boeing. I have tried posting the link but it never works. You'll have to google "Boeing Canada" to got to the Boeing / Canada website.

 

 

[Kip Powick]

Is this what you wanted to post ??

 

http://www.boeing.ca/boeing-in-canada.page?

[JL]

Not quite Kip, it was a different page. The page is www.boeing.com/canada

 

 

[Kip Powick]

This better ?? 

http://www.boeing.com/specialty/canada/index.page

 

[Lakelad]

Quote

The Montreal-based manufacturer is studying the disposal of assets including its Q400 turboprop and CRJ regional-jet unit, said the people, who asked not to be identified because the discussions are private. The company is also open to partnerships with other aerospace companies, one of the people said.

'Bombardier said to seek investors for aerospace business, mull asset sale'

[JL]

That's it Kip! Well done.

[st27]

http://www.cbc.ca/news/politics/canada-australia-fighter-jets-1.4354326

The libs might be thwarted even on their misguided efforts to buy Australia's cast offs. Imo it would be a huge waste of money trying to retrofit Old A models to bridge the military's shortcomings. I'm sure no one in the Air forces upper command would say what they really think.

[conehead]

I saw the Boeing commercial on tv last night as well.

[AAS]

They are also running spots on 680 News radio in Toronto 

[Super 80]

A few Boeing Canada ads showed up on my Facebook page, there is nothing aviation related on my Facebook page so I don't think it was targeted. I looked at the comments and there were hundreds of angry comments in French.

[boestar]

you searched or surfed to information related to boeing.  Cookies are watching you

 

[Super 80]

4 hours ago, st27 said:

http://www.cbc.ca/news/politics/canada-australia-fighter-jets-1.4354326

The libs might be thwarted even on their misguided efforts to buy Australia's cast offs. Imo it would be a huge waste of money trying to retrofit Old A models to bridge the military's shortcomings. I'm sure no one in the Air forces upper command would say what they really think.

If we want them we can't dither on it. The US Marines are also looking for used F-18 Hornets for parts.

[dagger]

Airbus just bought controlling interest in the CSeries - ha, Boeing will care now.

US CSeries aircraft will be assembled in Mobile, Ala

 

Primary CSeries assembly remains in Montreal

https://beta.theglobeandmail.com/report-on-business/bombardier-sells-majority-stake-in-c-series-to-airbus/article36610340/

 

Boeing's main concern was that Bombardier might become another Airbus. Don't have to worry about that now. 

[Guest]

53 minutes ago, dagger said:

Airbus just bought controlling interest in the CSeries - ha, Boeing will care now.

US CSeries aircraft will be assembled in Mobile, Ala

 

Primary CSeries assembly remains in Montreal

https://beta.theglobeandmail.com/report-on-business/bombardier-sells-majority-stake-in-c-series-to-airbus/article36610340/

 

Boeing's main concern was that Bombardier might become another Airbus. Don't have to worry about that now. 

DOES THIS MEAN WE WILL GET THE MONEY BACK THE CANADIAN GOVERNMENT LOANED TO BOMBARDIER, SOONER??????

[dagger]

Last loan wasn't for the CSeries, it was for the Global 7000/8000.

 

And a loan is a loan, nothing is apparently forgiven, but not sure yet whether the CSeries JV or Bombardier pays it back any outstanding loans for that program.

[Vsplat]

So Dagger, what does this do to the US Commerce Department tariff attack?  Boeing could now be accused of trying to kill good American jobs.

Vs

[dagger]

I'm not a trade lawyer, V, but the participants seem to think it means that the duties will not apply to planes assembled in the US. That may force a delay in Delta deliveries because it will take time for the transaction to close.

 

 

 

Airbus-Bombardier CSeries deal means no tariffs on US-assembled aircraft, says CEO

DOWNLOAD

Oct. 16, 2017, © Leeham Co.: The stunning Airbus-Bombardier partnership for the CSeries program guarantees the future of the new airplane, kills off the A319 and thrusts a big stick up Boeing’s tailpipe.

Boeing won big victories in its trade complaint filed with the US government, winning 300% tariffs on every CSeries imported into the US, throwing into doubt a big deal with Delta Air Lines for up to 125 aircraft.

 

US assembly line

The Airbus-Bombardier deal includes establishing a second CSeries assembly line at Airbus’ Mobile (AL) plant. Bombardier CEO Alain Bellemare is confident CSeries assembled there for delivery in the US will be duty-free.

This means Delta will have to reschedule its deliveries, if the US government doesn’t reverse preliminary findings on the duties or the US Court of International Trade or another venue doesn’t overturn the findings.

The news probably stunned Mobile officials, too. LNC was in Mobile last week; officials didn’t say anything about it then, and Airbus today told LNC that since this was a “material” announcement, they could not tell Mobile officials until the transaction was announced.

The transaction is scheduled to close in the second half of next year, after regulatory approvals.

Filling a gap

The deal fills a major gap in the Airbus product line: below 150 seats. Airbus CEO Tom Enders said there hasn’t been a sale of the A319, the 126-seat model, since 2012. The CS100 seats 100-110 passengers and the CS300 135-145 (and 160 in high density).

Enders declared that the CSeries presented no competition to Airbus because of the lack of sales for the A319.

Boeing, on the other hand, offers the 737-700, which will be phased out with the 737-7 MAX. Poor sales of the 7 MAX prompted a redesign, adding 12 seats. But the move hasn’t spurred sales.

The trade complaint Boeing filed with the US government asserted the CS100/300 will kill the 7 MAX and threaten the 737-8 MAX. The US government agreed, and levied the tariffs.

Alain Bellemare, CEO of Bombardier, firmly declared that any CSeries assembled at Mobile and delivered to a US airline or lessor will not be subject to tariffs.

With sales of the 7 MAX non-existent, and a duty-free CSeries available to US customers, Boeing has a huge product gap at the bottom end of its product line.

Boeing did not respond to an email seeking comment.

Boeing and Embraer have had several commercial agreements, though none for the E-Jets. It remains to be seen whether the Airbus-Bombardier deal will prompt something new between Boeing and Embraer.

 

[Fido]

Canadians hood-winked by Bombardier again.

[boestar]

How are we hoodwinked exactly.  We keep Canadian Jobs.  An Excellent aircraft gets a boost. Customers will get better after sales service and support than they would have.  Seems like this may have been a great decision for Canadian Aerospace.