Remember the 292% tariff ruling Boeing won against Bombardier and the CSeries? Turns out that was a short-lived victory. The US International Trade Commission ruled unanimously against Boeing today. The ruling – which can be appealed either within the US court system or to a NAFTA panel – kills the threat of penalties against Boeing’s smaller, Canadian rival.
Just a hunch here, but maybe the ITC ruled that Boeing wasn't harmed by the Bombardier jet since Boeing *doesn't actually compete with that jet*. (still surprising vote, tho)https://t.co/HWykbsWfPs
— Keith Johnson (@KFJ_FP) January 26, 2018
The ruling was handed down in a two minute long meeting of the 4-commissioner panel. Boeing needed only to secure two votes for a victory. It got none.
US ITC votes unanimously: No injury for Boeing! Bombardier wins! pic.twitter.com/c6HnfsnLSi
— Steve Trimble (@TheDEWLine) January 26, 2018
Bombardier issued a statement shortly after the ruling came down. It reads, in part:
Today’s decision is a victory for innovation, competition, and the rule of law. It is also a victory for U.S. airlines and the U.S. traveling public. The C Series is the most innovative and efficient new aircraft in a generation.…With this matter behind us, we are moving full speed ahead with finalizing our partnership with Airbus. Integration planning is going well and we look forward to delivering the C Series to the U.S. market so that U.S. airlines and the U.S. flying public can enjoy the many benefits of this remarkable aircraft.
For its part Delta Air Lines, representing the only US order for the type and the basis for the complaint, issued a statement that it is pleased by the ruling against “Boeing’s anticompetitive attempt to deny U.S. airlines and the U.S. traveling public access to the state-of-the-art 110-seat CS100 aircraft when Boeing offers no viable alternative.” It is unclear when the CS100 deliveries to Delta will begin. They were expected in early 2018 but Bombardier is slightly behind on production.
After the initial ruling in Boeing’s favor Airbus stepped in to support the CSeries program. It currently has a deal to take control of 50.01% of the CSeries from Bombardier and also to open a second final assembly line for the jets in Alabama. While that move was previously seen as an end-run on the potential tariffs the two companies appear keen to keep it in place. Airbus gains efficiency of scale at its Mobile plant and the geographic diversity offers some advantages for the CSeries delivery process as well.
Our partnership is fully on! We r building a FAL for the C Series in Mobile, Al, creating jobs!
— Rainer Ohler (@roblagnac) January 26, 2018
Indeed, the deal was moving forward earlier this afternoon, even in the face of a potential adverse ruling. Bombardier shared a photo of the teams working together in Montreal prior to the ITC announcement.
Full speed ahead on the C Series partnership! Senior Leaders from Airbus and Bombardier meeting in Montreal today to discuss integration planning. pic.twitter.com/bwrClKtpwa
— Bombardier Inc. (@Bombardier) January 26, 2018
Boeing can appeal but it is unclear the value of such a move. The manufacturer’s position already cost it a few potential deals, including significant ones on the military side of its operations. In one of those instances Canada scrapped a deal to buy Super Hornet fighters.
So where does this leave Boeing?
– Canada’s buying used F/A-18s from Australia
– Bombardier’s merging C Series with Airbus
– Delta's buying 100 A321neos
– Brazilian gov't won’t let Embraer merge with Boeing
– Boeing shares at $343, up 102% YoYhttps://t.co/3E6sGGtX3h
— Jon Ostrower (@jonostrower) January 26, 2018
And Boeing may want to save its cash and whatever corporate goodwill it still has to help further its efforts to align with Embraer – the on again, off again discussions about a merger or other joint venture flared up again just before the new year – to augment its offerings with a 100 seat model, something the 737 MAX 7 clearly never was meant to be.
Still, in its statement on the ruling Boeing maintains that it has suffered from “the billions of dollars in illegal government subsidies that the Department of Commerce found Bombardier received and used to dump aircraft in the U.S. small single-aisle airplane market.” Even with half the components of the CSeries made in the USA Boeing continues to maintain that the “violations have harmed the U.S. aerospace industry.”
One interesting take on the issue comes from Former ITC chairman Dan Pearson as quoted by Reuters:
Not a single commissioner was willing to buy Boeing’s arguments. I think ‘America First’ is a policy of the White House and the Commerce Department. But it’s not the policy of an independent agency (like the ITC).
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So you don’t think Boeing will appeal ?
We’ll have to see based on the detailed responses the ITC publishes eventually. The initial report was just the roll-call vote. The formal filings come later. Boeing might try to appeal but it is unclear that there is a ton of room for that to work given that it cannot yet show the harm happened. Maybe Boeing waits a few years and collects data and files an appeal eventually with more “proof” than it has right now.
But I think the current state of the situation is pretty heavily stacked against Boeing, at least from an objective view of the various market segments.
The higher this goes up the appeal chain, the more anti-Trump and pro-trade the tribunals become. If Boeing can’t get a panel of US trade commissioners to support it, good luck convincing a mixed panel of Americans and Canadians at NAFTA or random nationalities at the WTO.
Boeing should have bought the CSeries program for pennies on the dollar back when they had the chance.
Maybe now it’s time for Boeing to resurrect the 717 to compete.
That will never happen the C series now has the market to it self pretty much unless the Airlines start buying Superjet and the MRJ is so far away from being ready. Also it only seats 88 pax
MRJ is the wrong comparison. Also, way too heavy for the number of passengers it carries and the performance specs are mediocre at best.
Getting a US carrier to buy the SSJ would be a massive coup. But I’d wager significant volumes of cash that never happens. Similarly, the COMAC stuff coming out these days looks decent and could maybe compete with Boeing and Airbus in other countries but I would bet at least a decade or two before a US carrier would seriously consider it.
In the US market the tough question for these aircraft is pilot pay scale versus seating density. It is tough economics. Delta seems to be doing it okay but also has a much higher connecting passenger rate than United or American. That helps support the demand for that sized aircraft.
Yes the MRJ is losing orders and of course carries far less passengers than a C series. I shouldn’t have even mentioned it.
Boeing hubris pushed the program to Airbus. Now to see what Airbus turns the CS program into. They have shown success in running geographically disparate production with political aspects in a way that Boeing has not.
To think Boeing never got government assistance…during WW2 the government built its B29 plant. After the war the DOD paid for all the development work on the future jetliners through the B47 and B52 programs, and rationalized the cost of the 707 program buying transport and refueling versions. The company played Washington and South Carolina states against one another for massive tax abatements, as it did with Illinois moving its HQ from Seattle to Chicago.
This process cost Boeing dearly as you note in lost sales of both the DL order for larger single aisle jets and the F18 order from Canada. And it injected new life into Airbus…a second production line for the CS series will make it more attractive by giving airlines earlier delivery positions.
It will be interesting to read the decision.
Delta was supposedly offered the C-Series for $19.5 million USD a pop. Compare that price to any other jet Bombardier offers and it’s apparent that they’d have to receive substantial subsidies to stay in business selling at that price. (Even medium size biz jets cost twice that) .Boeing wasn’t “harmed” in that they didn’t have a competing plane, but the bad will generated was substantial. So, Canada bought some used FA-18s from Australia. Where will Australia buy replacements? Where does Canada’s security come from in large part? Yeah, it’s the U. S. tax payer funding our substantial military. How many military aircraft do they design, manufacture and deploy anyway? Ummm….not so many. So, let John do it, in this case John being the U.S.
As for the comments regarding military aircraft, what country has a private aircraft manufacturer that sells to the government at break even or a loss? Do you think we would have won WWII or remained a super power while waiting for the government to debate for months or years over the prices and merits of combat aircraft? One example that was a lousy compromise was the FB-111, an overpriced, limited capability plane that Robert McNamara insisted on. It was to be used by both the air force and navy. It never made it to the navy and had marginal success with the air force. A friend and neighbor, a Lockheed Martin manager, said that the delays and cost increases to the much ballyhooed F-35 are due in large part to changes to the thee variants demanded by the powers at the Pentagon who changed the requirements time and again after the original specs were agreed upon. So, who pays? The tax payer-just like the Canadians will for a commercial aircraft with no military variants.
Saab and Euro fighter build some great fighter jets so maybe Canada will buy those aircraft. I don’t think Canada will forget this in a hurry. Also Delta won’t be buying Boeing in a hurry either. This has harmed Boeing for many years to come and I am sure other airlines will now buy C series because there is nothing else in it’s class. Boeing stopped building 717s and didn’t think anyone wanted 100 seaters a bit short sighted. But then Boeing seem to be all about short term gain. Just look at the 757 replacement market which Boeing has nothing to replace the 757. Until the 797 comes along which will be years away.
Fun fact: Not every unit of every product is sold above cost. When a product is struggling sometimes you sell at a discount to give sales a boost in hopes others come along and also buy. Boeing and Airbus have done the same thing over the years, particularly as they launch new lines. Also, that $19.5mm number is disputed.
As for Canada’s security, there are other countries manufacturing fighters.
This move cost Boeing billions in lost sales. Maybe it finds a way to recover that cash. Maybe not. But this is a big hit for the company right now. Especially when going in to the vote no one seemed to expect a win, much less a unanimous one.
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