Bombardier Applauds UK Intervention in Boeing Subsidy Dispute

 - September 13, 2017, 11:12 AM
Delta Air Lines plans to start taking delivery of the 75 Bombardier CS100s it ordered next spring. (Photo: Bombardier)

Bombardier has welcomed UK prime minister Theresa May’s intervention in a dispute instigated by Boeing over Canadian government support for the C Series airliner. Speaking Tuesday with reporters at the C Series assembly site in Mirabel, Quebec, Bombardier Commercial Aircraft president Fred Cromer called the complaint an attack on innovation and a threat to jobs at companies around the globe—including in the U.S.—that comprise the new narrowbody’s supply chain.  

“For me, having that sort of support is important because it speaks to the heart of the issue, which is jobs, innovation and an international supply chain,” said Cromer. “It seems kind of interesting to me that the UK is obviously in support of Bombardier and you can argue that the U.S. should be in support of us against Boeing as well because 50 percent of the program in terms of value comes from the U.S. Over the life of the program that’s $30 billion of investment in the U.S. and over 20,000 jobs.”

Bombardier’s own Short Brothers subsidiary in Northern Ireland ranks as one of the C Series most important suppliers, providing the main structure of the airplane’s composite wings and undertaking final assembly. Of course, May’s interest centers on protecting jobs at the Belfast site, where some 1,000 of 4,500 employees work on C Series wing production. On Tuesday the UK prime minister appealed directly to U.S. president Donald Trump to ask Boeing to drop its complaint, filed with the U.S. International Trade Commission and U.S. Commerce Department in April. May next plans to meet with Canadian prime minister Justin Trudeau in Canada on September 18 to discuss the Boeing-Bombardier dispute among other matters.

The U.S. Commerce Department expects to issue a ruling by the end of this month. In the event it rules against Bombardier, the next step in the process would involve a determination on what penalties the U.S. could impose. “We’re looking beyond the first step,” said Cromer. “The first step is a relatively low bar and a mathematical process that is kind of pursued in that case. We’re looking beyond that, where you’re actually proving damages and that’s really the issue for next year.”

The charges stem from the 2016 sale of 75 CS100s to Delta Air Lines. In its complaint, the U.S. company claims Bombardier sold the airplanes for $19.6 million each, or some $13.8 million less than they cost to manufacture.

The contract with Delta includes options for an additional 50 aircraft, and the airline may elect to convert a portion of its commitment to orders for the larger CS300. The Atlanta-based carrier will serve as the U.S. launch airline of the 110-seat CS100 as well as Bombardier’s largest C Series customer. Delta expects to start taking deliveries next spring.

Delta’s order came six months after the province of Quebec agreed to infuse $1 billion in the financially strapped C Series program, giving it a 49.5-percent stake in a limited partnership with Bombardier. Less than a year later the Canadian federal government agreed to grant Bombardier C$372.5 million in interest-free loans for both the C Series and the Global 7000 business jet.

Cromer argued that the dispute centers on a category of airplanes that Boeing does not produce and over campaigns in which the potential buyers did not invite the U.S. company to participate.

“We produce a product that competes in a size category where Boeing does not compete,” he insisted. “We have airlines—specifically Delta—that has been very vocal about the fact that Boeing was not included in their process because they don’t have an aircraft in the size category that they’re looking for. So if you take a step back and you look at the facts of the case, I think the facts favor our position.”

Meanwhile, Cromer would not comment on the existence of any direct talks between Bombardier and Boeing, nor would he talk about suggestions of any “deal” struck between the two companies or the governments involved. “I think we’re going to look at what is in the best interest of Bombardier and the C Series program,” he said. “I’m not going to speculate on the outcome of a deal. We will be strategic in our thinking and we’re going to do what’s right for our people here at Bombardier and for aerospace in Canada.”

Although Cromer acknowledged he does not welcome the publicity generated by the dispute, he and Bombardier Commercial Aircraft vice president Colin Bole dismissed suggestions that it might have dampened interest in the program. “The interest level on the program continues to grow because the airplane is doing very well with our customers in service. This is not the kind of attention that I wanted on this program but this attention is also coming at a time when customers are starting to talk more and more about his aircraft, the merits of this aircraft in this size category and the benefits it can deliver to the airline community.”

“This has had no impact on the discussions I’ve been having with airlines,” added Bole. “Why? Because the airlines do recognize the product as exceptional...and second, to a certain extent this has drawn further publicity to the fact that it is an exceptional product, and Boeing is fighting because they are scared of this product.” 

Bombardier has announced plans to boost C Series production from seven airplanes in 2016 to between 90 and 120 airplanes by 2020. It expects to ship 30 of the jets this year.