On Tuesday, the US International Trade Commission is expected to announce its first ruling on the Boeing’s complaints against Bombardier’s sale of its new C Series airliner to Delta. It’s a ruling that could set off a trade war between the US and Canada.
The US Department of Commerce will make its ruling in October.
For years, the story around the Bombardier C Series program has been blighted cost overruns, developmental delays, and slow sales.
In 2015, Bombardier, on shaky financial group due to the C Series, was forced to write down $US4.4 billion. At the same time, the company took a $US1 billion bailout from the Quebec government. In return, the provincial taxpayers took a 49.5% stake in the C Series. Even as it struggled to close a sale, Bombardier was credited with building an aircraft that’s one of the most capable on the market today — besting rivals Boeing and Airbus in terms of efficiency and ability.
At the heart of Boeing’s complaint is a deal that was widely seen as the order that saved the Bombardier C Series program from its demise.
Looking for a blockbuster sale to help build traction for the plane in the US, Bombardier went all in on a pitch to United Airlines. Sensing the new competition, Boeing bit the bullet and gave United a whopping 70% discount on the 40 737-700s. While large airlines like United never pay list price, 70% off is the aviation equivalent of a Black Friday sale price.
In January 2016, United announced the sale of 40 737-700s followed by an order of another 25 of the same planes in March. (Oddly enough, United realised several months later they actually didn’t want any of these planes and converted them to four of the larger 737-800s and 61 737MAX jets.)
Finally, in April 2016, Bombardier struck pay dirt. Delta Air Lines ordered 75 C Series 100 airliners in a deal worth up to $US5.6 billion. In addition, Bombardier and Delta agreed to an option for 50 additional jets.
With the Delta order, Bombardier has not only found a US launch customer for the C Series, but it had the blockbuster deal it needed to validate the attractiveness of aircraft to other prospective buyers.
With the C-Series, Delta has a long-range ultra-fuel-efficient, 100-seat jet capable of making money in markets where competition has depressed profits. In addition, the new Bombardier jet will allow Delta to operate mainline service in markets that traditionally were serviced by smaller regional jets.
From Boeing’s perspective, how Bombardier netted the deal has it seeing red.
According to its complaint, Boeing claims Bombardier sold the CS100 for just $US19.6 million. That’s far less than the $US33.2 million the Chicago-based aviation giant alleges it cost Bombardier to make the plane and a mere fraction of the CS100’s $US79.5 million sticker price. As a result, Boeing claims the Montreal-based company is dumping its product on the US market to the detriment of the US aviation workers.
Thus, it wants to slap a 160% tariff on every one of the C Series jet ordered by Delta. It’s a move that is seen as one that could effectively kill off the C Series program.
In response, Delta and Bombardier posit that Boeing complaint is baseless because neither it nor any other US aeroplane maker currently offers a product comparable to the CS100’s size and performance. In fact, Boeing hasn’t included the pint-sized 737-600 in its annual price list for more than half a decade. As a result, they say Boeing didn’t lose a sale because they don’t have a product in the running.
In addition, Bombardier argues protectionist action against the C Series would harm US aviation industry as more than 50% of the plane’s components come from US suppliers.
The dispute how now entered the realm of politics with Canadian Prime Minister threatening to scuttle the country’s plans to buy $US5 billion worth of F/A-18 Super Hornet fighter jets from Boeing. British Minister Theresa May expressed her concerns regarding the dispute due to the fact that the C Series’ wings are made in Northern Ireland.
On Monday, the ITC is expected to rule on whether Bombardier benefitted from improper government subsidies, CTV reported. However, the contents of the ruling aren’t likely to be made public until Tuesday. On October 4, the Commerce Department will rule on whether Bombardier dumped the C Series on the US market.
As we await the rulings, let’s take a closer look at the plane behind all of this controversy.
Shortly after the deal’s announcement, Bombardier flew one of its CS100 demonstrators down to Delta’s Atlanta headquarters for journalists and the airline’s staff to get a closer look.
Get the latest Boeing stock price here.
Bombardier offers two versions of the C Series: a 130-seat CS300 and a smaller 108-seat CS100. Delta chose the smaller CS100, but expect the airline to switch some of its order to the larger CS300 down the road.
In addition, its pair of Pratt & Whitney PW1500G geared turbofan engines are some of the most fuel efficient on the market and help make the aeroplane 15% cheaper to operate than aircraft currently in production. Incredibly, Air Baltic and SWISS have both reported that the C Series has delivered fuel economy better than what was promised by Bombardier.
According to Bombardier, the C Series also emits 20% less carbon dioxide during operation and is the quietest airliner on the market.
With a range of more than 3,500 miles, the CS100 allows Delta to operate routes its smaller jets had not been able to reach before.
Step inside the Bombardier's cabin and you'll find a surprisingly spacious interior for a relatively small 108-seat aircraft.
Look toward the back of the plane and you see the CS100's five-abreast seating configuration in economy class. That means there's only one middle seat per row as opposed to two per row on the rival Boeing 737 and Airbus A320 family jets.
Since the aircraft presented to the press was one of Bombardier's demonstrators, the interior did not have Delta's seats, lighting, and in-flight entertainment systems. But the cabin layout is accurate.
Bombardier designed the CS100's overhead bins to open 5 inches lower, which makes it easier to load baggage. The overhead bins are also designed to hold oversize carry-on luggage.
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