Airways Magazine

U.S. Department of Commerce Drowns Bombardier’s CSeries Hopes

 Breaking News
  • Alitalia Resumes International Flights from Milan LONDON – Alitalia (AZ) announced yesterday the resumption of international flights from its second hub in Milan, as Italy gradually reopens its airports to foreign travelers and eliminates most of...
  • Boeing 747 Project Comes to a Close MIAMI – It is the end of the line for one of the world’s most iconic airliners. Boeing Co. has reportedly stopped sales of its 747-8 aircraft, the last generation...

U.S. Department of Commerce Drowns Bombardier’s CSeries Hopes

U.S. Department of Commerce Drowns Bombardier’s CSeries Hopes
December 21
16:18 2017

MIAMI — The U.S. Department of Commerce issued a preliminary decision reducing the tariff on the Bombardier CSeries to 292.31%. It will be imposed on all CSeries jets, whether they’re partially or fully assembled in Canada.

Bombardier planned to inaugurate a CSeries final assembly line in Mobile, Alabama, as part of a partnership deal with Airbus. But since the tariff will be imposed even if the aircraft are manufactured in U.S. territory, things might change for the Canadian manufacturer and Delta Air Lines.

RELATED: Analysis: Airbus Acquires 50% of Bombardier CSeries

The decision of the U.S. Department of Commerce comes after it concluded Bombardier “dumped its CSeries aircraft into the U.S. market” by “unfair government subsidies.” The Secretary of Commerce, Wilbur Ross, said the decision over the tariff was taken over a “full and unbiased review of the facts.”

“The United States is committed to a free, fair and reciprocal trade and will always stand up for American workers and companies being harmed by unfair imports,” Ross concluded.

The estimation released in September was almost eight percentage points more — 300%. However, it still affects deeply the Montreal-based manufacturer, giving a great advantage to Boeing.

With the preliminary release, the final decision on whether implementing the 292.21% belongs to the US International Trade Commission (ITC). It must determine on February 1, 2018, how “injured” was Boeing by Bombardier’s sales.

If the ITC does not find any reason to blame Bombardier or how to prove the damage to Boeing in the process, it could terminate the Commerce Department’s tariff.

The Escalating Clash Between Boeing and Bombardier

Back in April 2016, Delta Air Lines placed an order or 75 Bombardier CSeries 100 aircraft with 50 purchase options. At the time, it was the largest order in the history of the manufacturer.

Such a big commitment would nominally be worth over $5.3 billion based on the $71.8 million list price of the CS100, but Bombardier gave Delta a massive discount, between 65 and 70% off of the list price.

READ MORE: Delta Confirms Large Bombardier CSeries Order

As mentioned by Airways Senior Business Analyst, Vinay Baskhara, “the CSeries is a suitable aircraft to grow (in the short run) and replace the 100-150 seat narrowbody fleet” of Delta Air Lines. Indeed, it accomplishes every need the carrier has on the routes the aircraft was supposed to be deployed.

However, Boeing claimed the deal between Bombardier and Delta puts the future of the U.S. aerospace industry, and Boeing itself, at risk. According to the U.S.-based manufacturer, the deal around the pricing constituted “dumping” on the part of Bombardier.

Boeing also considered it has the effect of driving down pricing on the 737 MAX 7 and urged the U.S. Department of Commerce to impose tariffs over Bombardier’s aircraft, even if the 737 MAX 7 are not the same type nor has the same characteristics of the CSeries.

READ MORE: Op-ed: Why Design a Plane When You Can Sue?

On the other hand, Delta said it was confident regulators “will conclude that no U.S. manufacturer is at risk” from Bombardier’s aircraft. Yet, the U.S. Department of Commerce took Boeing’s advice and imposed nearly 300% tariff on Delta’s order for 75 Bombardier CSeries jets.

The Atlanta-based airline CEO, Ed Bastian, directly addressed the decision and said he will not pay the tariff:

The C Series debate or the decision from commerce is not just disappointing, it doesn’t make a whole lot of sense. We think it’s early in the discussions and we also know that is triggering a lot of discussions at political levels, not just within the aerospace field. We will not pay those tariffs and that is very clear. We intend to take the aircraft. I can’t tell you how it’s going to eventually work out.

He also remarked when asked again:

I think my words are very clear, no, we will not pay the tariffs that are being discussed or debated. First of all, those tariffs are preliminary as I mentioned. In our opinion, it is very difficult for Boeing or any US manufacturer to claim arm with a product that we purchased that they did not offer and they don’t produce. In fact, they ended the production of the 717, which would be the closest akin 10 years ago. When we went through the RFP to select and selected the C Series, Boeing competed very hard for the order, except they were competing with not their own product, but it was a Brazilian product, an Embraer product. That wasn’t even new, it was used, E190s ironically from all places over at Canada. So as you looked through this and tried to see how exactly a harm case is going to be developed, particularly to justify the type of tariffs that are being contemplated. To us it’s unrealistic, a bit nonsensical. But we’re working closely with our partners at Bombardier…

Consequently, Airbus and Bombardier announced a blockbuster joint venture where the European aircraft manufacturer acquired a majority stake in the CSeries jet. And Bombardier announced later an order for 100 Airbus A321neos plus 100 options. This announcement reaffirmed Delta’s decision to stay away from future Boeing commitments.

READ MORE: Delta Orders 100 Airbus A321neos, Says No to Boeing’s 737 MAX

“This is the right transaction at the right time for our customers, our employees, and our shareholders,” said Ed Bastian.

Last but not least, Delta Air Lines showed its disappointment over the latest decisions taken by the U.S. Department of Commerce. However, it remains confident ITC will reach a right conclusion.


About Author

Alvaro Sanchez

Alvaro Sanchez

Online Executive Editor. Journalist and Certified Radio Host. Studying for a Specialization in Public Opinion and Political Communications. Even though I love politics I've found myself fascinated by the Aviation World. I'm also passionate by economy, strategic communications, my family, my country, and dogs.

Related Articles

1 Comment

Only registered users can comment.