The Boeing trade dispute with Canada ended with Airbus, Alabama as the winner



[ad_1]

This week, a new $ 300 million Airbus jet assembly plant was opened in Mobile, Alabama and this is the culmination of a trade dispute that Boeing launched with Canada almost two years ago.

The dispute that began with a trade complaint filed by Boeing in April 2017 alleges that Canadian government subsidies were used to damage its business in the US.

This is how we got here

In 2004, Bombardier Canada, a maker of private jets and small regional aircraft, decided it was time to make the leap to the big league. It's time to build an advanced carbon composite jetliner to compete with the Airbus-Boeing duopoly. More specifically, Canadian aircraft, dubbed the Bombardier C Series, will compete with smaller variants of the Airbus A320 family and Boeing 737 dairy cows.

For the next decade, the story of the Bombardier C Series program is one of over-costs, developmental delays, and slow sales. Bombardier reported a loss of $ 4.9 billion during the third quarter of 2015 including a cost of $ 4.4 billion, mostly related to the Seri C program.

At the time of the announcement, Bombardier CEO Alain Bellemare admitted that his company was "overwhelmed" by the various development programs on its plate.

Weak Bombardier financially finally received a $ 1 billion bailout from the Quebec provincial government. In return, the provincial taxpayers take 49.5% of the shares in Seri C.

Although the first Series C prototype was aired in 2013 and soon received critical acclaim for its performance capabilities, Bombardier is still struggling to find large airlines that want to buy in large quantities. Especially major US airlines.

Bomber

In early 2016, Bombardier and Boeing competed directly to get orders from United Airlines. Boeing wins. United ordered 40 Boeing 737-700 in January of that year and 25 more in March. An industry analyst told Business Insider that Boeing gave United a 70% discount for March orders as a way to close Bombardier.

Bombardier's futility will finally end in April 2016 when landing long-sought sales; order for 75 C Series jets from Delta Air Lines.

This is a deal that is credited with saving the C Series program and that is an agreement that makes Boeing on the war path.

Boeing trade dispute

In April 2017, Boeing filed a complaint with the US Department of Commerce and the US International Trade Commission which stated that Delta C Series orders only allow low prices that are not reasonable supported by Canadian government subsidies.

The US International Trade Commission agreed and in September of that year recommended a tariff of 219.63%. A week later, the Ministry of Commerce added 79.82% of the other tariffs.

In total, Bombardier and Delta face tariffs of 299.45% for every Canadian Series C aircraft exported to the US.

The first Airbus A220 Delta was previously known as Seri C.
Airbus

Bombardier responded in a statement, calling the ruling "irrational and separate from reality." The Montreal-based aircraft manufacturer also criticized Boeing, accusing it of manipulating US trade laws to reduce competition.

Bombardier and Delta both argue that Boeing's business is unlikely to be harmed by the agreement simply because Boeing does not really have products in its ranks that have capacities similar to Seri C.

"Boeing does not have American-made products to offer because it canceled the only production aircraft in this size range – 717 – more than 10 years ago," Delta said in a statement at the time.

According to the Atlanta-based airline, Boeing's only proposed alternative for CS100 is to offer it a number of former Brazilian Embraer E190 regional jets.

Facing the possibility of losing the most important sequence in the history of the Series C program, Bombardier became Boeing's biggest enemy, Airbus.

Read more: Airbus CEO reveals why the company will be protected during the economic crisis.

Less than one month after the tariff was announced, Bombardier handed over 50.01% of its valuable aircraft program to Airbus with zero cash investment in advance originating from the European aviation giant.

As part of the agreement, Airbus announced that the C Series would also be produced at its assembly plant in Mobile, Alabama.

Fortunately for Bombardier, the US International Trade Commission dropped the tariff proposed in January 2018, ending the dispute.

Alabama Factory

In the summer of 2018, Bombardier C Series no longer exists. It has been renamed Airbus A220 and folded into the Airbus product line.

Airbus and Bombardier executives together with the Alabama Governor started with the new Mobile A220 assembly plant.
Airbus

While many saw a proposal to build Canadian jets in Alabama as a way to influence the trade regulator. Airbus, it turns out, is really serious.

Fast forward to January 2019 when Airbus CEOs and Bombardier along with Governor Ivey of Alabama gather on a sunny Wednesday to open the ground for the final A220 assembly line on Mobile.

The $ 300 million facility will assemble aircraft intended for A220 North American customers such as Delta and JetBlue. The first shipment from a Mobile plant is expected in 2020.

This is also the latest chapter in the long multinational saga, Bombardier C Series.

Look forward to it further.

[ad_2]

Source link