Boeing seeks U.S. anti-dumping probe vs. Bombardier

[peekay4]

There have been some skeptical articles in the press about the $19.6 million CS100 unit price alleged by Boeing.

E.g., FlightGlobal published an editorial noting that at that price, Bombardier's "onerous contract provision" would have been $930 million instead of $500m. However, this argument isn't entirely convincing because under GAAP / IFRS Bombardier's accountants have a lot of leeway in what's considered an expense vs. capital, and how to recognize losses over time.

In the filed complaint, here's how Boeing justifies the $19.6m figure:

1. Boeing examined Delta's quarterly SEC filings (form 10-Q) and noted a $420m increase in "Aircraft Purchase and Lease Commitments" for deliveries in 2020. Specifically, Delta's 2nd Qtr 10-Q (before CSeries deal) reported $1,900m while the 3rd Qtr 10-Q (after CSeries deal) reported $2,320m, for a difference of $420m.
   
2. According to the Ascend Fleets transaction database -- ironically a FlightGlobal product -- the only deliveries scheduled for Delta in 2020 are 18 CS100s ordered in April 2016.
   
3. So the total "all in" price per plane is $420m / 18 = $23.3m. However, this price includes additional items such as EIS support, pilot & cabin crew training, residual value guarantees, performance guarantees, spare parts, etc.
   
4. Boeing submitted a worksheet (redacted) based on Boeing's internal numbers estimating the value of these additional items to be $3.7m per aircraft.
   
5. The "ex-factory" price is then $23.3m - $3.7m = $19.6m per aircraft.

Boeing also cited press & trade articles stating that Delta received very steep discounts from Bombardier, in the 65% to 75% range. (I found examples here and here.)

The CS100 had a list price of $71.8m so according to press reports at the time Delta purchased the CS100 for a price between $17.95m and $25m depending on the discount level. This range is in line with Boeing's analysis above.

As a comparison, reports from Forbes, Leeham News, etc., value Boeing's own 737-700 sale to United at around $22m per aircraft. Bombardier lost on this deal (offering the CS300), so a sub-$20m price to Delta for the CS100 in a "must win" situation isn't far fetched.

Finally, I believe in this industry aircraft pricing is an "open secret" to the major players. Everyone knows roughly how much everyone else paid, as they all basically use the same advisors / consultants / lawyers / accountants.

So I think Boeing's sales people got wind that Delta got sub-$20m pricing then perused publicly available financial data to "work backwards" for numbers that matched that info.

Meanwhile Bombardier can publicly claim that the actual price is "millions more" with a straight face, because obviously the "all in" price is above the "ex-factory" price, as noted above.

However, all these numbers are far lower than the $30 million per unit Air Canada reportedly paid for the CS300, hence the dumping claim.