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

Escalation from Boeing:

Full article: Boeing seeks U.S. anti-dumping probe against Bombardier jet | Reuters

Good for Boeing.
Why waste time with a WTO hearing. They're busy with an Airbus hearing anyway. Since Trump seems to be willing to club Canadian trade and NAFTA, why bother with the WTO when Trump can do your dirty work.
Canada won't stand up to the US anyway. Turdo doesn't have the will or the fortitude. Dairy, soft wood, now aircraft.
Now we'll hear it, Bombardier should be shut down, cut off, and allowed to go out of business for their insensitivity to the needs of Americans.
Shame on Bombardier. Shame on Canada. Shame, shame, shame.
Wait, weren't Boeing approached by Bombardier last year about the C series?
Something about a sale? Investment? Missed opportunity?
I guess Boeing's business practices must be above reproach.
What was I thinking?

Willie :ok:

Bombardier Inc rejects Boeing’s claim of ‘predatory pricing’
 

Bombardier Inc rejects Boeing’s claim of ‘predatory pricing’ as rival seeks to ban CSeries from crucial U.S. market

Ross Marowitts, The Canadian Press | April 28, 2017 12:34 PM ET
More from The Canadian Press
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Bombardier and Ottawa say they will defend against complaints that the plane-maker is ‘dumping’ its CSeries jets in the U.S. market at below cost.
MONTREAL — Bombardier and the federal government have rejected Boeing’s claim in a complaint filed with the U.S. government that its Canadian rival has dumped its new CSeries commercial jet into the United States at below cost.

“Bombardier structures its commercial dealings to ensure compliance with the laws and regulations of the jurisdictions in which we operate, including those issues raised by Boeing,” the Montreal-based aircraft manufacturer said in an emailed statement.

The world’s third-largest airplane maker said it spends about US$3 billion annually with U.S. suppliers and employs about 7,000 people in dozens of facilities in both rail and aerospace across 17 states.
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The Seattle-based competitor said Thursday that it petitioned the U.S. Department of Commerce and the U.S. International Trade Commission for investigations into subsidies and pricing of the CSeries.

It is also seeking an order to be issued against the sale of the plane in the important American market.

Economic Development Minister Navdeep Bains said the government objects to the allegations and vowed to mount “a vigorous defence.”

“We are confident that our programs are consistent with Canada’s international obligations,” he said in a statement.

Bombardier shares fell as much as 5.45 per cent Friday at midday.

Boeing said it asking the Trump administration to act “to end Bombardier’s illegal and unfair business practices before it is too late to prevent significant harm to America’s aerospace industry and thousands of good-paying aerospace jobs.”

The aerospace giant said the threat against its suppliers will only grow as Bombardier increases the annual production rate of the CSeries to between 90 and 120 airplanes by 2020.

It said more than US$3 billion in government subsidies so far have allowed Bombardier to engage in “predatory pricing” for an aircraft that competes directly against its 737-700 and 737 MAX 7 airplanes.

Boeing claimed Bombardier has sold CSeries planes that cost US$33 million to produce for less than US$20 million each and at prices below what it charged in Canada.

“It’s selling the aircraft in the U.S. at prices that are millions lower than those that they’re charging in Canada, which is the very definition of dumping,” Boeing spokesman Daniel Curran said in an interview.

Boeing joins Brazil, which filed a similar complaint with the World Trade Organization at the urging of rival manufacturer Embraer.

Delta Air Lines will become the first U.S. CSeries carrier after placing a firm order a year ago for 75 CS100 aircraft valued at US$5.6 billion. It also has options for 50 more planes and can covert some of the aircraft to larger CS300s.

Air Canada followed by ordering 45 CS300s for US$3.8 billion at list prices, plus options for 30 more planes.

Airlines typically pay much less than list prices and early buyers of new planes usually get low prices.

The latest challenge against Bombardier’s largest aircraft came just days after the U.S. imposed preliminary duties of up to 24 per cent on softwood lumber imported from Canada.

Of course Bombardier should be "cut off", if by that you mean cut off from direct taxpayer loans. And if my money is going to continue to be used to prop the company up then the company should be re-structured such that it's shares (and BoD) aren't controlled and manipulated in the current way. After all, is Bombardier a real public corporation or is it still a family business, albeit wearing corporate clothes?

It's ironic how the 5 year graph of Bombardier's share prices looks exactly like an unstable non-precision approach... :)

Bombardier approached Airbus, and when talks failed they reportedly reached out to Embraer.

There was never confirmation that Bombardier approached Boeing. If they did, that might actually be even more damaging to Bombardier, as Bombardier might have divulged some very confidential financial info to Boeing (manufacturing costs, margins, etc.) -- enabling Boeing to make a very strong case to the US Dept. of Commerce using Bombardier's own financial data.

re cutting off Bombardier, as long as they pay the loans back then no harm. I don't believe there is any airline out there that has not benefited from Government subsided loans etc.

Don't forget, Boeing owned Canadair for a while - and it turned out to be a huge money pit (IIRC, the total write-off was in excess of $1 Billion US, and that was 30 years ago when the dollar was worth a whole lot more).
Hummm, sounds oddly familiar to the current Bombardier experience with Canadair :rolleyes:
I suspect if Bombardier approached Boeing after Boeing previous experience with the aircraft portion of the company, they would have been laughed out of the room...:=
(or perhaps chased out with pitchforks :})

I sincerely doubt BBD ever went to Boeing. Airbus, yes, they speak the same language, sort of.

tdracer. Getting in the room would have been amazing, unless they intended to laugh the Montrealers out after getting the financials. I also doubt Montreal would release any data. Heck, they don't release data internally.

GF

Trudeau 2.0 cancels F-35 and orders a few super hornets, Boeing thanks him by doing this? School boy is so far out of his league it's almost laughable, if it were not our money. Nice hair tho....

I'm sure Boeing understand they have to pick their battles and this appears to be one of them they need to pick. They don't have an answer for the C series and aren't likely to have one in the near term. The NG isn't it and I think they've finally realized that as well. Their best customers (with pricey backlogs of aircraft) are falling into hard times. That could put into peril their delivery of previously ordered 777s, which must be a serious financial concern for them.

Boeing has to do what it has to do because, business is business. Let's not pretend Boeing is the only one with scruples in all this.

Willie

In another thread, I had written that (as far as I knew) the $1.5 Billion investment Caisse made into Bombardier Transportation was made under commercial terms and therefore is not an example of ""corporate welfare" (or subsidy).

However, as part of the latest anti-dumping complaint, Boeing alleges some interesting details about the transaction -- based on Bombardier's own financial reports. E.g., as part of the deal Caisse received warrants convertible to 100 million Bombardier Class B shares, but those warrants were actually commercially worthless because the exercise price was far above market value at the time.

And allegedly the Caisse deal included provisions to severely limit Caisse's potential profit while fully taking on the risks -- provisions a normal commercial investor would never agree to. I had previously written about this type of provision in relation to the Quebec government investment, but I didn't know the Caisse deal was structured in a similar way.

Having looked through the (redacted) formal complaint, I think overall Boeing makes a fairly strong case, and obviously to a receptive administration. Bombardier's biggest issue might be the alleged price difference between the Air Canada deal (CS300) and the Delta deal (CS100).

The CS100 and CS300 have 99% parts commonality. According to Boeing's calculations, the CSeries cost around $33 million to manufacture. Air Canada paid about $30 million per CS300 but Delta was offered the CS100 for just $19.6 million. These numbers are roughly in line with analysis I've seen in the press (Leeham News, etc.)

Hence the complaint is not just about "subsidy" but about "dumping", i.e., selling to foreign markets at "predatory" prices far lower than normal home market prices.

Grizz
 

Dude, ... grow up.

Respectfully, I'm about as far from a "dude" as possible. Keep drinking your Liberal Kool Aid, Butts et al are banking on your naivete and inability to understand international trade. You do know who Butts is?

Adult behaviour
 

I am 69 year old Red Tory who spent 50 years in aviation, studied international trade in university and hold an MBA. I am well aware that Gerald Butts is Trudeau's senior adviser along with Katie Telford.

I reiterate, dude, grow up.

Not a good article. He confuses subsidies with dumping.

Selling at a discount (or even at a big loss) is not dumping. Dumping is differential pricing between home market and foreign markets.

Did Boeing sold 787s to Air Canada at a steep discount vs. those sold to United? No. If anything United likely got a better deal.

Did Bombardier sold CSeries to Delta at a steep discount vs. those sold to Air Canada? Allegedly yes.

This is funny. No corporation in the history of mankind has benefited from more corporate welfare in the form of tax breaks and over-inflated government procurement contracts than Boeing. I'd call it a case of pots and kettles but there is no other pot like the one Boeing swills from.

Kewbick, Chicago wages cheaper than Seattle? Have you been smoking something?
There were a number of reasons for moving the headquarters out Seattle - some of them less than 'honorable'. But saving on office wages wasn't one of them.

Boeing never owned Canadair - that was DeHavilland, Toronto. Bombardier bought DeH from Boeing. BTW when I worked at the Lazy B back in the 70s, they were reported as receiving 12.5% of all the costs of running their Seattle area plants from the USAF just to keep the facility running in case it was needed for War Production. Any discussion of CSeries pricing should include that it has significant US content - engines, APU & Avionics are all American.

OK, faulty memory - the point is still that Boeing had recent, detailed, and very unpleasant experience with a major part of what is now Bombardier Aerospace.
Urban legend - there might have been something to that in the 1950s (the story is fuzzy), it's not been true for at least 50 years.

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.

ACs CS300 at $30m?

Where did you get this?

I was told (from a friend at Dorval AC HQ) that AC got the "better" plane (CSeries) for less than what the others offered.

AC was stunned to obtain the "Cadillac" for so cheap...

$30m was cheap. When Pierre Beaudoin still ran the show, he would never have sold the CS300 for that price. Then the Delta deal completely reset expectations on how big of a loss Bombardier was willing to take.

Also remember that Air Canada received some "non-monetary" subsidies as part of the deal, like a court case being withdrawn by Quebec and favorable amendments to Federal legislation. Those changes / subsidies were worth millions to Air Canada and hid the "true cost" of the CS300 deal.

Some references:

Globe & Mail:
The Economist:

Delta has refuted Boeing's accusations:
https://leehamnews.com/2017/05/23/de...dumping-claim/

It's interesting that Delta's testimony didn't contradict Boeing on the most important allegation: price. Delta's assertion that Boeing didn't offer an aircraft against the CS100 is a red herring.

Boeing's proposed scope in the anti-dumping complaint is the class of aircraft with "standard 100- to 150-seat two-class seating capacity and a minimum 2,900 nautical mile range". This effectively lumps the CS100 and CS300 together in the "domestic like product" analysis. The CS300 competes with the 737-700 and 737 MAX 7.

In the original complaint, Boeing went to great lengths to argue that the "100- to 150-seat" category is the appropriate grouping, citing prior findings and decisions from the European Commission, the Government of Canada, and even Bombardier's own marketing materials.

The bottom line is that Boeing anticipated this line of defense and Boeing's attorneys pre-emptively crafted the complaint to tie the CS100 and CS300 together.

Boeing is a complete hypocrite when it comes to pricing and everyone knows it. Will nobody give Delta's management credit for strong negotiation? They have that reputation. Regardless, Boeing can afford deep discounts and they provided United a very big discount. See this recent


example:https://www.forbes.com/sites/scottha.../#66e0915930da

Dumping in this context is about giving deep discounts in a foreign market (cross-border) as compared to normal home market prices.

Boeing is American and so is United. There's no cross-border dumping.

Let me see:

Boeing responds to the Airbus NEO with a warmed over, 50 year old airframe with several major disadvantages: significantly narrower seat, only one engine choice (because of short main landing gear geometry), etc., etc.

Five years after launch, Airbus is eating their lunch at the top of the size spectrum with Max 9 market share only 40%. At the same time, AB and Boeing have together only sold 120 aircraft in the entry level A319NEO/Max 7 segment! And Boeing blames the C Series.!!

Boeing's failure to develop a new, clean sheet product for this segment is to blame.

Things which make logical folks go Hmmm. (Red Tories aka Liberal lapdogs will differ)(Apparently the Tory brand has more incarnations than M&M's have flavors).
https://www.flightglobal.com/news/ar...er-cse-437768/
Liberals & defense procurement, a dichotomy of epic proportions. Remember they just paid Lockheed to maintain the F-35 spot???

If it stops us from wasting 4.5 billion dollars on 18 useless planes, I am in favour of giving the Liberals an excuse to back out of a badly thought out, badly executed, single source, no bid contract.

Perhaps they will actually hold their promised competition... okay, I laughed for a long time after I wrote that.

Boeing's complaint against Bombardier and C Series is a last gasp tactic and nothing more. The next large order for C series from any established American carrier will be "the end of the B737-700/7 MAX". (Boeing's words, not mine)
I doubt the A318 could be far behind.
If Delta Air Lines chose to run trans Atlantic ops with C series (eastern seaboard to London, Paris, or Amsterdam) it's likely United and American would take a second look at this aircraft.
There hasn't been much from the rumour mill regarding potential C series sales as we approach the Paris air show but we do know Air Baltic will have one of their 300s on display. The first impressions and feedback from Swiss and Air Baltic have been extremely positive.
With airlines' increasingly preferring single aisle aircraft and new technology, the C series might finally get some traction.

Willie :ok:

Actually one of the interesting tidbits is that apparently Delta can't fly trans-Atlantic using the CSeries under the terms with Bombardier.

Why? Because Bombardier reportedly sold the CS100 to Delta as a "regional jet" to compete in price with Embraer, so range restrictions were put in as part of the deal. I believe Delta can only operate the CS100 on segments of 1,000nm or less, unless they pay more.

I wrote about this last year -- that the CSeries is really competing with regional jets despite Bombardier's wishes -- but if the Delta agreement has this kind of restriction then it shows how desperate Bombardier was to close the deal.

And this kind of arrangement isn't likely to be repeated with other US majors, especially since Bombardier can't offer the same heavily-subsidized deal anymore.

Lastly I don't think it makes sense for the US majors to fly the CSeries to Paris, Amsterdam, etc. Unless we're talking niche airports like LCY, economies of scale favor larger aircraft. Even WestJet is buying 787s.

I have no idea what's in their sales agreement, but I'd say somebody's telling you little porkies.
Delta also bought the C Series without HUD. Delta needs HUD if they ever decide to operate into LCY. Mandatory kit.
Here's another tid bit for you ...
Delta are now re-considering HUD for that reason and I doubt it would be for services to Bowling Green or Valdosta.
The feasibility of using the CS100 transatlantic out of KJFK or CYUL is suspect, and would be better left to the 787s or similar types, I agree. But I doubt AC or DL would provide services from either of those points exclusively for 100 economy fares. They could run a service like that out of Kitchener, or Binghamton though. Lots of new and viable City pairs off the east and west coast. You need to think outside the box as Delta route planners and Air Canada route planners are discovering.
The C series is outside of union scope. It will not be used by any Express carrier. So, call it a go-cart, call it whatever you like. It will gradually operate on regional services presently served by their regional partners. It will eventually create secondary hubs. They will likely suffocate those Regional partners, greatly reducing their size, and eventually reclaim most of the services they surrendered in the mid-80s when they dumped the inefficient classic airliners in favour of smaller, cheaper turbo props and RJs.

Willie :ok:

The info was from Delta's own testimony before the US Trade Commission. I'd say it's pretty solid. :ok:

Wow!
Perjury.
I guess Boeing isn't the only one telling little porkies at this hearing.

The fact is the B737-700 was out of production before the C series was even certified. Boeing claims in this hearing that Bombardier's dumping of the C series will kill, or has already killed the 700 and MAX 7, (porkie). It was already dead and C Series had very little to do with it. Okay, let's agree with Boeing. C Series unfairly killed the 700 due to dumping, (another porkie). Either way, the 700 is dead.

By Boeings own admission at this hearing they sold 737-700s to United at fire sale prices just to cut Bombardier out of a sizeable order. Their spin on it is that they had to, (another porkie, poor Boeing) because Bombardier were dumping C Series in Delta's lap at way, way below fair market prices.
HA!
What? Just like practically everybody else, including Boeing. Hilarious!
Those aircraft, I believe, were hermetically sealed in the Arizona desert. You can decide for yourself whom to accuse of dumping, but business is business. If Delta had taken the 700s over the CS100s (bearing in mind Delta say the 737-700 wasn't even in the running. You may recall Boeing tried to hawk used EMB190s, not 700s) I seriously doubt Boeing would be making these outlandish claims.

Now, let's discuss the C series as a Regional Jet.
It's not a regional jet, unless Bombardier want to label it that. So far, they haven't. If the manufacturer wants to call it a regional airliner, it's a regional airliner, just like every airliner ever built could be called, labelled, or considered a regional airliner. We might even call them whisperliners. Whatever it gets labelled, it's a label and nothing more. (maybe we could call it a Dreamliner? Star Liner? Astro Jet?)

In China, the CAAC temporarily halted airline industry startups due to a number of safety concerns. They decided all new startups could no longer operate an aircraft type of their choosing. They had to henceforth only operate regional jets or the CAAC would not issue an OC. With potential sales for Bombardier in jeopardy, Bombardier now calls the C series for the Chinese market a regional jet. Problem solved.

Sounds like this regional jet, regional airliner label has crept into this 3 ring circus Boeing has decided to perform. You believe what you like, my sources tell me a very different version.

Willie

Willie...

You seem to know the C Series so I'd like to ask a few questions if I may...

The C Series' cockpit is basically the same as the Global's 6000/7000 and 8000 cockpits except it as an extra screen in the middle (wider cockpit).

From your comments above we know HUDs are available as an option on the aircraft so...

Does the C Series have synthetic vision like the Globals do?

Does the C Series have EVS like the Globals do?

Does the C Series have autoland capability?

Is the C Series CAT III capable and if so, is it a manually flown CAT III assuming no autoland?

Thanks.

And why would Delta perjure themselves to help Boeing in this case?

The 737-700 remained in production long after the CS100 was certified (Dec 2015) and throughout the Delta deal (April 2016). In 2016 Boeing delivered 737-700s to Air Algerie (2), Kunming Airlines (3), Ruili Airlines (1), Lucky Air (2) and the US Navy (1).

Eg., MSN 61341 for Air Algerie only had its first flight on September 2016. In fact technically the 737-700 is still in production, with Kunming Airlines scheduled to take two more deliveries.

The C Series' cockpit is basically the same as the Global's 6000/7000 and 8000 cockpits except it as an extra screen in the middle (wider cockpit).
No. The CS130 has a different cockpit from the GX6/7 and 8. The C series has the same Collins Proline 21 avionics with some differences and FBW with a side stick controller. It will have the same FBW control laws.

From your comments above we know HUDs are available as an option on the aircraft so...

Does the C Series have synthetic vision like the Globals do?
No. But it is wired for later installation should a customer decide to install it. (Great idea by the way)

Does the C Series have EVS like the Globals do?
No. EVS should be available as above, but I'd have to check.

Does the C Series have autoland capability?
Yes. It is under certification now as is ETOPS.

Is the C Series CAT III capable and if so, is it a manually flown CAT III assuming no autoland?
It will be Cat III capable once autoland is certified. This also makes it tougher to push HUD as an option in a Cat III autoland capable aeroplane. Especially dual HUD installations.

Willie :ok:

peekay

Try a broader search, the 700 is by 'special order' I believe. Boeing could build a brand new one tomorrow if you liked. Essentially it's out of production (my opinion). Like the 600. Only the 600 if it were special ordered, Boeing would have to find the jigs to build one. I guess they could always go to the desert for one though.

Willie

Not sure what you are saying here...

I saw the C Series sim in Montreal and aside from the extra screen it looks exactly like the GEX 6000's cockpit which will also be used in the GEX 7000/8000, the Global Vison or Collins Fusion cockpit as I believe they are known which is the latest Pro Line 21, am I not correct?

Of course there will be some differences in aircraft systems between the GEX 6000 and the FBW 7000/8000.

Thanks for the info.