US Dept of Commerce slaps 220% tax on Bombardier c series

[Pizzacake]

To the multiple posters saying "slap tariffs on the Boeing aircraft AC are getting"....... Air Canada would be the ones paying the tariff, that just counter intuitive. If they are due delivery in the not too distant future they need them delivered so the counter of " well they can buy airbus then" doesn't work as airbus have orders to be fulfilled already and can't just magic up extra aircraft for AC.

[Snyggapa]

Originally Posted by oleary

As much fun as that would be, Canada does not produce anything in those classes so we could not prove "economic harm".

Ah, but is it being prevented from producing anything in those classes by the "dumping".

Of course the argument works both ways - and starts to get silly if you base "economic harm" on whether it might have stopped someone doing something that they didn't do.

[BRE]

Interestingly, the NYT had a longish article on the 17th which I could not find on the business pages when I looked for it yesterday (found it only now through keyword search). Slate does not even have an article by today. Does not seem to be that much of a big deal in the US.

[Fun Police]

i'm not surprised really, since the flow of self inflicted crises of incompetence that are coming out of Washington since January are so much more interesting to the angry people on both sides that a trade spat like this would not make the news.

[oleary]

Originally Posted by Intrance

I assume the poster meant it like this; The point being that if that US DOC 300% will stand, it should be no problem to raise the same kind of tariff against those 737/787 orders, baseless or not.

Ummmm, .... no. It is not Boeing who would pay the 300% tariff, it is the buyer.

Tariffs are generally applied to PROTECT HOME INDUSTRY. Canada does not produce anything in the 737/787 class so there is no home industry to "protect".

A tariff such as you propose would simply be "punitive". It would hurt Air Canada, its paying passengers and Canada's reputation as a "fair trading partner".

Finally, if Canada were to apply a 300% tariff against Boeing they would have to, under international trade law (WTO), also to apply it to Airbus.

[msbbarratt]

Hmmm, well Canada now has an interest in all of Airbus's product line up, even if none of it is made there. And whatever the "rules" are a country can do whatever it wants if it decides that the reaction of other countries is not going to be too troublesome. The US does that all the time!

But I doubt anything like this will happen. Boeing's name now has a lot of mud stuck to it, and that's certainly going to be part of an airline's purchasing considerations. That's probably enough for the Canadian government to achieve the desired effect in the long run without resorting to imposing punitive trade tariffs against Boeing.

There's probably some other US airlines that are worried about being forced to buy Boeing. It's hard to be competitive on international routes if you're unable to buy the best aircraft due to domestic political machinations. A trade war is not in their interests either.

[oleary]

Originally Posted by msbbarratt

Hmmm, well Canada now has an interest in all of Airbus's product line up, even if none of it is made there.

.... How so?

[Lonewolf_50]

Is this normal for new aircraft development?
About 2 years late and about 2 billion over budget?

Chief Executive Officer Alain Bellemare is trying to stop a cash drain after its C Series jetliner came to market more than two years behind schedule and about $2 billion over budget.

I suspect that it's within at least two sigmas, but maybe that's just not understanding the "how to get a new airliner to market" as well as I might .

I noted from that article that Bombardier's revenues from aircraft are abou 57% of the business.

[triploss]

First the 787, then the CS100. Yeah, it seems it's normal nowadays.

[underfire]

I see that yesterday, Boeing just upped the breakeven on cost to produce the 787 to 1400 units. What this means is that they expect to sell one for as much as it costs to make it, at 1400 units. Total sales of all variants currently sits at around 1283 units, so they are still losing money on each aircraft that they sell.

THEN, the profits from each sale will be applied to the $29.6 Billion design/certification costs.

[UnderneathTheRadar]

Originally Posted by underfire

What this means is that they expect to sell one for as much as it costs to make it, at 1400 units. .

Are you sure about that? In the rest-of-world speak, that means that at 1400 units, the costs of design and certification are covered and then they can start making a profit......

[underfire]

Actually, looking at this again, I do think you are correct, and I got spun around on sales vs deliveries.....

thanks for correcting me.

[tdracer]

Which is what I posted in response to you several pages back - Boeing is currently cash flow positive on the 787 to the tune of roughly $25 million per aircraft - and that number is getting better with nearly every delivery.
No question Boeing botched the 787 development big time - and paid a hefty price for that. But it's far from the long term disaster that people like you have made it out to be.
The real question will be what happens with the 777X (and before you dismiss the 777X as being as simple derivative, there is little common between the current 777 and the 777X other than the fuselage diameter - it's pretty much a new aircraft). Will it be close to on-time/on-budget, or will it be a repeat of the 787 fiasco? It'll likely be a couple more years before that question can be answered...

[WHBM]

Originally Posted by tdracer

Which is what I posted in response to you several pages back - Boeing is currently cash flow positive on the 787 to the tune of roughly $25 million per aircraft - and that number is getting better with nearly every delivery.

That's not quite an accurate representation. While they may be "cash positive" on current work, in terms of labour, components, current assembly hall costs, etc, there is the most enormous debt for the R&D, prototype production, and all the money borrowed to fund the production of earlier aircraft that didn't get delivered or any revenue for a long time. That has to be paid back from current production revenue. It's also difficult to know correctly how cash positive each aircraft is because the price each carrier has paid for each is commercially very confidential. But the USD 25m is still very much being taken up by the cost of all the borrowing used to fund those past costs. I don't think the shareholders have seen anything yet, and in fact Boeing has extended the production run over which they are absorbing these past expenses.

[Airbubba]

Looks like Airbus is having its usual problems with corruption, that may not help according to this article from Canadian news organization Thompson Reuters:

OCTOBER 22, 2017 / 8:09 AM

Airbus turmoil overshadows bid to rescue CSeries

Tim Hepher

PARIS (Reuters) - Airbus’s (AIR.PA) coup in buying a $6 billion Canadian jetliner project for a dollar stunned investors and took the spotlight off a growing ethics row last week, but internal disarray has raised questions over how smoothly it can implement the deal.

The European planemaker secured the deal for Bombardier’s (BBDb.TO) CSeries program by pledging to throw its marketing might behind the loss-making jets, just as the Airbus sales machine reels from falling sales and internal and external corruption investigations.

Chief Executive Tom Enders has urged staff to keep calm in the face of French reports describing payments to intermediaries and growing concern over fallout from the investigations.

But the mood at the group’s Toulouse offices remains grim.

“Bombardier asked for an ambulance and Airbus sent a hearse,” said one person with close ties to the company.

In the first nine months of the year Airbus accounted for only 35 percent of global jet sales in its head-to-head battle with U.S. rival Boeing (BA.N).

The Airbus sales operation is demoralized and in disarray, multiple aerospace and airline industry sources said, with some blaming Enders for turning the company against itself.

Hopefully the Canadian taxpayers will continue to bail out Bombardier as they have in the past. They lose money on every plane but make up for it with volume, right?

[Heathrow Harry]

suits everyone........... the 737 is the most outrageous

[DaveReidUK]

Originally Posted by ExXB

Of course other regulators are not required to accept the FAA’s verification.

But these days, they almost invariably do.

[tdracer]

Originally Posted by DaveReidUK

Answering my own question, with a bit of Googling:

"The Federal Aviation Administration said it will allow Boeing to have the 777X wide-body aircraft certified as a new version of the current 777 instead of as a brand-new airplane."

FAA to Fast Track Boeing 777X Certification - Agency to Treat New Design as Version Upgrade

There is something called the "Changed Product Rule" or CPR that governs derivative design certification. The details can get messy, but what CPR basically says is that if a system is unchanged it can retain it's original cert basis, but if it's changed then it has to step up to the latest regulations. There is a process for exceptions where the airframer can show that it's impractical to step up to the latest regulations and it wouldn't meaningfully improve safety to step up. CPR is a 'harmonized' regulation - meaning EASA applies it as well. CPR has been applied to all the major derivative programs over the last 15 years - 737 MAX, A320 NEO, A330 NEO, 747-8/8F, 767-2C.
All that being said, there isn't much on the 777X that's common to current production. So while the 777X may have the same TCDS as the 777, most of the cert basis will be new.


Every Boeing aircraft certified in the last 20 years has been certified to both FAA and EASA - the lone exception is that the 767-2C/KC-46 will be certified FAA only since it's not expected to have any EASA customers.

But these days, they almost invariably do.

Ah, actually many of them don't. Obviously when you certify EASA, anyone in EASA must accept the cert, but many other countries do at least a cursory review of the cert basis before they accept it. Russia and China do much more than a cursory review - getting approval for the 747-8/8F and 787 required weeks of meetings and reviews with the Russian and Chinese authorities...

Now that sounds like illegal state aid.

You might be interested to know that EASA and most of the other non-US regulatory authorities bill Boeing for their costs associated with certifying. In fact I believe the FAA is the only authority that doesn't bill foreign airframers for their services...

[Turbine D]

WHBM

That's not quite an accurate representation. While they may be "cash positive" on current work, in terms of labour, components, current assembly hall costs, etc, there is the most enormous debt for the R&D, prototype production, and all the money borrowed to fund the production of earlier aircraft that didn't get delivered or any revenue for a long time. That has to be paid back from current production revenue. It's also difficult to know correctly how cash positive each aircraft is because the price each carrier has paid for each is commercially very confidential. But the USD 25m is still very much being taken up by the cost of all the borrowing used to fund those past costs. I don't think the shareholders have seen anything yet, and in fact Boeing has extended the production run over which they are absorbing these past expenses.

I am not sure your rendition is accurate either. In the United States, Generally Accepted Accounting Principles (GAAP) require companies to treat R&D as an expense in the year spent. This impacts a number of things leading to sometimes wildly different calculations of economic profit. So, is R&D an expense or is it an investment, an investment into the future as it was with the Boeing 787 aircraft? Some think that R should be expensed each year, but D capitalized once the asset being developed has been deemed technically and commercially feasible. A simpler approach is to treat both as capital or an investment.
If you look at Boeing, 2008-2010 were the years of heavy 787 R&D expenditures. If you look at these years using GAAP (which the US government does) for Boeing's net income it looks like this:
2008 $2.8B
2009 $1.3B
2010 $3.3B
Boeing had had a terrible 2009, right? But actually, it related to the timing of the largest R&D investment:
2008 $3.7B
2009 $6.5B
2010 $4.1B
Now if you adjust net income for the R&D volatility, e.g., Net Income + R&D
2008 $6.4B
2009 $7.8B
2010 $7.4B
2009 was a better year than 2008
But now you amortize the R&D investment over it life to be realistic to obtain Boeing's Adjusted Earnings:
2008 $3.0B
2009 $4.8B
2010 $4.4B
The point is, Boeing invested heavily in 2009 to position themselves for cash flow generation for the future years.
Aside from this, Boeing has experienced really good earnings growth from 2009 to today when you take out the volatility of R&D investments year to year.

[CONSO]

In the United States, Generally Accepted Accounting Principles (GAAP) require companies to treat R&D as an expense in the year spent.

But do not forget to mention the miracle of " program accounting " virtually invented/used by Boeing.