April 27, 2017, © Leeham Co.: The Boeing Co. late today filed a petition with the US government, charging Bombardier with “dumping” the CSeries in its deal last year with Delta Air Lines for 75+50 CS100s. Delta can convert the order to the larger CS300, which competes with Boeing’s 737-700/7 MAX.
Boeing claims Bombardier sold the airplanes for about $20m, against a cost to build the airplanes of about $33m.
The 1,039 page complaint cites as one of its references Leeham News and Comment. A redacted, 147 page version may be downloaded here: BBD Complaint 042717.
Boeing’s press statement is below the jump.
Boeing competed in the Delta competition, offering a combination of used Boeing 717s and, LNC believes, new 737-700s. The fully amortized -700s can be offered at a very low price, compared with the new 737-7 MAX (which at that time was the 125-seat, two-class version, not the 149-seat configuration it has since become). Boeing beat Bombardier in a hot contest at United Airlines, predating the Delta deal, by offering the -700 at a rock-bottom price believed to be in the $24m range, a price Bombardier could not then match. (A United official denied the $24m price to LNC, but others cited this number.)
Since the United deal, Bombardier received investments from the Quebec provincial and federal governments specifically tied to the CSeries, and more than US$1bn from a quasi-government pension fund for a stake in Bombardier’s rail unit. The investments are widely considered to be bailouts that prevented Bombardier from declaring bankruptcy due to cost overruns and delays from the CSeries and Global corporate jet development programs.
Bombardier took a US$500m “onerous contract charge” in connection with the Delta order and one from Air Canada.
Rival Embraer immediately cried foul and alleged the government monies violate World Trade Organization rules. Bombardier says the financial structures comply with WTO rules. Brazil, at the behest of Embraer, filed a formal complaint with the WTO. Boeing, while not filing its own WTO complaint, joined in the action, according to press reports at the time.
Boeing’s action today so far is limited with the US government.
April 27, 2017
Boeing today issued the following statement regarding its petition to the U.S. Department of Commerce and the U.S. International Trade Commission (ITC) seeking investigations into the subsidization and pricing of Bombardier C Series airplanes and an antidumping, countervailing duty order against the sale of those aircraft in the U.S. market:
“Boeing is asking the Department of Commerce and the ITC to take action 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.
“Bombardier has embarked on an aggressive campaign to sell C Series aircraft into the U.S. market at absurdly low prices – less than $20 million for airplanes that cost $33 million to produce, based on publicly available information. Notably, it is selling the aircraft into the United States at prices that are millions lower than those charged in Canada – the very definition of dumping.
“As a result, Boeing and its extensive U.S. supply chain of more than 13,000 companies face a competitive threat that will only grow in magnitude as Bombardier increases its production rate for this aircraft. Bombardier has announced plans to boost C Series production from seven airplanes in 2016 to between 90 and 120 airplanes by 2020.
“Substantial government subsidies have enabled Bombardier’s predatory pricing of the C Series, which competes directly with American-made 737-700 and 737 MAX 7 airplanes. The C Series has received extensive government support totaling more than $3 billion so far. Bombardier launched the program in 2005 with hundreds of millions of dollars from the Canadian, Quebec and UK governments, and it has received additional government support every step of the way, including $2.5 billion in 2015 from the Government of Quebec.
“Bombardier has a long history of relying on government subsidies to compete in the marketplace, but the subsidies for its C Series program dwarf all those Bombardier has received previously. Equity infusions from government coffers not only rescued the program but have given Bombardier the resources it needs to aggressively target the U.S. market.
“The U.S. antidumping and countervailing duty statutes are designed to address precisely this type of predatory behavior.”