Leeham News and Analysis
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Leeham News and Analysis
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Bombardier “deliberately misleading” in price dumping case, says Boeing
Delta Air Lines CS100. Source: Delta.
May 29, 2017, © Leeham Co.: Boeing minced no words in its closing brief to the US International Trade Commission in its price dumping complaint against Bombardier.
“Bombardier’s intentional obfuscation simply proves that Bombardier has no credible answer to [the] allegations,” Boeing’s lawyers wrote in the second sentence.
“Deliberately misleading”
“On each critical issue, Bombardier’s deliberately misleading presentation…confirms its inability to refute [Boeing’s] allegations,” the lawyers write.
Boeing took issue with Bombardier’s effort “to distance itself from the 100-150 seat” market and wrote that it was “disingenuous” for BBD to claim it only competes with Embraer.
Bombardier, Boeing notes, always said it competes with the 737-700/7.
Boeing is correct—for the CS300, though not so for the smaller CS100. But the point is valid.
Bombardier is the next Airbus
Boeing goes on to essentially claim Bombardier will be the next Airbus if the US ITC doesn’t agree that the Canadian company sold its CS100s to Delta Air Lines at a price that qualifies as “dumping” under international definitions.
“If Bombardier’s practices are left unaddressed, it will continue to use highly distortive pricing to eliminate the 737 MAX 7 from the 100- to 150-seat market. Bombardier will then use the resulting profits and momentum to wield the forthcoming CS500 in the medium single-aisle market against the Boeing 737-800 and MAX 8. The cycle will repeat itself…,” Boeing writes, charging that Airbus was responsible for the demise of Lockheed and McDonnell Douglas from the commercial aviation industry.
Boeing calculates that Bombardier sold 75 CS100s to Delta at $19.6m, a price BBD and Delta deny.
“Absent orders, the likely scenarios for the domestic industry’s product of the future, the 737 MAX 7, are that very soon it will either be marginalized…or that it will have effectively ceased to be a viable competitor…,” Boeing writes.
Delta’s testimony largely ignored
While Boeing refuted Bombardier’s testimony in nearly 40 pages of its 104-page brief, the US company referred to Delta’s testimony only is passing. Delta is a large customer of Boeing’s and the latter hopes that Delta will be a launch customer of the 737 MAX 10 later this year. Delta is expected to open competition between Airbus and Boeing for its first NEO or MAX airplanes.
Many believe Boeing is risking winning orders for the MAX from Delta by attacking the Bombardier deal. This may be why Boeing largely ignores Delta’s May 18 testimony in its closing brief.
Heavily redacted
Boeing’s closing brief is heavily redacted of information it considers proprietary. For example, Boeing doesn’t reveal its 20-year market forecast for the 100-150 seat sector in the US. Boeing doesn’t break out the sector in its Current Market Outlook.
Bombardier testified May 18 that its forecast is 1,900 aircraft in the sector for North American, which includes Canada and Mexico in addition to the United States. Neither Airbus nor Embraer segment this sector, either.
Embraer ignored
Boeing completely ignored Embraer in its May 18 testimony and in its closing brief. The E-190, at maximum one-class capacity, is 100 seats. The E-195E2 has 133 seats in one-class, squarely in the sector. Embraer has firm orders for 172 E-195E2s, including 67 from US-based lessor Aircastle and AerCap, which inherited the order when it acquired US-based ILFC.
More to come
LNC has not yet received the Bombardier closing briefs. We’ll synopsize this when we do.
The loser in the ITC case may appeal to the US Federal District Court in Washington (DC).
Amazing, if you consider Boeing has sold the 500 initial 787 below their production costs…
Boeing now can offer Delta to drop this case if they buy the 737MAX instead of the A321neo.
or Delta could just ignore Boeing for future purchases 🙂
After all, from Delta’s point of view, exactly what is it that Boeing has that is worth buying at a price that is actually profitable for Boeing?
I’m guessing not a lot. But there is an issue – the airlines collectively cannot afford to totally screw the manufacturers (whoever they are) deep into the red. For example, if Boeing did actually go out of business (and, given their poor line up, they might), who acts as Design Authority for all those Boeings still in service?
@matth that would be considered collusion I’m sure.
Boeing is showing signs that it is on its knees. Even if it wins it will loose because the rest of the world will see it as one rule for one and another rule for the rest. Boeing frequently sells airlines at a loss and is also heavily subsidised. It is just making the wrong decisions. The 737 been ripe for the taking for years. The only reason it still sells is that Airbus only produces ~600/year for a market that needs more than a 1000/year. Airbus won’t go in for the kill, but others (Russia/China/Brasil/Canada) are circling.
Boeing need to take grip of the small airline market by launching best in class replacements for the 737 and 757/767. There should be two developments with essentially the same design but different fuselage sizes for 6 abreast and 7 abreast seating.
Airbus also need to be careful for if they delay the A320 replacement too long, they will end up in Boeing’s world.
I think Boeing and Airbus will launch new small airlines in the next two years with engines one further step beyond the Leap/GTF. Entry into service, circa 2025
Nothing to complete directly with the C series? I doubt that they’ll even bother.
You mean ”compete”, in that case, I agree.
I think the point being made by the article and by Boeing is that a CS500 will compete with the 737 and be miles better and even better than the A320. On that basis Boeing is seeking protection.
If Boeing continues to believe that it can sell 40-50 year old airframes, they will go out of business. Airbus will follow them if they have the same belief
I’m sure that one of the reasons why they haven’t done so already is that they have no spare cash, at least not enough to spend on a new plane or two without dramatically impacting their share price.
Part of this I’m sure is that the management are probably renumerated partly with stock; a price drop is a pay cut for them. Hence the stock buy back, a technique to use profits to keep the share price high when all else is driving it down.
The shareholders need to change the renumeration policy of the company, put management on a salary, and get them looking after the long term health of the company. Everything they’re doing at the moment (777-X, a derivative, keeping the 737 going, the derivative of many previous derivatives, giving up on the 747-8, a derivative too far, turning the handle on the 787, a platform with limited options for derivatives) feels very short-term to me.
“If Bombardier’s practices are left unaddressed, it will continue to use highly distortive pricing to eliminate the 737 MAX 7 from the 100- to 150-seat market. Bombardier will then use the resulting profits and momentum to wield the forthcoming CS500 in the medium single-aisle market against the Boeing 737-800 and MAX 8. The cycle will repeat itself…,”
If they are accusing Bombardier of dumping, then there will be losses, not profit, so what is Boeing about? The whole saga is that Boeing despise competition and when one emerges they will do or say anything to kill them off. Just refer to the USAF tanker replacement, they appeal against Airbus winning the order. Why did they not oppose the tender when it was competing but only after they lost? History repeats itself. Boeing is a bad loser period.
I think many of you are overlooking one line from Boeing that Scott had included in his post,
“Absent orders, the likely scenarios for the domestic industry’s product of the future, the 737 MAX 7, are that very soon it will either be marginalized…or that it will have effectively ceased to be a viable competitor…,”
There you have it folks, Boeing’s domestic product of the future, not just the immediate future, is the 737 MAX 7!!!
Boeing apparently decided they have nothing to loose at Delta. The A321NEO, A330NEO and A350 orders of the last years, combined with the CSeries order let them reach that conclusion.
Now they even more need the government to support them. A razor sharp NSA and bigger wing for the 787 could restore parity IMO.
The Gov can help in various ways. Import barriers, tax breaks, NASA R&D, IP, defense orders/ export licenses. etc.
First you have convince them / the voters it’s all unfair, they’re a victim that needs support.