US finds “dumping,” adds 80% tariff to CSeries

Here it is, the press release from the US. The tariff is what Boeing originally asked for, 79.82%. A far higher one was expected, following last week’s subsidy determination.


WASHINGTON –  Today, U.S. Secretary of Commerce Wilbur Ross announced the affirmative preliminary determination in the antidumping duty (AD) investigation of 100- to 150-seat large civil aircraft from Canada.  As AFA, Commerce applied the sole dumping margin calculated in the petition for Canadian exports of aircraft, which is 79.82 percent.  This rate will apply to all other producers/exporters as well.

The Commerce Department will instruct U.S. Customs and Border Protection to collect cash deposits from importers of 100- to 150-seat large civil aircraft based on this preliminary rate.

165 Comments on “US finds “dumping,” adds 80% tariff to CSeries

  1. Thanks, as expected. To stay alive BBD will most likely have to sell a CS300 for $40M to airlines?

    So that is $40M to BBD and $120M to the Feds, so cost to Airline $160M. If this gets approved in December it will be the end of the C-series in the US.

    Will be interesting to see DAL’s response.

      • I am sure they are working on something. Will they wait for the December ruling or make a move before then?

    • @Anton:
      “To stay alive BBD will most likely have to sell a CS300 for $40M to airlines?”
      The above statement is only valid if BBD survival depends solely on U.S. based airline customers.

      And we all know that’s far fm the truth. U.S. airlines customer represent very large potential opportunities for any mainline narrowbody producer but they clearly are no longer the only large potential customers on earth(They probably were 20yrs ago and in earlier era).

    • You get a 787-9 for $160M…
      The game is just to enrich mainly US lawyers for up to 5 years of negotiations.
      Canada should be used due to other tarriffs the US uses against Canadian timber and wood.
      It is a risk Canada reduce trade with the US and shut down the Alaska oil pipeline or impose a fee of the same magnitude, stop electrical Power export and stop wooden Products export to the US and become more European centered and close Canada air space for US airlines.

      • We, I in arms about the situation.

        Had a look at published data, and that claimed for the MAX7 makes it look not that a shabby aircraft for ~140 seats?

        Deltas problem is a 100-120 seat aircraft, the E190E2’s just don’t cut it in a number of areas?

        The CS100 is the only REAL option.

  2. And so, our nation in its present paranoid and delusional state, foisted upon it by an underinformed, extreme, radical fringe element heretofore only believed possible to exist in some twisted universe Rod Serling called the “Twilight Zone” propels our country ever further down the proverbial slippery slope, at an even more rapid speed, towards the cliff where our nation’s social, political, cultural, but more than anything else, it’s own economic divisions, make the jump from tearing our own country apart, to tearing the world apart.

    Many, many, many times over history, for those who take the time to even briefly, or casually, read it, has proven that when trade-wars erupt, tensions further escalate, and more often than not, bloody, not to mention very costly, military conflicts emerge to “settle scores” that trace back to the mercantilism, protectionism, colonialism, or whatever other “ism” defines the political and/or economic conflicts of that particular moment in time.

    In the end, many lives are lost, often needlessly, families, cities, even whole countries, are laid to waste and left in ruins.

    Leaving out the yuuuuuugggeee irony that one of our nation’s biggest defense contractors is the principal instigator of this nasty, unwanted, unneeded, and certainly unnecessary looming trade war — with our neighbor, leading trading partner, and one of our staunchest political friends and allies no less (I’ll leave that insanity for Oliver Stone and the already far too plentiful conspiracy theory nutters to take THAT up…), by now doesn’t anyone with one functioning brain cell or more know that history is already littered with more than enough examples that when trade-wars erupt, they often escalate rapidly to something far worse, and in the end, nobody really wins…but nearly everyone ALWAYS loses?

    Thanks, Boeing. I hope you and your stingy, short-sighted, let’s milk the 737 cash cow another 20-30 years more than the 50 already, instead of investing and building our own modern, carbon composite, fly-by-wire, waaaaayyyyyy more comfortable, high performance single aisle airplane, shareholders are happy.

    You’re only risking a major trade war…and possibly worse.

    • Very timely. The worst in this situation is the telling of the lack of memory of Trump and Boeing. Not to know the history of international trade, exchanges between nations that are signs of social peace. How could they have forgotten that the Mesopotamian, Egyptian and Chinese civilization met to trade first. Get to know each other. Not to learn the lessons of history, not to believe in living together, to fuel the infantile regression, I am fed up with having to entrust my future, our future to megalomaniacs.

    • “And so, our nation in its present paranoid and delusional state, f ..”

      IMU nothing much changed.
      The pretense of saneness has been dropped ( for good?) though.

  3. 300%? Hahahahaha! 300%? Hahahaha … Decidedly in the realm of Trumpism, the delirium of omnipotence gains even the technocrats of commerce. Unless the analyzes are washed with acidic politics. Finally, there is something to dispel it … Again, imagine the Boeing sellers unpacking their documents without even insisting on a negative reputation that will get heavier every day. Imagine the arguments they are going to have to offer to justify such a 300% to future Japanese, Indian, Chinese, etc. buyers. Imagine their halo above their heads, without even saying a word, without selling anything at all! Hahahahaha …..

    • Yes, indeed, how to restrain a little and not laugh a good move later when Boeing sellers will dare to say that Bombardier has sold down the cost price and received government subsidies … Yes, how to humbly receive the hilarious reactions of its future customers …

      • This is “nothing” in the bigger picture.

        Boeing busy selling aircraft to the ME airlines at seriously discounted prices so they can stuff up Western airlines, including the US “Big 3”.

        And Mr.T will make sure there is tension in the World so that Congress can approve Trillions on military spending where Boeing often wins contracts.

        Now Boeing’s share price is pumping!

        • Also read about a potential big order by the Chinese for Boeings (wide bodies?) at very favorable prices so the Chinese can now stuff up the US “Big 3” on the Transpacific routes.

          Well done Boeing.

          • Hmmm, that’s a bit much.

            Isn’t Boeings business selling aircraft?

            I have no issue with the well deserved pummeling on the C series, I think grossly stupid by a corporate welfare pig.

            How about a minimum corporate tax?

  4. FI-NA-LLY, the USITC gets the right number that Boeing wanted all along, 80%. Well, no need to say that this is additive to the 200%; details, details… The important thing here is that the USITC finally did what it was told, 80%. Good! When can all go for a good long weekend now. Job well done. Merry Christmas everyone, I’m sure it will be a great one in Canada and Northern Ireland. Imagine how close to the abyss we all were, Boeing almost went bankrupt. Darn skidoo company. We can now all look up to Boeing with ever more admiration. I’m sure their corporate signature value just went up in value (ahem). This is not your old weak Boeing company, this is the new “you don’t mess with us” Boeing (ahem, China, you’ll be fine, the commerce dept just put you off the hook yesterday on Aluminium, not need to worry, you’re fine,, we cannot wait for the C919 and newly announced C929). Ah, Boeing, you’re truly awesome, the old squeeze someone so low that they have to follow [UA 737 deal]. And when they do try to make a sale [who knew? they tried to survive and make a sale], boom, go after those sons of witches (I forgot it was Halloween first). Don’t we all breathe a lot better now? No need to worry about that half-built final assembly line that has barely cranked out 18 CSeries so far since first flight. Whew, no more worrying about that now. Imagine, 5 years from now, if they didn’t stumble on a rock, they could’ve reached 10 planes per month. Like HAL9000 would say: “I’m sorry Dave, I can’t allow that to happen”.

    • Hello Pierre,

      USITC (US International Trade Commission) did not issue a ruling today and does not rule on dumping margins. Note that the press release that Scott posted starts with “US DEPARTMENT OF COMMERCE ISSUES ….”. USITC is a quasi-judicial body that is not part of US Commerce. USITC rules on whether US industry has suffered injury, on which they will make a final determination after Commerce has issued final CVD and dumping determinations. See the link below for an article about the USITC, whose commissioners serve 9 year terms. Of the current commissioners, none have been appointed by President Trump, although he does have two nominations pending US Senate confirmation.

  5. I’m surprised BBD hasn’t filed a subsidy complaint with the Canadian government against Boeing. Air Canada and Westjet have a lot of Boeing planes on order.
    Than again, the Canadian Government isn’t as corrupt as the US one so it probably wouldn’t do any good.

    • But I thought BBD said that its product doesnt compete with Boeing?

      If there is no domestic production of aircraft in Canada that Boeing is importing, you can’t have a subsidy complaint because there is no Canadian product being injured.

  6. What stops airlines based in the USA from having someone (outside the USA) buy the planes, and then lease them to the airline? Given the size of the tariff, it seems like an easy dodge to avoid!

    • Doesn’t matter who owns them, duties have to be paid when the aircraft enters the USA.

  7. From what I understood, the 195E1 and 195E2 will need to collect the same import taxes. The 190E2 still have the 99 seats configuration.

  8. Below is a link to a fact sheet issued by the Commerce Department on the preliminary dumping margin decision, and a couple of quotes from the fact sheet. Seems to me that it was a big mistake for Bombardier to not provide the requested information, unless it suspected that the information withheld would lead to an even larger dumper margin if it was supplied to US Commerce.

    “Commerce based Bombardier, Inc.’s (Bombardier) preliminary dumping margin on adverse facts available (AFA) because Bombardier failed to provide information requested by Commerce’s AD questionnaire. The Petitioner alleged one dumping margin in the petition. As AFA, Commerce applied the sole dumping margin calculated in the petition for Canadian exports of aircraft, which is 79.82 percent. This rate will apply to all other producers/exporters as well.”

    • Commerce is scheduled to announce its final determination on or about December 19, 2017, unless the statutory deadline is extended.
    • If Commerce makes an affirmative final determination, and the U.S. International Trade Commission (ITC) makes an affirmative final determination that imports of aircraft from Canada threaten material injury to the domestic industry, Commerce will issue an AD order. If either Commerce’s or the ITC’s final determinations are negative, no AD order will be issued. The ITC is scheduled to make its final injury determination approximately 45 days after Commerce issues its final determination, if affirmative.”

    • @AP_Robert

      What are you smokin?

      Boeing and Airbus never comment on the exact value of aircraft sales agreements. In fact, they go to great lengths to keep pricing confidential.

      Yet, you seem to believe that Bombardier should have provided sensitive and confidential information on pricing to this politicised charade — run by an administration that seem to have few qualms sharing classified information from even their most trusted allies. One thing is for sure, and that is if Bombardier had handed over this information to the kangaroo court on a friday, by monday the information would have been readily available in Chicago and Seattle.

      • There are clear safeguards against disclosure of confidential info. BBD is not the first company who has had to submit confidential info to Commerce.

        • Safeguards in theory. In practice — no.

          Due to the revolving doors inside-the-Beltway, I’d expect a large chunk of the US Commerce Department staff that are working on this particular case, would start working for Boeing within a year, or two.

          • Correct. The Federal Government leaks like a sieve, often as a matter of policy. Anything disclosed to the government is going to be shared with competitors. There are no real consequences for government malfeasance at any level.

          • Boeing’s lawyer (Robert Novick) is in fact a former Washington trade office insider …

          • I’ve worked on trade cases and the safeguards are extremely stringent.

            Do bear in mind that basically everyone knows what it takes to build a plane.

            There are industries out there where the production process and sales mechanisms and programs are much, more complex than for BBD.

            They have no problem submitting their confidential information.

            Not submitting info is a cop out.

          • @JamesBrown, from BBD’s comments it seems that they were asked for the info only for the first 12 months, not for the years that it would take to deliver the DL order, let alone a 787 accounting block equivalent.

            The costs are far higher in the first 12 months, for any aircraft, and basing CVD/dumping duties on that period is at best unreasonable.

          • Hello Thysi,

            I am not JamesBrown and not a lawyer, but I have read a number of documents in the case in their entirety, including Boeing’s original petition.

            Regarding: “from BBD’s comments it seems that they were asked for the info only for the first 12 months, not for the years that it would take to deliver the DL order, let alone a 787 accounting block equivalent”. – the dumping margin that Boeing petitioned for and was then imposed when Bombardier decided to stop participating in the case, was calculated from Boeing’s estimate of average production costs over a production run of 2,085 C-Series aircraft over a 20 year period, and allowed for a 32 million USD loss per aircraft for the first 50 aircraft, something which Mr. Hamilton either has not read in the material he has posted links to, or continually choses to ignore. Bombardier could have submitted a rebuttal to Boeing’s calculations, perhaps a production run of 2,085 aircraft was not enough or the loss per aircraft early in the program needed to be larger then 32 million USD or for more than 50 aircraft, instead they chose to boycott the proceedings by refusing to complete their questionnaire. The only reasons I can think of for their doing this are: i) their legal representation was incompetent and didn’t know that Boeing’s requested dumping margin would be used if they didn’t rebut it, ii) they knew if they submitted data the dumping margin would be even bigger, or iii) they actually believe that the US legal system wouldn’t safe guard the data they submitted, in which case they are probably better off not pursuing any future business plans in the US, instead focusing on countries whose legal systems they believe to be fairer – Communist China?

            For more details on Boeing’s dumping margin calculations, to which Bombardier could have submitted a critique and rebuttal, but did not, see below. There are one year periods of investigation involved in the case, (for instance, sales were examined over a one year period), but these do not prevent ‘startup costs”, which are allowed for under US trade law, to be calculated over longer periods of time, such as the 20 years and 2,085 aircraft that Boeing used.

            The following is from pages 123 and 124 of the redacted version of the Boeing complaint, to which Scott posted a link in April of this year.

            “Both the Air Canada and the Delta orders are scheduled for deliveries early in the program’s life cycle. Because of the “learning curve” effect, the actual variable manufacturing costs in those years will greatly exceed the average variable manufacturing costs over time. Therefore, as a conservative measure for its calculation, Boeing used average variable manufacturing costs, expressed in constant U.S. dollars, over the life of the C Series program. These costs have been spread over the projected number of deliveries over a twenty-year period, which is a reasonable estimate for the life of an LCA program. In essence, for purposes of this petition, notwithstanding the limited grounds on which the Department will grant a start-up adjustment under 19 C.F .R. § 351.407, Boeing has applied a start-up adjustment to Bombardier’s POI production costs. In its normal books and records, Bombardier, following International Financial Reporting Standards (“IFRS”), does not allocate learning curve costs over the life of
            the program. Thus, Boeing’s calculation of Bombardier’s recurring costs is very conservative.

            To estimate Bombardier’s recurring costs, Boeing constructed a Bombardier recurring cost curve model using the following known information:
            • Bombardier’s published delivery schedule;
            • The published break-even point of the first quarter of 2020;
            • Bombardier’s expected loss of USD 32 million per unit over the first 50
            • Published list prices; and
            • Boeing’s own experience on the shape of the cost curve for a new aircraft series.

            In addition, Boeing assumed the following:
            • A total production run of 2,085 units for the C Series program; and
            • An average list price discount for the first 206 aircraft of 50%.
            Boeing’s estimates of Bombardier’s production costs are provided at Exhibit 42, Tab 3. A, detailed explanation of the model and how the public data were incorporated into the model to derive Bombardier’s production cost for the C Series is provided at Exhibit 152.”

          • Only the White House leaks like a sieve.

            I will note many government entire,s state and local get propriety information for the purposes of management.

            Extremely rare those go rogue.

            There are a lot of hard working government employees with vastly more integrity than elected officials.

            Lets not tar them with the clowns.

        • “There are clear safeguards against disclosure of confidential info.”
          Prior to January 2017, that statement was still accurate. Under Wilbur Ross (and his boss), I don’t have any reason to share that confidence.
          The info would get out, and years later some career Inspector General would issue a scathing and probably very accurate report, which will be laughed at by Trump or his clownish successors.
          Having confidence that systems in place before this admin will still work is, unfortunately, just a bad idea now.
          The shoes have not all dropped, but (and it pains me greatly to say this) the USA’s reputation is taking many deserved hits. And it will get worse – hope it gets better in the future, but I’m not sure how many mop-ups the global business and political spheres will accept.

  9. This is a forward looking statement (FLX can give me uphill on this tomorrow), but I won’t be surprized is this is a run-up to Boeing buying Embraer?

    Take out BBD competition and have the market for yourself.

    • Perhaps, but would Airbus then acquire BBD to keep pace with Boeing if it acquired or entered into some other joint-venture with Embraer?

      Not to mention handing Airbus another extremely valuable carrot that would come with BBD to dangle in front of British PM Theresa May for those 4,000 jobs in Northern Ireland she desperately needs to protect to keep her fragile political coalition in power to go along with the other wing facility for current Airbus production that is at risk since Brexit…

    • Oh, and speaking of “what if’s” — with or without Boeing acquiring/JV-ing with Embraer:

      What would happen if, say, Airbus, rented space, or even formed either a joint-venture, with BBD, to set up a final assembly line at the facility in Alabama specifically for Delta’s, and any other US-based airlines’ CS100 & 300 orders?

      Then Airbus could offer updated smaller jets to replace the slow selling A319, “kill-off” or eliminate the risk of any potential near-term launch of a higher capacity CS500, while keeping the orders rolling in for the hot-selling A320neos, and its de facto 757 replacement, A321neo and A321neoLR, both of which have already left Boeing’s 900/9 and higher series in the dust…

      • Hello Howard,

        I think that something more than “final assembly” would be required for your US assembly suggestion to successfully evade the proposed CVD or dumping duties, since all federal register notices to date in the case have included partially assembled aircraft in their scope statements.

        Below is an excerpt from the scope statement in the Federal Register notice for the preliminary CVD determination and a link t0 the full document.

        “The scope includes all aircraft covered by the description above, regardless of whether they enter the United States fully or partially assembled, and regardless of whether, at the time of entry into the United States, they are approved for use by the FAA.”–to-150-seat-large-civil-aircraft-from-canada-preliminary-affirmative-countervailing-duty

        • Is the 787 then a foreign aircraft because the wings are not produced in the US?

          • @MHalblaub:
            “Is the 787 then a foreign aircraft because the wings are not produced in the US?”
            Yes, mostly around Nagoya including the center wing box. Oh, also don’t forget those hi-tech CFRP fuselage barrels for 787 center sections built by Kawasaki in Japan….the Dreamlifter practically land @ NGO every other day to pickup these giant 787 pieces(Thx to that good old Just-In-Time delivery system so popular for Japanese industries) to feed the 12/mth final assembly rate.

            In fact, I estimate the 787 supply chain consist of contractors/partners fm @ least a dozen nations around the globe….even critical parts like floor beams are built by Tata group of India.

        • Why doesn’t pre assembly count? Most of that is already done in the US.

    • It wouldn’t be surprised if BBD would be sold off to the Chinese . The Chinese then would have a plane already built and into the marketplace . Chinese then will pull all the parts built in the United States out and then sell the plane to the rest of the world excluding the American market.

      • Reality says no. So far the important stuff on the Chinese aircraft is made by the same suppliers as Boeing or Airbus, Europe or US origin.

  10. Oh, and of course, classic Trump…they wait until the end of the week Trump dump to throw this gnarly political garbage out — that they can ever so conveniently repurpose as ‘red meat’ to satiate barbarians in the Bannon/Nationalist crowd…

    For those who remember Stanley Kubrick’s stunning “Dr. Strangelove”, Rod Serling’s “Twilight Zone”, or Mel Brooks at his best and funniest moments, nearly every day now, there are so many moments when the lines between the twisted, dark, zany and insane things portrayed by the characters in the fictional universes these great storytellers used to warn us of the enemy from within, and what I see, hear and read going on in our country have become so blurred I sometimes wonder if all of this bs crazy stuff is really happening…or if somehow, perhaps unknowingly, I was in some sort of horrific accident, where finally after a months long coma that was filled with fantastical, freakishly demented characters like those seen in those stories, I wake up to much relief that not only am I still alive and survived a horrific accident, I become overjoyed upon learning that this mother of all freakshows playing out on our tv screens everyday of late, was nothing more than a spectacular, if horrific, nightmare typical of the hallucinations those in long term comas experience where while “out” the twisted rabbit hole their comatose mind that they thought was real, however Kubrick-ian, Serling-ian, or Brooks-ian, was nothing more than a figment (however dark and twisted) of my imagination.

    Here’s hoping anyway. Because whatever we now see going on right before our eyes is a dead ringer for the dark, twisted, and zany worlds portrayed in “Dr. Strangelove”, many “Twilight Zone” episodes, and of course, many of Mel Brooks’ characters — especially Governor William J. Lepetomane, the hapless, idiot governor played by Mel Brooks, who, like you-know-who, had a penchant for grabbing and fondling women’s private parts, whom was easily “played” for a fool and manipulated by Harvey Korman’s scheming and conniving character, Hedley Lamarr, which but for Korman’s far better looks, is a dead-ringer for Steve Bannon.

    If you’ve seen these movies, or know the “Twilight Zone “ episodes that easily capture the delusions, insanity and irrationality permeating vast swaths of a certain political party, then you will easily recognize how uncanny — and truly frightening — these imagined, and alas, real, dark universes are. If you haven’t seen these movies — Peter Sellers played 3 different roles and was nominated for an Oscar for Dr. Strangelove…and well, Mel Brooks’ “Guv” is priceless when realizing who’s in the White House these days…

  11. Only in a Trumpian world would an elephant be so vaingloriously jubilant over its conquest of a mosquito. Perhaps, it’s an advance warning of an impending corporate collapse. Of course, when your company is built on flimsy foundations, the elephant seems to be convinced that the competition must be crushed no matter what. In short, the elephant’s behaviour is counter to a sound corporate assertiveness.

      • Hyperbole? Not, really.

        What we’re witnessing here is a company that is acting like wounded animal. Perhaps, Boeing’s behaviour is partly due to the “enronisation” of the company.

          • Wilbur Ross is a TRump appointee and, importantly, I think, a distressed asset investor. He’s doing a fabulous job making BBD a distressed asset. Admittedly, Bombardier did a lot to create this situation. They are by no means blameless. But it seems risky to me to think Ross isn’t siding with Boeing in anti-competitive, squash-the-mosquito ways. There’s a lot of possible future profit in a Bombardier bankruptcy/takeover scenario.

  12. New references to Boeing’s own practices in this official Bombardier release:

    “We strongly disagree with the Commerce Department’s preliminary decision. It represents an egregious overreach and misapplication of the U.S. trade laws in an apparent attempt to block the C Series aircraft from entering the U.S. market, irrespective of the negative impacts to the U.S. aerospace industry, U.S. jobs, U.S. airlines, and the U.S. flying public.

    The Commerce Department’s approach throughout this investigation has completely ignored aerospace industry realities. Boeing’s own program cost accounting practices – selling aircraft below production costs for years after launching a program – would fail under Commerce’s approach. This hypocrisy is appalling, and it should be deeply troubling to any importer of large, complex, and highly engineered products.

    Commercial aircraft programs require billions in initial investment and years to provide a return on that investment. By limiting its antidumping investigation to a short 12-month period at the very beginning of the C Series program, Commerce has taken a path that inevitably would result in a deeply distorted finding.

    We remain confident that, at the end of the processes, the U.S. International Trade Commission will reach the right conclusion, which is that the C Series benefits the U.S. aerospace industry and Boeing suffered no injury. There is wide consensus within the industry on this matter, and a growing chorus of voices, including airlines, consumer groups, trade experts, and many others that have come forward to express grave concerns with Boeing’s attempt to force U.S. airlines to buy less efficient planes with configurations they do not want and economics that do not deliver value.

    The U.S. government should reject Boeing’s attempt to tilt the playing field unfairly in its favor and to impose an indirect tax on the flying public through unjustified import tariffs.

    Commerce’s statement that Bombardier is not cooperating with the investigation is a disingenuous attempt to distract from the agency’s misguided focus on hypothetical production costs and sales prices for aircraft that will be imported into the United States far in the future.

    As we have explained repeatedly to the Department, Bombardier cannot provide the production costs for the Delta aircraft for a very simple reason; they have not yet been produced. Commerce’s attempt to create future costs and sales prices by looking at aircraft not imported into the United States is inappropriate and inconsistent with the agency’s past practices. This departure from past precedent and disregard of well-known industry practices is an apparent attempt to deprive U.S. airlines from enjoying the benefits of the C Series, even though Boeing abandoned the segment of the market served by the C Series more than a decade ago.

    This action also puts thousands of high-technology U.S. jobs at risk given the C Series’ significant U.S. content. More than half of each aircraft’s content, including its engines and major systems, is sourced from U.S. suppliers. Going forward, the C Series program will generate more than $30 billion in business for U.S. suppliers and support more than 22,700 jobs in the United States.” “

    • Especially for US pax.

      New add: “This aircraft is so good the US needs to ban it.“

  13. Updating & adding another hypothetical:

    1.) Rent/lease land/facilities from, and/or create a joint-venture with, Airbus at its final assembly line in Alabama, to do the final assembly of CS100 & CS300 aircraft already in order from Delta, and any future orders from other US-based airlines;

    2.) Do as Boeing has done, and put out an RFP for US cities & states to submit their absolute very best economic development/incentive/tax exemption/abatement packages, and then set up shop in the USA to crank out those puppies!

    In fact, it’s NOT as if something like this is unfamiliar or all that exotic for Bombardier!!! They’ve been doing that for years anyway for their railcar division since ALL of the companies hoping to win the lucrative contracts to supply cars for NYC’s subway and the region’s two commuter railroads, Metro-North and Long Island Railroad (all by far the largest subway and commuter lines in the country, and among the largest in the world), MUST agree have final assembly lines within NY State as part of the eligibility for consideration of any contract for new build and/or life extension refurbishments.

    Where there’s a will, there’s a way…perhaps Bombardier would be wise to filll their own giant grab bag of publicly funded tax breaks and other goodies “Boeing-style” for use at Airbus’ Alabama facility, or perhaps just across the yard from the facilites they already have closer to home in NY State where they already produce railcars…and then have the satisfaction of hoisting Boeing by its own petard as they might say up in Quebec!!!

    …just sayin’

  14. The plane has “more than 50% US content”, so what does it really mean, to say, this is an imported plane? What is the threshold for “US made”? If it is merely point of final assembly, then that does not conform to economic reality. If this plane truly has more than 50% US content then this is a war by the US government on US producers, who have, in the worst case, in some way being subsidized by a neighboring government, which has a highly integrated economy with that of the US. Government subsidization of companies goes on all the time in the US, by states for example, with all sorts of competing economic incentives amongst themselves (Boeing takes these monies), so, even if by some technical stretch these were international Trade violations, it would have been, for a highly engineered product of this sort, with clear criss crossing supply chain across the two countries, very properly ignored by any sensible Administration. Net, it adds to US prosperity and is par for the course in this highly integrated joint marketplace. But these are not people that think. For example Amazon (I guess believing that North America is generally thought as 1 market btw US/Canada) recently put out feelers for US/Canada cities to bid to host its “2nd HQ”, yes, its a clear money grab from taxpayers. But imagine the not so far-fetched case where a Canadian city wins (Vancouver for example, might have all the requirements Amazon is looking for). So, then would the Trump Admin turnaround and charge Vancouver with subsidizing Amazon to the detriment of Walmart & Target? What of professional sports teams. They get city or state monies for stadia all the time, and the leagues cross the countries. What of the joint Canadian/US rescue of GM & Chrysler. Was it illegal when Canada gave money to the bankrupt car companies and they imported to US vs. Ford? Indeed, by that situation, US car companies should be paying heavy tarriffs right now if they export cars anyplace in the world. Why shouldnt the whole industry have gone bankrupt and left the field to the Japanese and Europeans to buy their em, carcasses, so to speak.

    • Trump and his cronies couldn’t care less about reality, all that matters is that he can tweet endlessly that he is “making America great again” even while he destroys US jobs…never, ever think Trump worries about reality, only his tweets and his TV spots….the US government is sadly becoming a world joke that is no longer trusted by anyone at all. Even by its former closest ally, Canada is learning an expensive lesson that you can’t even trust the US to act in a fair manner with an ally.

      • @Rational guy:
        “…all that matters is that he can tweet endlessly that he is “making America great again” even while he destroys US jobs.”
        Probably because over 99% of his tweet followers know the U.S. brand Boeing but less than 1%(or far fewer than that) is aware of U.S. brands like UTC, P&W, Rockwell Collins, Goodrich, etc. are financially deeply involved in a ‘foreign’ civil airliner program or even exist on earth….

        Trump politics is an animal of the instant interactive media age. The only logical outcome is that his econ-related policy decisions will leverage heavily on the extent of his audience’s perception/knowledge, not necessarily reality, about the U.S. economy.

    • Is it really “a war by the US government on US producers”? Whichever airframer ends up supplying Delta will still have significant American content. Both Embraer and Airbus use the GTF, for example. It would be interesting to know how much of the E2 is American?

      • If the government levies war on GM, and Ford gets the business instead, it is still a war by the government on us producers. Republicans used to be extremely animated by any thought of “government choosing winners and losers” in the marketplace. But down is up and up is down. Bombardier and Canada aside, this will not end well certainly for this Administration and political party, and maybe far more broadly. It is truly an interesting and in many ways sad time to watch this devolution.

        • Come on guys, as much a F inch Moron Trump is, this was done under current US law made prior to Trump, not Trump law.

          • The law doesn’t get applied and interpreted in a vacuum. If the law functioned autonomously, we wouldn’t be having huge fights over US Supreme Court seats.
            Wilbur Ross is a Trump appointee. Boeing filed the complaint this year, knowing full well who would be the final decision maker.
            This is political. The law is political. That was made clear to me from my excellent B-law professors, and over 30 years as an investor and business person, I’ve seen it with my own two eyes.

          • @TransWorld:
            “this was done under current US law made prior to Trump, not Trump law.”
            Very true. On the other hand, it’s also true that in this case:
            1. It is Trump admin’s(e.g. DoC) interpretation of such law.
            How else can we explain tariff % calculation re anti-dumping charge to be exactly as Boeing’s recommendation(unless Boeing’s legal team = DoC’s legal team)?

            2. It is Trump admin selectively enforcing such law.
            How else can we explain going after 1 player specifically targeted by Boeing but not the other 2 players in the same relevant industry(i.e. both produce & export 100-150 seater airplanes, per DoC/Boeing definition, into the U.S. mkt)?

          • Hello FLX,

            Regarding – “How else can we explain going after 1 player specifically targeted by Boeing but not the other 2 players in the same relevant industry?”.

            Boeing filed a subsidy case against Airbus with the WTO back in 2004. With no conclusion of this case after 13 years, Boeing will probably never waste their time with the WTO again in cases that would be possible to pursue through US Commerce; however, with the WTO Airbus case now 1 to 2 years away from completion, there is probably no point at this time in filing a subsidy complaint with US Commerce.

            I believe that Boeing has not filed a dumping complaint against Airbus or Embraer (not to be confused with subsidy cases) because it doesn’t believe there is a good case to pursue. Airbus and Embraer generally have plausible business models for paying for their programs over the life of the program (exception A380?), and have never suddenly dropped their prices after being rescued from bankruptcy by a multi-billion dollar government bailout, which I believe is the event that caused the kill order to go out to Boeing’s legal department, and also the event that drove Embraer to file their WTO complaint against Embraer. Is Embraer also part of the Boeing-Trump conspiracy?

            I’m sure someone will say that Boeing has benefited from US Government NASA research, defense contracts etc, but funding generic research, or contracting with a company to buy a product that a government needs at fair market price, is something that is far less problematical under US or international trade law than bailing out a specific failing program at a specific manufacturer. Maybe Canada should have ordered some ski-equipped CS100’s for arctic transport duty rather than providing a direct bailout.

            Robert Novick, a trade lawyer who represents Boeing in both the Bombardier and Airbus WTO cases, is quoted in the Seattle Times article at the link below as saying that retaliatory tariffs against Airbus are coming “very soon”. According to the article Boeing has remedied, to the WTO’s satisfaction, all but 800 million USD of 10.6 billion USD in subsidies that Airbus cited in its original complaint against Boeing. Canada seems to be digging in for a fight, why doesn’t it instead go the remedy route like Boeing did? Does Canada believe it has more power to influence trade laws than the US does?

            “A WTO panel adjudicating U.S. compliance with previous rulings found that, while all other Boeing subsidies have been remedied, the state’s aerospace business tax rate reduction — worth about $800 million to Boeing since 2004 through last year — remains illegal and must still be fixed.

            The ruling by the compliance panel is another legal step in an international trade dispute that has played out slowly over more than a decade: The U.S. sued the European Union in 2004 over Airbus subsidies and the EU filed a countersuit in 2006 over subsidies to Boeing.

            The U.S. will appeal Friday’s ruling and the appeal won’t be decided for about another year. Only then might Boeing have to consider what it can do to bring the Washington state tax subsidies into WTO compliance.

            U.S. government and Boeing officials spun the outcome as a victory because the other 28 state and federal funding programs challenged as subsidies in the dispute, amounting to an alleged $10.4 billion in subsidies to Boeing, have been addressed and are now resolved.

            “The panel found that 28 of the 29 programs were consistent with WTO rules,” the U.S. Trade Representative said in a statement.

            Boeing General Counsel Michael Luttig in a statement said that “today, the EU and Airbus suffered yet another resounding defeat.”

            Airbus officials had an opposite interpretation, with chief executive Tom Enders calling the ruling “a great victory.”

            State tax reduction problematic
            Ted Austell, Boeing vice president for trade issues, said the lone issue now outstanding in the WTO case against the company — the Washington state aerospace Business & Occupation (B&O) tax rate reduction — represents “only the smallest sliver” of the original claims.

            Boeing estimates this tax incentive has been worth about $700 million between 2004 and 2015. Data released this month by Washington state show Boeing saved another $101 million from that tax reduction in 2016.

            This tax rate reduction is only part of the state incentives that benefit Boeing.

            Last year, Boeing saved a total of $242 million from the total package of state tax incentives, including B&O tax credits for property leases and investments in pre-production equipment and a sales and use tax exemption.

            However, these other tax incentives are no longer an active part of the WTO dispute panel’s remit. It’s only the $800 million Boeing has saved from the B&O rate reduction that is still in dispute.

            This compares with $22 billion in Airbus launch aid — government loans used to fund development of new airplanes — that remain in dispute following the corresponding ruling last September in the parallel WTO suit against the EU.

            That case, filed more than a year before the case against Boeing, is closer to an endpoint.

            Bob Novick, former general counsel to the U.S. Trade Representative and now outside counsel to Boeing, said the appeal in that case against the EU should be decided this year, after which the U.S. government can begin the process of taking retaliatory trade measures.

            “The U.S. is headed for the right to retaliate,” said Novick. “It’s coming very soon.”


    • Thanks, good reading in there. Assuming this tariffs are to stay, what is DAL’s plan B, C, etc.

      First aircraft was due April next year, they obviously have a business plan to follow.

      Wonder which of DAL’s competition is going to benefit most from this? There are some bad thoughts bubbling in my head.

  15. Have to look again at what the wording of the CVD ruling was, for me the big problem area to get a solution for.

    This ruling says tariff on import from Canada. Does “from” mean originated from or manufactured in Canada.

    If it means manufactured there are ways passed it but if it’s “genetic” you snookered.

    Photography is my hobby, even see some “famous” German lenses have written on it, designed in Germany (but its manufactured somewhere else).

      • Thanks, lots off things for the guys with gold pens.

        If the PW1500G assembly and CS FAL is moved to outside Canada this could get technical. The CVD tariff likely the most tricky.

      • So if COMAC (state owned aerospace company) puts up a C919 manufacturing facility in the US they will be immune to CVD claims?

  16. In essence the Trump administration has declared war on Canada – its best trading partner by far. A country which it enjoy’s a $12 Billion SURPLUS in the trade of goods and services. Slapping a 300% tariff on a aircraft that has 55% American content cannot be justified in any way. According to Reuters the CSeries employs 22,700 Americans in 9 different states (including swing states that Trump won). I wonder if Bombardier can sue Boeing and the US government in US court since this absurd penalties cannot be justified in any way.

    • AS far as I know the Trump administration (or more lack of) doesn’t even know this is occurring .

      • Sorry to keep bumping on you, TransWorld, but of course the Trump Admin ‘knows this is happening’.
        Secretary of Commerce is a Cabinet seat. That is, by definition, the Administration.
        You think Ross and Trump don’t talk?

  17. Who remember the screaming doctor dragged from the plane and the dead giant rabbit. Has United gone down? Seems they are actually doing better.

    In a couple of months this is all forgotten and US airlines will order Boeing.

  18. Great job with the hysterics, folks! Truly excellent. I especially love the theories that all of this a sign of the impending demise of Boeing, or that Air Canada and Westjet will soon be cancelling orders for Boeing products. Seriously, you guys need to step back and think before you type.

    Here’s a few sensible realities for you all:

    1. In the end, CSeries aircraft will be flying US passengers around US airspace, operated by US carriers. The final solution here will be a negotiated agreement about how BBD conducts business going forward, in exchange for dropping the US-imposed (proposed) import penalties. Rather than thinking of these recent announcements of tariffs on BBD products as the final decision on the matter, think of them as the opening position in a negotiation.

    2. Boeing and the US have effectively made an important point to the rest of the world, which includes emerging state-funded OEMs planning direct competitors to Boeing products (e.g. Comac C929). The point being that illegally subsidizing of the development of these products, or using illegal subsidies to distort market pricing will result in swift and decisive measures that cut off the US market. Boeing has said publicly over the last couple years they have a significant concern with the above scenario, so it is logical to assume this BBD action may be with a vision toward broader long-term goals.

    3. There is a distinction between selling initial production units at a price lower than what it costs to build them (all OEMs do this) and selling products at that kind of pricing with an accounting block that results in a forward loss situation. There have been plenty of programs in history in the forward loss category (recent examples include CSeries, A380, 747-8). What makes the CSeries unique is that the 747-8 and A380 were selling initially into a market which appeared to have enough market potential to satisfy the accounting block. Once this was acknowledged as no longer the case (e.g. for the 747-8), Boeing did not go out with loss-making pricing that distorted the market for other competitors. Instead they reduced the market forecast and reduced production rate. This is how for-profit business has to be conducted when there are not external factors (like subsidies) permitting a company to operate in market-distorting ways.

    3. The final reality is about all of you. Your duplicity (including yours, Scott) is truly mind boggling. If the situation were reversed and BBD brought suit against Boeing in Canada for all the same reasons, the outcome of which was Canada imposing ridiculous import penalties on Boeing products, you all would be cheering the “justice” of such a decision. The fact is BBD and Canada significantly transgressed international trade laws through huge cash infusions into BBD – subsidies which permitted a not commercially viable program to survive. Just something to think about as you continue your little tea-party of hatred for Boeing.


    • I think the amazement here is about the recent history of WTO condemmed business practises by these entities themselves. There is a tonne of don’t do what I did over this. By one of the biggest government sponsored exporters. Taxbreaks , NASA, WTO, accounting methods, Ex-Im bank, pricedumping, tanker fraud, attack a non competive product. It’s getting too cheesy / selfserving inconsistent for many really. It’s hurting credibility.

      • Nice list… except they all have been upheld as legal with the exception of the the tanker fraud (seriously, you brought up something from 2003?).

        “Taxbreaks” – WTO just threw out the “illegal” claim on appeal.

        “NASA” – All NASA sponsored research is public, including research performed by Boeing under NASA contract. Airbus products fly every day using high-lift technology developed by Boeing under a NASA research grant.

        “WTO” – ?? Not sure what this means, but no WTO rulings have cast meaningful shade on Boeing business practices.

        “Accounting methods” – Have you taken an accounting class? Have you read Boeing’s SEC filings? Can you even describe the issue? If there is a problem, why are no shareholders or financial regulators coming after Boeing?

        “Ex-Im Bank” – which returns a profit to the US government every year it has existed. The same argument you use to justify Euro launch aid to Airbus.

        “Price-dumping” – I can’t even help you if you believe this is true. If there was any shred of evidence to support this, trade bodies all over the world would be challenging Boeing… but they aren’t.

        And “tanker fraud” – Great job. Dig up a Boeing misdeed from 2003, while ignoring the daily slew of truly egregious headlines coming out of your home team… corruption, bribery, money laundering, shell companies, etc, etc… Here’s just a few from the past 24 hours!

        As I said earlier, the duplicity on this site is mind-boggling.

        • IHSV:

          1. Boeing pays no taxes, spends billions on stock buy backs.

          2. Boeing has huge tax breaks fro Wa State and South Carolinas.

          Whats in it for US?

    • Very calm entry, by you there. You should win the Trump award for reasoned discussion.

    • @IHSV

      The assumption is the CS series won’t make money. There is no evidence to support your assumption

      I accept the subsidies given to Bombardier were after it got into trouble. The subsidies given to Boeing are to prevent it getting into trouble.

      Part of the US government position is that Bombardier didn’t or was unable to finance it losses on the equity markets. Thankfully subsidies mean that Boeing don’t need to finance their programmes on the equity markets. The 787 has a loss of $28billion. Where’s the money come from? Subdidies. More recently, the 777X has been given an $8.7billion subsidy in the form of tax breaks with more to come.

      • In reality we subsidize Boeing daily as they forward their losses endlessly all the while spending billions on shareholder buy back. .

        Who is being harmed here?

  19. Some sobering words, the CS aircraft seems excellent from what has been said. I question the financial ability of BBD to move sensible forward with the project, it need a partner/s.

    But where I would like to “differ”. By who’s standards is a legal and an illegal subsidy measured? The USA is not the world, its just happen to be part of it.

    Why does Boeing feel threatened by a company who’s market cap is <3% of Boeing's?

    • You are right that trade laws differ from country to country and are (mostly) not enforceable beyond the country they exist in. What is more enforceable are trade agreements. The issues at stake in this Boeing/BBD case are violations of trade agreements between Canada and the US. If the US and Canada cannot agree on a reasonable settlement of this BBD dispute, the arbitrator becomes the WTO. BBD/Canada will me motivated to settle this matter with the US without taking it to the WTO for two reasons:

      1. A WTO settlement would take a long time, during which the US-imposed import tariffs would stand.

      2. BBD would not likely prevail at the WTO, because the nature of state subsidies they received are a fairly clear and egregious violation of trade agreements between Canada at the US.

      As noted in my post above – this won’t go to the WTO and the tariffs wont stand for very long. The US and Canada will quickly come to a mutual agreement and CSeries aircraft will be flowing into the US.

      • Look who is going to be visiting his pal Donald in Washington next week. What do you suppose they might talk about?

        I suppose many of the people who post here think that Trudeau will be warning Trump that Canada, a country with a GDP of 1.5 trillion US $, will launch a trade war and bring the US, the worlds largest economy with a GDP of 18.6 trillion US $, to its knees if the US does not change its laws to what Canada would like them to be. I suspect that Trudeau is much too smart to do any such thing or dare to repeat to Trump’s face the threats he makes against the US in the Canadian press (sorry about some of the stuff I’ve been saying Donny buddy, you and I both know that sometimes you have to throw out some red meat to keep your base happy, right?), and will instead be starting the negotiating process that IHSV suggests will occur.

        • Surely, the law is the law and there’s nothing that can be negotiated?

          • Will the CS100 bring more good or bad to the US?

            That’s what needs to be determined, then you look for paragraphs in the law to support your view.

      • Hope common sense will prevail. Very much a catch two situation, BBD developed a very good aircraft. Must the Canadian Government watch it perish due to BBD most likely bit of more than they could chew?

        Maybe something like wave the CS100 CVD tariff (there are no alternatives build in the US, the E Jets are not US build) for the DAL deal and other CS100’s order. The dumping charge stay but softened to reflect a price to the difference of the equivalent of 50% of the list price at time of order and the actual order price.

        But for all new orders for CS300 or bigger the where there are US build alternatives a CVD tariff will apply if BBD does not get non-Government partners to take Government equity to 0%?

        Prices of new orders should also not be <50% of the official list price. Just thoughts?

      • Boeing is enormously admired for their legendary history by everyone commentating here. But,
        They don’t have a completing product.
        They were the ones who drove the price down to such a low level.
        They couldn’t have built the planes even if they had a suitable model and they had been invited to tender.
        Boeing did go out with loss making prices that distorted the market for other competitors with the 787, and were prepared to take a huge loss doing so.
        I am certain that everyone would be equally critical if the position was reversed.
        Boeing is extremely hypocritical with both state aid and predatory pricing

        • Boeing/Muilenberg more cunning than people may think.

          Sell at near cost and make money on the service agreements for those aircraft.

        • “They don’t have a completing product.”
          >>This is true, but is not a relevant factor, based on the way the complainant petition has been presented.

          “They were the ones who drove the price down to such a low level.”
          >>This may or may not be true, but no evidence has ever been presented that Boeing offered the 737-7 at below cost. In fact, I think there is strong evidence Boeing has positive margins on the 737, even at the lowest prices we’ve seen rumored.

          “They couldn’t have built the planes even if they had a suitable model and they had been invited to tender.”
          >>This may be true, but is not a relevant factor, based on the way the complainant petition has been presented.

          “Boeing did go out with loss making prices that distorted the market for other competitors with the 787, and were prepared to take a huge loss doing so.”
          >>This is not true, as the 787 program has never been in a forward-loss position. That is a key consideration of whether or not 787 launch pricing was improper. It is telling that no entity (namely Airbus) has ever made the claim Boeing did anything illegal or even improper with initial pricing of the 787. Surely you know enough about the history of these two companies to realize if Airbus thought they could have made a legal case to slow or stop the 787 they would jumped at the chance to do so. The fact is there was no case to be made.

          “I am certain that everyone would be equally critical if the position was reversed.”
          >>You are deceiving yourself.

          “Boeing is extremely hypocritical with both state aid and predatory pricing”
          >>You are drinking the Kool-Aid of this opinion website and its fanboys. Go read the long history of legal analysis from the WTO regarding “state aid” to Boeing. The most recent legal assessment (WTO appellate ruling from this summer) of the state tax breaks and other incentives rejected Airbus’ claims they were illegal. The most unfavorable of the rulings called some of the tax breaks “improper”, but not a violation of any trade laws.

          • That’s the point, it’s not improper to sell early products at a loss, its a universal practice in the aircraft industry.

          • No, Grubbie, you’re missing an important point.

            You can only sell at a loss when the program overall is not in a forward loss position. All commercial aircraft sell at initial pricing which is lower than the production cost of the aircraft. Companies do this because they see daylight at the end of the tunnel – a future point at which the overall program turns a profit. This is not “market distorting” or “predatory” pricing. It is just simply a reality of how much it costs to develop an airplane.

            BBD’s situation is a bit different, as there no longer appears to be a case to be made which can show the program with a net-positive program-level result. In a truly free market, no company will continue to sell at a Loss under these circumstances. They can’t. Otherwise the are insolvent and all the debt comes due overnight. The only reason BBD would and could sell at loss-making prices with no hope of someday turning a profit is because of the government cash infusion. This is a cercumstance which uniquely applies to the CSeries. The 747-8 and A380 May be approaching a point where there is no longer a large enough accounting block to show a net-positive program return. All other programs I can think of either are cancelled, or can show a net-positive business case at the program level. Definitely not applicable to any pricing Boeing offered for the 787.

          • So basically what IHSV is saying is that BBD need to go ahead with the CS 500, and claim of 5-10 thousand potencial sales and healthy return on a one or two billion govt loan, did I get that right?

      • “The issues at stake in this Boeing/BBD case are violations of trade agreements between Canada and the US.”

        Could you please point out which NAFTA chapter (or other US-Canada) is being violated? Quite to the contrary, based on chapter 19, Canada is able to refer such unilateral US action to the trilateral NAFTA panel for a binding decision.

  20. I’m not an accountant, but I think Boeing are the only ones that use programme accounting.
    If you were a company with lots of cash and lots of products, there’s no reason why you should not make a loss on one of your programs for strategic or development reasons. This is very common.
    I am fairly sceptical about how BBD can drag the price back up to a respectable and profitable level, but no one knows how many planes they will sell or for how much in 10 years time.Almost any commercial enterprise is a gamble.
    This case is nonsense, just imagine applying it to other products.
    Airbus does have a soft underbelly that Boeing could justifiably attack, bribery. Embraer probably has a case, but Boeing are abusing the law.

    • Regarding intentional / strategic loss-making being very common: I agree. It happens in many industries – even the car industry. Ford sold the Taurus at a loss for more than a decade. They can get away with it because it is a highly commoditized market, where there is no risk to the company, and where a case can be made they are doing it for the overall long-term profitability of the company. Aviation is unique in that every clean-sheet product is a bet-the-company type endeavor. In the US, the SEC will require this kind of risk risk-taking from a public company be justified by a sound business case. Shareholders will demand it as well. The fact Boeing uses program accounting and some other OEM does not is not really relevant*. All of them have to show a long-term business plan that is net-positive or they will get accused of distorting the market. Airbus in their Investor Day comments always gets asked and is always obliged to answer whether or not the A380 will reach break-even status. They always say yes, then talk about a future market which will demand enough units to eventually turn a profit. This kind of circumstance does not exist for widget manufacturers selling into a commodity market.

      *This website and the anti-Boeing crowd like to make a big deal about Boeing’s use of program accounting, imagining it is some kind of Boeing invented way to fool the world about its finances. It is just one of several ways to look at the overall prospects of a program. In fact, if you read Boeing’s annual report, you will find Boeing publishes analysis on a program level using program accounting method, as well as unit accounting method (the method most other OEMs use). Program accounting is a legitimate analysis method for large capital projects, which every accounting student learns about in any first-year university accounting degree program. Generally, investors prefer to see large capital projects analyzed using program accounting because it is easier to understand the prospects for profitability (how soon and how much). In reality, Boeing’s use of program accounting has nothing to do with how a program spends and earns money. All of the “deferred costs” which appear using program accounting are real costs which are already sunk – it is money Boeing has already spent. It is cost which has already had its impact on cashflows, which is already reflected in the balance sheet, and which is now cooked into the capex of the company. Another OEM may not publish results using program accounting, but you can bet investors, analysts, and even those companies themselves are doing program accounting as a way to analyze the prospects of their individual airplane programs.

      • @IHSV

        The fact of the matter is that the sticker price for the 787-8 was around $120 million* when the programme was launched in April, 2004. In contrast, the list price for the A330-200 was around $150 million for the A330-200 in 2004.

        As Jon Ostrower pointed out in a Flight International analysis in 2011**, “the order backlog for the 787 was based partly on steep discounts driven by now-discarded design and manufacturing assumptions.”

        Mr. Ostrower further pointed out that, “The 2004-06 airframe prices charged to airline customers ranged from $83.5 million down to $65.7 million for the 787-8 for one higher-volume deal with a blue-chip customer.”

        That $65.7 million deal for the 787-8 was the deal with Qantas for up to 115 787s in 2005.

        As was pointed out under guidance in 1981 by the American Institute of Certified Public Accountants***, “programme accounting can go wrong if a company either initially overestimates the number of airplanes it plans to sell or its costs are significantly higher than planned.”

        So, what do we have?

        787 programme accounting going wrong because the programme was launched under seemingly false pretenses — that the 787-8, for example, would be significantly cheaper to produce than the same-priced 767-300ER; $30 million, or so, cheaper list price than the similar sized 330-200.

        The people at Boeing seem to have been caught up in a mentality where they were believing their own hubris, leading to an incredible and incompetent underestimation of both developmental costs and production costs — the consequence of which resulted in a de facto dumping of Dreamliners into Airbus’s home markets in Europe.

        As for your increasingly tedious rants, do you actually believe that the 787 deferred costs are nothing but a mirage?

        In the real world, the removal of deferred cost from the equation means lower profits. Lower profits means lower dividends for Boeing shareholders, lower bonuses for Boeing’s top management and much fewer share buy-back schemes in the future.

        In the real world, the 787 programme seems to be trapped in negative equity, thus Boeing don’t really own anything of the cash coming in from 787 sales — the cash is just on loan.

        To grow equity from minus to plus requires profits in order to remove the deferred costs form the books. For the remaining 800 airframes in the accounting block, we’re talking about a requirement of $30 billion-plus in profit per plane that must be met — which btw, is a totally unrealistic goal.


        The Boeing Co. on Wednesday confirmed that the asking price of the 7E7 Dreamliner is about $120 million, according to press reports. Mike Bair, the senior vice president in charge of the 7E7 program, also said in a conference call Wednesday that the company hopes to land the program’s first orders this year.

        Bair’s comments echo those made by vice president of marketing Randolph S. Baseler at the Asian Aerospace convention in Singapore in February.

        “You can look at the price of the 767-300 ER on our Web site and that’s the ballpark figure (for the 7E7),” Baseler said at a convention briefing, according to Dow Jones. That plane lists for between $115.5 million and $127.5 million, according to Boeing’s Web site.


        Cost overruns, penalty payments and supply chain changes adopted in the past two years will force Boeing to achieve unprecedented cost savings for the widebody to turn a profit even after delivering the current 846-aircraft backlog.

        With first delivery nearly three years behind schedule, the cost to build each 787 has skyrocketed from original assumptions of lower and more predictable production costs, say company insiders.

        In the race to sign up customers between 2004 and 2006, airframe prices averaged just below $76 million, a price that does not include the $20-30 million GENx or Rolls-Royce engines, buyer furnished equipment and in-flight entertainment, according to pricing data.

        While Boeing will probably never disclose the actual prices for which its mega-backlog of 787s were sold, chief executive Jim Albaugh acknowledged in a recent interview: “I think we gave away some of the value of this airplane to a lot of our customers.”

        Customer and company sources, as well as industry analysts, say that statement is an understated acknowledgment that Boeing’s huge 787 backlog was fuelled not only by predictions of huge future growth in air travel and sharply-rising fuel prices – but by a steady and strategic drop in the price of the aircraft.

        In late 2004, Boeing started employing aggressive, price-cutting sales tactics, according to sources familiar with the pricing discussions, blunting the ambitions of the original Airbus A350, which at that time was an A330 update rather than the all-new aircraft in development today.


        Under guidance proposed in 1981 by the American Institute of Certified Public Accountants, program accounting may be used only under a very narrow set of circumstances involving a recurring product that requires substantial investment and has high barriers to market entry.

        The method can go wrong if a company either initially overestimates the number of airplanes it plans to sell or its costs are significantly higher than planned, accountants said. Either scenario results in miscalculating the company’s margin.

        Because of the estimates, “you have to accept a great deal of subjectivity,” said Robert Willens, a corporate tax and accounting consultant in New York.

        • Nobody here has implied the 787 business case has played out as Boeing intended. Certainly I have not. In reality, development cost overruns, the cost of delays and associated mitigation with customers and suppliers, as well as the unexpected and precipitous drop in the price of oil have all worked to put pressure on the 787 program’s business case. Hindsight is wonderful, isn’t it? You have the benefit of it now, which is why you can roll out all of your wisdom. It is much harder to do when you are looking 10 years forward instead of 10 years behind. To ascribe malicious intent to the original 7E7 business plan is a stretch. I’m sure most at Boeing thought they could make it happen when it all began. I’m sure the same could be said of leadership at BBD. In reality, markets change and airplanes are exceedingly difficult to develop. It only takes a small hiccup to overturn the whole apple cart.

          I work for a supplier which has parts flying on Airbus, Boeing, Bombardier and a couple different Asian aircraft. I didn’t support the 787 program directly, but I know the original production plan had us providing parts basically for free to Boeing in production, as we were given a larger slice of the aftermarket than on past products. This was the mechanism by which they felt their cost to build the 787 would be so low. In the end, they had to mitigate the delays with us and as a result their cost for production units from us went up. Such is the way the world turns. But these are facts, as opposed to your assertions of something nefarious with Boeing’s original assumptions about cost of production, which drove initial pricing in the market.

          • Oh come off it! I remember it being said often that Boeing was trying to finish off Airbus particularly wide bodies. There was no other reason to price so low, regardless of how cheap the plane might of been to produce.
            Very interesting information about Boeing going for the engine manufacturer/razor model, eventually this caused Rolls-Royce a lot of trouble.

          • @IHSV

            Actually, I was highly critical of the 787 business model long before the Potemkin roll-out on 07/08/07.

            The fact of the matter is that Boeing took huge risks when launching the 787 programme. When companies aren’t smart about their innovation efforts, taking risks becomes that much riskier. In the case of the 787, Boeing didn’t follow any of the industrial best-practice recommendations which suggests that new products should use existing processes and tools, the existing organisation and demonstrated technologies. Launching the 787 on a 4-year development track is arguably the greatest con ever pulled in the history of the Large Commercial Aircraft (LCA) business.

            It’s not surprising, though, that someone who’s aggressively ranting and raving about those who’re critical of the accounting methods at Boeing and the sheer hypocrisy of Boeing attacking Bombardier — and
            claiming to work for a Boeing tier-1/-2 supplier, while seemingly having bought into the hype and “drug-like-rush” of the 787 — would be rather unfamiliar with the terms of industrial best-practice recommendations.

            As for malicious intent — Yes, it arguably was malicious intent on the part of Boeing from the very beginning.

            Boeing launched the 787 in April, 2004 and got the Bush Administration to sue Airbus and the EU one year later at the WTO. Central to what Boeing was doing was to undermine the launch and development of the A350, while underpricing the A330 cash cow, in order to try to stall the competitive response from Airbus.

            The top management at Boeing seem to have erroneously believed that Airbus couldn’t possibly manage to start developing yet another all new aircraft, just 5 years after they started the development of the A380. In the seemingly self-righteous reality of Boeing’s managers, Airbus had already made their bed with the A380 — now, they had to lie in it. Most of the nonsense about point-to-point (PTP) vs. hub-to-point (HTP) can be traced back to how Boeing planned to undercut Airbus’ twin aisle business. Going so low on initial 787 pricing was a clear attempt on the part of Boeing to stop the A330 dead in its tracks — a programme providing critical funding for the A350.

            What the decision-makers at Boeing didn’t take into account, though, was the ever growing free cash flow from the A320 cash cow. Now, when the 787 programme started to unravel, the A330 reigned supreme for another half-decade (plus). Hence, the free cash flow coming from both the A320 and A330 essentially paid for the A380 and the A350. The funny thing is that Airbus was slow to ask for Reimbursable Launch Investment (RLI) loans for the A350 — they didn’t really need it!

        • Correction

          I wrote:

          To grow equity from minus to plus requires profits in order to remove the deferred costs form the books. For the remaining 800 airframes in the accounting block, we’re talking about a requirement of $30 billion-plus in profit per plane that must be met — which btw, is a totally unrealistic goal.

          That should be $30 million-plus per airframe; not $30 billion! 🙂

          • Its not the 787, Boeing uses that for ALL aircraft.

            So the US taxpayers endlessly subsidize Boeing and get what for it?

            Tax the workers more so we can get something out of it?

            Frankly, this is illegal and should be ruled as such.

            Welfare Pig Indeed

  21. Lots of anti-Boeing sniping on this thread. (I have my issues with BA management, but they’re focused on greedy, retired McNerney, and the collosal, current mismanagement of the KC46 program!) Nobody here has really focused on how stunningly incompetent Bombardier has been in their management of the CSeries program. (Leaving aside their screw ups in rail, Q400, CRJ, etc.) By all rights, Bombardier should be dead and/or on the way to being buried. But Quebec hasn’t let that happen. There a cause for BA’s complaint right there, LOL. Don’t discount Bombardier’s continued mismanagement of this program, with some help from their “friends” at P&W! (Late delivered geared turbofans anyone?)

    • As said a few times, the CS program should be taken out of BBD or its dead. Let them try to save the rest of their business. Not even selling a 1000 CS planes tomorrow will save them, they will be just be deeper in the…….

      But that didn’t change the fact that Boeing management is ………………..!
      ……… and many feel like that.

    • I don’t think that the C series is much worse than other airliner projects. The $2,6 billion wasted on the Lear jet 85 would be really useful now though.

      • Hope the CS series survives, not so sure about BBD?

        Maybe after the Canadian PM’s visit next week to Mr.T there could be a US controlled Newco building the CS and Learjets for White House private flights.

        • And so should the whole US auto industry (Chryslers twice) and Lockheed, but push comes to shove, all government are going to save large industries if they imperil the economy.

          When a company says screw you and hooray for us, then they deserve to get bashed.

          And in this case they imperil US jobs and industry.

          I want my fair share of Boeing stock as I am an owner.

    • The rail division is profitable, the Q400 is doing fine (and would do much better if the even more subsidised ATR was not around) and the CRJ is a resounding success over almost 30 years. And as so many have pointed out the role of Quebec in Bombardier mirrors that of Washington State over Boeing. The fundamental issue is that Boeing has initiated an out of WTO penalty ‘war’ – ignorant of course of the obvious fact that other internal national regulations are equally capable of penalizing companies that sell to them at a higher cost than they do in their own nation.

      • Of course Boeing knows that other countries can retaliate. I think that they are relying on the US having more clout and an effing moron as president.. How about the much more dignified approach of building a better product? Or even one that fits Deltas requirements?

    • Interesting, they call it AD’s and CVD’s (D=duties) but refer to its as “tariffs”.

      One for the lawyers?

      • The agreement on aircraft provides for elimination of standard tariffs for aircraft and parts when they go from one country to an other. When the USA imports an A321, the regime seeks to eliminate the 2% or 5% tariff that would have applied (as is the case for entries of millions of other goods). Same for India: when an Indian airline wants to import a CRJ-200, the regime seeks to eliminate the 5% or 7.5% tariff that Indian Customs would normally tax the aircraft at.

        The agreement does not eliminate the right of nations to seek redress against trade distortive practices (illegal subsidies and dumping).

        • Thanks James.

          So if an airline in the US buys C919’s from COMAC, that is a Chinese Government sponsored company, the CVD tariff could maybe even 1000%?

          • I can’t speculate what the subsidy rate would be. As with BBD, trade remedies can only go into final force when there has been a petition against a product from a country. We’ve not seen that yet.

        • If BBD sells it 50.5% steak in the CS to the Canadian Government, call it Montreal Aeronautic’s (=COMAC), and MA sells the CS100’s to Delta will it carry a CVD tariff?

          • @Anton, the short answer is yes. It’s based on country of origin, the ownership of the company doesn’t matter.

  22. Early last Century the UK signed a mutual defence agreement with it’s oldest enemy, and only nine? years later honored it, to the surprise of their one time best ally, Germany. When will we see Chinese bases on the North shore of the Great lakes? Or Canadian recognition of Russian claims to Alaska? If the US continues this course they will sooner or later get a nasty shock.

  23. Interesting story about Monarch 737 max financing by Boeing in the Financial Times. Or it would be if I could make head or tail of it. Sounds quite complicated.

    • Just read the shorter Reuters report. Seems Boeing invested roughly $130 million in Monarch to keep it afloat — so that orders for 737s would stay in process, among other things.
      Boeing says ref this that they “are always compliant with trade law”.

        • I don’t know, but it could be an illegal subsidy. I would guess that the maintenance division was used as security. I would have liked to have known that if I were one of the other creditors. Definitely smells funny, rumours of similar goings-on at Ryanair

  24. Really… what did happen.
    BBD decided to show everybody they can develop really modern and fine aircraft. During the process they practically went down since they took more they were able to take. What did happen – the Canadian government (do not barter which one) decided they are almost done and they do have really excellent product so they let “some money go”.
    Now consider in reality how much subsidies gets Boeing from the government (do not barter which one) in different ways. How much they have on each satellite made for NASA, each military plane – just name them. They got HUGE subsidy from Washington state on local taxes – and to sum it up it is together orders more than BBD got. To be frank AB is in the same league with BO concerning some subsidies – the difference is they shut up – they do not complain, only as a reaction to claims made by BO.
    So to me BO is extremely HYPOCRITICAL fighting against competitor “in the future” when CS500 comes and be frank it is going to be considerably better plane than 737MAX7,5 or A319neo.

    I do agree that this draconical due will somehow be solved and not payed in real life.
    Maybe DELTA will start daughter company in Canada ?

    Why not – EasyJet already has sister company in Austria using 1/3 of the original fleet. Why DELTA could not do similar thing ? Canadian Airlines can go from SFO-JFK and pay taxes in Canada.

    • What “did happen” is just business: the use of available tools to minimize competitive threats.

  25. Are Boeing really stupid enough to lose money by lending it to Monarch?
    There’s a mountain of slime to dig through if you want to find out.

    • Boeing must be the Uber company in the world with the highest market cap?!

  26. I’m sure folks in Toulouse, Mobile and São Paulo are popping Champagne

    By the way, lets avoid thinking the U.S. DEPARTMENT OF COMMERCE is some kind of independent objective organization. It’s totally US political driven, not above the parties or something.

    • In South Africa there is the big “State Capture” by the Guptas going on.

      Maybe Boeing is doing the same to the US Government?

  27. Well If you can’t beat them join them.

    BBD and the Canadian Government should get together and launch the C500.

    No different that Airbus.

    Then beat the living daylights out of Boeing (and Airbus) selling thousands of C series all over the world.

    See how Boeing reacts then as their cash cow dries up the milk supply.

    • Agree 100% no reason why not to now that they are freed from having to worry about a US trade complaint, except for the WTO which doesn’t count.

      • PS they have started the process of obtaining RAAF F-18s, Super Hornet dead and burried?

        • No way the US will have any of that,half of the Cseries is made in the US, they’re in control. Airbus needs to wake up a bit on that front as well.

          • Not sure how they can stop it. Also suspect Airbus are well aware of the risk US content poses these days. I can see the day coming when AB and BBD might prefer non-US suppliers, killing the US biggest export industrial. Not to forget UT is approaching the point where it might soon be bigger/stronger than BA, and aren’t going to let that happening if it can be avoided.

  28. If the choice boils down to a gap between the old E175 and the 738 for US carriers like United and American, then the E190/195E2 may be the next logical choice. How low can Embraer price the aircraft before Boeing has a cow again?

    • The E195E2 isn’t really big enough for the upper part of the gap (if there is that much of a gap).
      E195E2 is 120pax typical 2.5 class. CS300 is 130 seats. (146 vs 160 max density seating).
      And there is a big range penalty with the E195: 2,600nm vs 3,300nm. For plenty of missions, the E195 is OK. But with scope clauses, at least in the US I think the CS would be a far superior product, absent the trade kerfuffle.
      Probably why DL canceled the E195 (used, not E2) deal and went with the C-Series.

      • Seems like a big gap between 70 seats for regional and the next option at 160 seats for mainline. 120 seats may work on some routes where it is better than flying a 160 seat aircraft at 60% load most of the time. The E195E2 will have lower ownership costs without a 300% penalty.

      • The E195E2 is about as big as the 2-2 E’s could go, which is about 10-15’s seats shy of the C300/319’s/MAX7. So Boeing wont shout to much because it cant grow into MAX8 competition (which is their bread and butter aircraft), but the CS300 could grow into a CS500 that could hurt the MAX8.

        On the smaller end, on 500-1000Nm sectors, the CS100 uses ~5-8% less fuel per seat mile as the E190E2.

        After all the goings on it appears from published data that the CS300’s and MAX7’s sector and seat mile fuel costs will within 5% of each other?

        The sector cost of the CS300 and 195E2 is about the same but he CS3 could potentially carry more pax.

        However, the 737-700 is a “dog” compared to the CS300.

  29. One thing that has received little or no attention here is that in the CVD ruling there were a number of subsidy programs to which US Commerce found no objection, notably the 1.5 billion USD investment by Caisse de Dépôt et Placement du Québec. My advice to Bombardier, in the unlikely event that they asked me for it, would be to restructure the programs that US Commerce found to justify CVD duties, EXACTLY along the lines of the programs that US Commerce found allowable, and then file a petition of changed circumstances instead of pursuing any of the far fetched schemes being suggested here, such as third county factories or shell leasing companies, which I believe would have little chance of success. If the Commerce objection to a program was that it was in effect an interest free loan, aswas the case for the programs that accounted for the 2nd and 3rd largest components of the CVD duties, then perhaps Commerce might be satisfied if the government bodies involved charged Bombardier for future and back interest at the market rate for companies whose bonds are rated as junk (which is the case for Bombardier). The quotes below are from the decision memorandum that Scott posted a link to a few threads ago.

    “B. Programs Preliminarily Determined Not to Confer a Benefit During the POI

    1. Equity Infusion by Caisse de Dépôt et Placement du Québec

    On November 19, 2015, CDPQ announced an investment of $1.5 billion in BT Holdco. CDPQ’s
    $1.5 billion investment was disbursed on February 11, 2016. In return for its investment, CDPQ
    received a 30 percent equity stake in BT Holdco, a guaranteed annual return on its investment,
    and warrants to purchase shares in Bombardier.172”

    “Nonetheless, as discussed in the “Equityworthiness” section, above, we preliminary find CDPQ’s
    investment in BT Holdco to be equityworthy. As a result, we preliminarily find that the equity
    infusion CDPQ provided to Bombardier conferred no benefit.”

    “2. Other Programs Conferring No Measurable Benefit During the POI

    Bombardier and its cross-owned affiliates reported receiving benefits under various programs,
    some of which were specifically alleged and others of which were self-reported. Based on the
    record evidence, we preliminarily determine that the benefits from certain programs: 1) were
    fully expensed prior to the POI; 2) are less than 0.005 percent ad valorem when attributed to the
    respondent’s applicable sales as discussed above in the “Attribution of Subsidies” section above;
    3) are only tied to the production of non-subject merchandise; or 4) in the case of export
    subsidies, were not tied to U.S. sales of subject merchandise. Consistent with the Department’s
    practice,178 we have not included these programs in our preliminary subsidy rate calculations for
    Bombardier. Moreover, we determine that it is unnecessary for the Department to make a
    preliminary determination as to the countervailability of the following programs:

    Canadian Federal Programs
    1. Export Development Canada Export Financing
    2. Consortium for Aerospace Research and Innovation in Canada
    3. Defence Industry Productivity Program
    4. Green Aviation Research and Development Network
    5. National Research Council
    6. Natural Sciences and Engineering Research Council of Canada
    7. Ontario Centers of Excellence
    8. Regional Aircraft Credit Facility
    9. Water Bomber (CL-215 Amphibious Aircraft) Nose Wheel Steering Kit Purchase
    10. Tax Credits from the Government of Canada for the C Series

    Québec Province Programs
    11. Investissement Québec Export Financing
    12. Consortium for Research and Innovation in Aerospace Québec
    13. Fuel Tax Refund
    14. Investissement Québec Loan Guarantees for Non-Subject Aircraft
    15. MESI Support for Events
    16. Systemes Aeronautiques D’Avante-Garde Pour L’Environnement I
    17. Systemes Aeronautiques D’Avante-Garde Pour L’Environnement II
    18. Tax Credit for Investment (CR 85)
    19. Tax Credit for Private Partnership Pre-Competitive Research (CR 79))

    U.K. Programs
    20. INI Grants Tied to Non-Subject Merchandise
    21. R&D Grants Expensed Prior to the POI
    22. Aeronautical Engineering Transitional Funding Project

    C. Programs Preliminarily Found Not to Be Used During the POI
    1. CDPQ Line of Credit
    2. Innovation, Science, and Economic Development Canada Support for Aerospace R&D
    3. Technology Partnerships Canada Program

    D. Programs Preliminary Found Not to Be Countervailable
    1. Tax Credit for On-the-Job Training Period (CR 9)

    • Wait a minute, please. All of the items listed above are not considered to be subject to countervailing duties and the values imposed were still that large?!

      Seems all very strange to me.

  30. Simple answer would be for Bombardier and Boeing to agree to a suspension agreement…….

    • Give up now or a long drawn out death with no investment. A lot more like blackmail than an agreement.

  31. It seems regarding the challenging MAX competitiveness, 787 profitability, 777 customer base and 797 development financing, Boeing really needs this government support. This is one of the US’ most strategic companies.

    And who am I to judge, I’m not a US tax payer/ voter! I sponsor healthcare, defense and social security in my country too, knowing it won’t bring in direct revenues.

    • Keesje on something less “political”, just been looking at some fuel burn figures. Not taking purchase price into consideration but why are airlines go so “bonkers” about the 787-9.

      Looking at sector fuel burn the 787-9 has small margins on the 359 for routes 5000Nm routes the 359 could have lower fuel burn rates per NM less than the 787-9. The 359 takes more pax which makes it better on seat mile cost.

      Was just wondering, potentially how much less fuel would an 359 variant burn that have de-rated 79KLb XWB engines with a lower MTOW of around 265T and range of 7500Nm?

      • Some text got scrambled here, the 787-9 looks slightly better for direct fuel burn on routes less than 5000NM but for routes longer than that the 359’s direct fuel burn is actually starting to look better than that of the 787-9?

      • In my opinion the 787-9 is the best aircraft Boeing is producing at this moment. Well placed around 300 seats/ 5500 NM. It might very well be more fuel efficient than a A350-900, if both have e.g. same PIP level RR engines.

        One has a bit wider seats for long flights, but I think the main difference between the 787-9 and A350-900 is that the latter, with 300 passengers & luggage, over a 6000NM flight, can move an additional 8t / 18k lbs more revenue cargo. That differences grows further if you depart from hot/high airports.

        Plus, you order a bigger variant if in the future the market out grows capacity.

  32. Aegean is in the market for a fleet renewal. Sure CS1/3’s could fit in well with some of the requirements for the region?

  33. There is obviously going to be a business jet version of the C series at some stage, what then?

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