Dec. 4, 2017, © Leeham Co.: The Delta Air Lines management decision for an order for 100 Airbus A321neos or Boeing 737 MAXes, plus an equal number of options, is expected this week. A decision by the Board of Directors is expected next week.
Competition between the two companies was heated. Commercial terms were aggressive. Airbus and Boeing each want this deal badly. An Airbus win speaks for itself. For Boeing, a MAX order would give a boost to the MAX 10. A blocking move on Airbus is desired. For Boeing, a win would be especially meaningful.
Relations between Boeing and Delta are notoriously strained. These were exacerbated by Boeing’s complaint with the US government over the Bombardier C Series order, in which Boeing alleged price dumping and illegal subsidies. To no surprise, the Trump-led Department of Commerce found in favor of Boeing on both.
When Boeing filed the complaint, many—including this writer—believed Boeing’s complaint so angered Delta that it made a tilt toward Airbus a slam-dunk.
But the Delta CEO, and others within Delta, said there would be a fair and open competition. By all accounts, it has been, at least on the numbers.
The CEO said there were other factors to consider, too. The C Series issue, of course, is one of them. So is, I’m told, a bit of a public relations issue. Delta is building up a big hub in Seattle in competition with home-town airline Alaska.
Seattle is also the home town for Boeing Commercial Airplanes and production of the 737. There is at least some concern an Airbus selection might cause some bad publicity and passenger avoidance.
(This might be mitigated by the fact Alaska will be operating Airbus A320s and A321s for at least the next 7-12 years because of its acquisition of Virgin America. Aircraft lease terms extend this long.)
Where does the Boeing trade complaint fall in all this?
This is a good question.
You can bet that if Boeing loses, the trade complaint will be pursued with vigor. But what happens if Boeing wins?
Did Boeing offer to drop the complaint as a carrot to win the deal?
Did Delta demand Boeing drop the complaint as a hammer to award the deal?
We may never know, but if Boeing wins and the trade complaint goes away, one can draw his own conclusions that there was a nexus.
“Since Boeing, in effect, is a one-company US industry, it controls whether the case goes forward or not,” says William Perry, a trade dispute attorney with the Seattle law firm of Harris Bricken. “If it withdraws the complaint, the case will end.”
If the anti-dumping and countervailing duties orders are issued, Boeing “can also inform the Commerce Department that it is no longer interested in the orders and the orders will end,” he told me.
“If there are more companies in the US industry, then it gets complicated, but in the Bombardier case, Boeing, as the sole US producer, drives the boat,” Perry said.