No harm to Boeing, no threat to US aerospace, ITC finds

Feb,. 14, 2018: The US International Trade Commission’s 4-0 vote against Boeing in the Bombardier trade complaint last month found no harm was suffered by Boeing and no threat to the US aerospace industry occurred with the sale of 75 CS100s to Delta Air Lines.

Reuters first reported the issuance of the Determination. The public version wasn’t supposed to be issued until March 2. The parties received it Feb. 9.

Here is the 194-page decision: ITC Public Opinion Aircraft.

LNC hasn’t yet digested the document.

20 Comments on “No harm to Boeing, no threat to US aerospace, ITC finds

  1. I love it, a story that garnered more comments than any other has died a lonely death in just a couple of weeks. There appears nothing to say about it, literally.

    • Yes, although I’m not sure why the ITC didn’t address any CS300 options from Delta. Cross that bridge when it happens?

      I still think it is funny business to calculate a lowest allowable sale price. What’s fair? Tax breaks? Cheap rent on state land? Government covered health care or food for workers? Slippery slope.

      • Hello Ted and TransWorld.

        Regarding: “I’m not sure why the ITC didn’t address any CS300 options from Delta. Cross that bridge when it happens?”

        “Cross the bridge when (and if) it happens” it a pretty good paraphrase of footnote 237 on page 33 of USITC’s final report. See below for an excerpt from this footnote.

        “Delta’s potential future conversions to the CS300 are not a factor in our threat analysis. Further, Delta claims to not be interested in the CS300 and that its presence in the contract terms is a standard industry practice allowing for upgrades.”

        Regarding: “CS300 was not part of the protest.”

        This is not true, the CS300 is within the 100 to 150 seat scope of Boeing’s complaint, which was adopted by both USITA and USITC, and Boeing briefs included the argument that Delta’s claim that they had been looking only for aircraft smaller than the 737-700 and 737-7, was contradicted by Delta’ inclusion of CS300 option in their purchase contract.

        • Thank AP

          I keep going back and forth.

          It does seem that the CS300 does trim on 737-7 (by the time it come to issue)

          But it does not negate the 737-7 is not going to be anything other than a bit player for a few routes.

    • So, why did Boeing spend so much legal, political and reputational capital on this open and shut case?

      No damage to Boeing in the 100 to 150 seat market space, thereby allowing delivery of the CS100 and CS300 to any US airline from the Montreal, or Alabama production lines.

      All Boring has to do is create a better mouse trap – the essence of entrepreneurship! Seems to be sadly lacking in Chicago and Seattle.

      • The stupid part by Boeing was the ripple affect with Canada and a loss of 20 billion minimum fighter deal.

        Also the follow on negative assessment factor on all future submittals they might have put in.

        Well it was not open and shut to start with, they won the first ruling.

        This is listed as a surprise second ruling.

        No one took into account that it was a different political setup than the first committee.

        If I was ruling on a CS300 case, I would make the same logic.

        The 737/7 is not longer a significant market, someone that has a use for that compromised aircraft will buy it (high and hot and commonality) otherwise its off the table and the CS300 and or E series are the market.

  2. A quick read indicates that Boeing’s claim was primarily rejected because it really does not offer competitive aircraft. Because airlines select aircraft based on seat count, Boeing’s argument that the 737 range is a continuum did not get support from the ITC.

    A few key paragraphs:

    “We do not find, however, that Delta’s imports of CS100s from Canada will come at the domestic industry’s expense. As discussed in section V.B.3 above, Delta ordered 75 CS100s pursuant to a campaign to acquire 100- to 110-seat aircraft, and considered Boeing’s 126-seat 737-700 and the 138-seat 737 MAX 7 unsuitable for the mission profile in question.264 Had the CS100 not been available, Delta contends it would have satisfied its needs with used 717s and E190s.265 Because Boeing did not lose this sale to Delta, Delta’s imports of CS100s will not displace domestically produced 100- to 150-seat LCA from the U.S. market.

    Based on the record of the final phase of these investigations, we cannot conclude that Bombardier is likely to make additional sales in the imminent future at Boeing’s expense. We recognize that Bombardier has the ability and the incentive to make additional sales to U.S. purchasers.266 Bombardier’s projected excess capacity over the 2018-22 period gives it the ability to make sales to U.S. purchasers, with projected unfilled capacity of *** units in 2018, *** units in 2019, *** units in 2020, *** units in 2021, and *** units in 2022.267 Because Bombardier’s current orders fall *** short of its projected capacity, which reflects “very important” production ramp-up targets, Bombardier has the incentive to seek additional orders in the U.S. market in the imminent future.268 We also recognize that the United States is an attractive market due to its size and Bombardier’s familiarity with the market.269

    Nevertheless, we find insufficient evidence to conclude that Bombardier is likely to secure additional sales for importation of 100- to 150-seat LCA in the imminent future, or that any purchases of subject imports in the imminent future would likely be at Boeing’s expense. Contrary to Boeing’s claim that Bombardier derived commercial momentum in the U.S. market from its sale to Delta, Bombardier made no sales to U.S. purchasers between April 2016, when it made the sale to Delta, and April 2017, when Boeing filed the petitions, or thereafter.270 Indeed, the only offer made by Bombardier to a U.S. purchaser after its sale to Delta, ***, was rejected.271 ***.272

    Nor does the record show that any firms reportedly contemplating a purchase of 100- to 150-seat LCA will likely make a purchase in the imminent future. In its questionnaire response, Boeing reported its belief that *** will either purchase or launch campaigns to purchase 100- to 150-seat LCA within the next year or two.273 The record, however, does not establish that any of these airlines are likely to purchase 100- to 150-seat LCA in the imminent future. Because purchases of 100- to 150-seat LCA tend to be large and infrequent, as evidenced by ***, we cannot assume that these airlines will purchase 100- to 150-seat LCA in the imminent future in the absence of positive evidence that they are likely to do so.274

  3. Fro what I read, BBD can supply aircraft up to 150 seats.

    Looking at Air Baltic (145) and Korean (127) and Luft (145) that is below the 150 even though its nominally 160.

    So can they sell Delta the CS300 from Montreal without a new challenge?

    • Hello TransWorld,

      Regarding: “So can they sell Delta the CS300 from Montreal without a new challenge?”

      The present decision applies only to the facts and circumstances of Boeing’s particular complaint during the period of investigation for this particular complaint. Boeing, or any other domestic producer, is free to file a new complaint at any time in the future if they believe they have suffered material harm from dumping or disallowed subsidies during some new period of investigation. Boeing won on dumping and subsidies, they lost their case on the material injury issue.

      Regarding the CS300, USITC essentially said they were not going to consider the CS300 in threat analysis unless some US customer had actual purchase commitments, as opposed to purchase options for the CS300. See footnote 237 on page 33.

      “Delta’s potential future conversions to the CS300 are not a factor in our threat analysis. Further, Delta claims to not be interested in the CS300 and that its presence in the contract terms is a standard industry practice allowing for upgrades.”

      • Agreed, flamingly (sp intended) to get all the interlocking of thought process in the ruling.

  4. The CS100 and CS300 appear to be both lumped together as under 150 seats with the standard seating definitions.

    Ergo the CS300 is listed as 130.

    737/700 and 7 are also defined there, but harm done on non existent sales?

  5. So. why did Boeing spend so much legal, political and reputational capital on this open and shut case?

    No damage to Boeing in the 100 to 150 seat market space, thereby allowing delivery of the CS100 and CS300 to any US airline from the Montreal, or Alabama production lines.

    All Boring has to do is create a better mouse trap – the essence of entrepreneurship!

    • Boeing’s intent is to sell inferior airplanes at higher prices…they can do this by playing to Trump’s playbook that any sale lost to a superior product from a non-US competitor can only be because it is being dumped on the market…why bother competing on a level playing field when you’ve got a protectionist running the government. Now that Air Canada has received dumped Boeing 737’s in Canada, Bombardier should bring a case against Boeing for dumping planes in the Canadian market using the same moronic logic that Boeing uses….very sad when a once proud innovative company like Boeing has turned into an abusive monopolist unwilling to develop superior products.

      • Depends on what Canadians law says, this is a US law and no idea what Canada law says.

        As Canada does not have a direct competitor to low ball 737800/8 we are talking 700/7

        And so far WestJet wants a few for their route reasons that they say are perfect.

        No harm, done deal.

        How other countries laws go, different story.

        Only UK, Germany, France and Spain are in play here as they are the ones that can have any harm.

      • Hello Rational guy and TransWorld,

        For any country that it party to the WTO agreements, as Canada, EU countries, and the US all are, the definition of dumping according to the laws of that country must be essentially the same as the WTO’s definition, i.e. selling a product in an export market at prices that are lower those charged in the home market. See the excerpts below from a WTO web page. Disallowed subsidy (CVD) cases are considered separately from dumping cases. Do either of you have a source you can cite that indicates Canadian or European airlines are charged lower prices for 737’s than US airlines are?

        “What is dumping?

        Dumping is, in general, a situation of international price discrimination, where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country. Thus, in the simplest of cases, one identifies dumping simply by comparing prices in two markets. However, the situation is rarely, if ever, that simple, and in most cases it is necessary to undertake a series of complex analytical steps in order to determine the appropriate price in the market of the exporting country (known as the “normal value”) and the appropriate price in the market of the importing country (known as the “export price”) so as to be able to undertake an appropriate comparison.”

        “Two alternatives are provided for the determination of normal value if sales in the exporting country market are not an appropriate basis. These are (a) the price at which the product is sold to a third country; and (b) the “constructed value” of the product, which is calculated on the basis of the cost of production, plus selling, general, and administrative expenses, and profits. The Agreement contains detailed and specific rules for the determination of a constructed value, governing the information to be used in determining the amounts for costs, expenses, and profits, the allocation of these elements of constructed value to the specific product in question, and adjustments for particular situations such as start-up costs and non-recurring cost items.”

        https://www.wto.org/english/tratop_e/adp_e/adp_info_e.htm

    • Also of note, the ruling gave consideration to the fact that new airplane models are discounted heavily to get them into the marketplace. Hence, Bombardier will not sell the plane as cheaply to the next customer.

      • I think they said launch customers for that model.

        So a new customer could it initial major discount pricing to “try out”

        Follow up sales would cost more.

        They do have to make money on it.

        United looks to get back into the game so there could be an order there. Probably CS300.

  6. I see that the situation can still be seen as unfavorable for BBD and Delta:

    1. The conquest of a large and prestigious client did not prevent BBD from surrendering to the competitor (Airbus);

    2. Delta’s price would have been outrageously low, causing a significant loss;

    3. The possibility of a negative interpretation may prevent Delta from exercising the future purchase of the CS300, clearly the most competitive aircraft in cost per passenger;

    4. Concurrent airlines will be able to pick up the 195E2 and CS300 aircraft, gaining an advantage over Delta;

    5. It is hard to imagine how the shuddering relationship with Boeing could increase Delta’s competitiveness

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