Leeham News and Analysis
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Leeham News and Analysis
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Airbus 2017 in review and 2018 Outlook
Dec. 26, 2017, © Leeham Co.: It’s been a miserable year for Airbus.
Corruption investigations. Delayed deliveries due to engine issues for the A320neo. Delayed deliveries due to interior supplier issues for the A350. A year’s delay for
the A330neo due to engine development issues.
Production reductions and doubts over the future of the A380. Continued cash drains and write-offs for the A400M. Internal turmoil as CEO Tom Enders dramatically changes responsibilities and reporting lines.
Getting walloped by Boeing at the Paris and Dubai air shows, losing the wide-body order race in a landslide and losing the narrow-body order race.
Next year will have continued challenges.
US Commerce confirms tariff on C Series; parties await ‘harm’ determination
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Introduction
Analysis
Dec. 21, 2017, © Leeham Co.: To absolutely no surprise, the US Department of Commerce yesterday confirmed its preliminary finding that the Bombardier C Series is illegally subsidized and the company illegally “price dumped” the airplane into the US with the 2016 order for 75+50 to Delta Air Lines.
Bombardier told the trade commission this is a “partially assembled” aircraft: it has no interior, IFE, etc. It flies but it’s not a completed aircraft. Photo via Google images.
The DOC confirmed its proposed tariffs of nearly 300% on every aircraft or “partially assembled” aircraft.
The confirmation came the day after Boeing, Bombardier, Delta and other interested parties testified before the US International Trade Commission (ITC) over whether Boeing was harmed by the Delta deal and one with United Airlines that Boeing won.
If the ITC determines there was “harm” to Boeing, the tariffs go into effect upon importation. If the ITC finds no harm, the DOC’s case becomes moot and no tariff is imposed.
When Bombardier ships its wings from the Belfast plant to Canada–or to the US, once the Alabama plant is completed–does this qualify as a “partially completed” aircraft? Nobody at this stage knows. Artwork via Google images.
As LNC reported yesterday, Bombardier said its proposed final assembly line in Alabama will proceed regardless of the ITC ruling. BBD claims this FAL means the C Series becomes a US-produced product, immune to tariffs. Boeing claims the FAL’s purpose is to circumvent the tariffs and a circumvention tariff should be levied in that case.
Summary
- This case is “uncharted territory,” says a trade lawyer.
- What’s the definition of a “partially assembled” aircraft?
- Appeals expected on ITC outcome.
- Bombardier’s “fatal error.”
The Supersonic dilemma
By Bjorn Fehrm
December 20, 2017, ©. Leeham Co: The Super Sonic Transport (SST) has a new spring. Aerion announced its new partner Lockheed Martin Friday and Boom got a new investor in Japan Airlines (JAL) the week before.
The design of a supersonic transport aircraft is exciting and difficult. Yet it isn’t the key challenge. The engine is.
Alabama plant goes ahead regardless of outcome in trade case, says Bombardier
Dec. 19, 2017, © Leeham Co.: Bombardier will build a C Series final assembly line (FAL) regardless of the ruling from the US International Trade Commission on 
whether Boeing was harmed by the order from Delta Air Lines for 75 CS100s and options for 50 more.
This is what Bombardier officials told the ITC, under sworn testimony, in the “harm” hearing Monday, according to a transcript.
Boeing officials argued that the plans for a US FAL at Mobile was a feint and that the line wouldn’t be built, claiming it doesn’t make economic sense.
Delta, for its part, said it’s negotiating a contract revision with Bombardier to accept deliveries assembled only from the Mobile plant.
Boeing, Bombardier, Delta square off in new round of C Series trade dispute
Rob Dewer, VP of the C Series program, testified at the US International Trade Commission, Dec. 18 in the trade dispute following Boeing’s complaint.
Dec. 18, 2017: Boeing, Bombardier and Delta Air Lines squared off today in the new round of the trade dispute over Boeing claims BBD “dumped” the CS100 in an order with Delta Air Lines in 2016 in violation of anti-dumping and illegal subsidy laws.
The US Department of Commerce this fall, in a preliminary decision, ruled that a 300% set of tariffs should be levied on importation of the C Series. A final decision is due this week or next.
Delta was originally due to take delivery of the first of 75 orders next year. This has been postponed. Since the case started, BBD and Airbus struck a deal in which Airbus takes a 50.01% ownership stake in the C Series program. Bombardier plans to build a final assembly line in Mobile (AL), next to the Airbus A320 FAL, to deliver all aircraft ordered by US carriers from a US FAL.
Pontifications: Alabama loses key committee slot in US Senate following election
By Scott Hamilton
Dec. 18, 2017, © Leeham Co.: The special US Senate election last week in Alabama drew world attention of the showdown between Democrat Doug Jones and Republican Roy Moore.
Jones eked out a victory, becoming the first Democrat in 25 years to be elected to the Senate from Alabama.
I’m not going to get into all the issues, allegations and political implications of this race. Instead, a new item from Defense News caught my eye about the implications to the Alabama aerospace position in Congress.
Defense News’ headline is eye-catching: “Election leaves Alabama-shaped hole on Senate Armed Services Committee.”
Assessing the Delta-Airbus order
In an event timely to the Delta Air Lines order for 100+100 Airbus A3231neos, the airline just took delivery of the 50th A320 family member to be delivered from the Airbus Mobile (AL) plant. Source: Airbus.
By Scott Hamilton
Analysis
By Scott Hamilton
Dec. 15, 2017, © Leeham Co.: Was the choice by Delta Air Lines the big “blow” to Boeing many in the media are making it out to be?
It was a PR blow, yes. Even this was limited to those in the know.
But it wasn’t a material blow by any stretch.
Here’s why the hand-wringers are wrong.
Top Airbus officials scoffed at Leahy’s 50% market share goal
John Leahy, the chief operating officer-customers for Airbus, will retire in January after 33 years with the company. LNC’s editor, Scott Hamilton, has known Leahy for most of this time. This is the second of a series of reports derived from interviewing Leahy about his pending retirement. The first article appeared Nov. 28.
By Scott Hamilton
Dec. 14, 2017, © Leeham Co.: When John Leahy was promoted from his position as head of Airbus sales in North America and moved to headquarters in Toulouse,
John Leahy, COO-Customers Airbus. Reuters photo via Google images.
France, to assume the world-wide position as head of sales, he had an ambitious goal to achieve 50% market share by 2000.
He had a little over five years to go from low-double digits to this lofty goal.
The Airbus executive board initially laughed at him, Leahy recalls 22 years later.
History undermines Boeing claim of C Series impact: analysis
Analysis
Dec. 22, 2017, © Leeham Co.: Boeing blames a subsidized, price-dumped Bombardier C Series for the poor sales of the smallest member of the 737 family, the -700 and the 7 MAX, but history doesn’t support the claim.
The US Department of Commerce clearly ignored sales evidence that the 737-700 has been “done” for many years and the 737-7 MAX was an unattractive design
Boeing 737-7 MAX. Rendering via Google images.
that hasn’t been fixed with a redesign; airlines simply don’t want the airplane. Commerce levied tariffs amounting to 292% on C Series imported into the United States in the future.
The US International Trade Commission is currently awaiting post-hearing briefs from Dec. 18 testimony from Boeing, Bombardier, Delta Air Lines and other parties to determine whether Boeing suffered “harm” by the C Series deal with Delta and a near-miss with United Airlines.
If the ITC concludes Boeing suffered harm, the DOC tariffs stand. If not, the DOC action is moot. The loser at ITC is expected to appeal.
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Posted on December 22, 2017 by Scott Hamilton
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