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.”

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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.

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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.

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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.

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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.”

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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.

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It’s official: Delta orders A321neo with GTF engine

Dec. 14, 2017: After a wave of news stories yesterday, today’s it’s official: Delta Air Lines ordered 100 Airbus A321neos and optioned 100 more.

Deliveries begin in 2020.

The airplane will be equipped with the Pratt & Whitney GTF and Delta Tech Ops will be a third-party maintenance provider.

Delta’s investor day begins in 20 minutes. Questions about the competition with Boeing, Boeing’s trade complaint against Bombardier for the Delta C Series order and related issues are certain.

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.

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Singapore Airline’s new A380s feature improved cabins

By Bjorn Fehrm

December 13, 2017, ©. Leeham Co, Toulouse: Singapore Airlines took delivery of its first new generation A380 today in Toulouse. The aircraft features new cabins in all four classes, First-, Business-, Premium economy- and Economy class.

The aircraft is the first of five newly ordered A380. In addition, 14 of the present A380s will be upgraded to the new cabin standard.

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Delta Airbus deal means Bombardier trade complaint continues

Dec. 13, 2017, © Leeham Co.: Delta Air Lines chose to place its long-awaited order for the re-engined single-aisle airplanes with Airbus for the A321neo, powered by Pratt & Whitney GTF engines, according to an exclusive report from CNN’s Jon Ostrower.

The Delta Board of Directors was expected to decide today, announcing its decision either today or tomorrow at the investors’ day event.

If confirmed, the deal is a major loss for Boeing, which hoped to sell the 737-10 MAX to Delta. A win would have been a huge boost for the MAX 10.

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