Post-hearing briefs in Boeing-Bombardier trade case

Dec. 28, 2017, © Leeham Co.: It’s not often that levity appears in briefing papers in US government trade cases, but Delta Air Lines managed to draw LNC’s chuckle in its post-hearing brief in the Boeing-Bombardier trade case.

Dec. 27 was the deadline for Delta, Bombardier, Boeing and other interested parties to file post-hearing (Dec. 17) briefs and exhibits.

Delta’s introduction was novel to say the least.

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Bombardier’s bittersweet year

Dec. 28, 2017, © Leeham Co.: Two thousand seventeen had to be a bittersweet year for Bombardier.

Despite landing two good, blue-chip orders in 2016—Air Canada and Delta Air Lines—it hadn’t achieved the “commercial momentum” hoped for. At long last, Letters of Intent for 31+30 and 12+12 orders and options were announced this year for the CS100 and CS300 from an Unidentified European carrier and Egyptair respectively. Officials hope to firm these up by the end of this year.

No additional C Series orders were forthcoming for the rest of 2016 and none for 2017 when Boeing stepped up and puked all over the program.

In April, Boeing filed a trade complaint with the US government. Boeing would prevail with the US Department of Commerce, which preliminarily determined to levy a 300% tariff on each C Series imported into the US.

The US International Trade Commission took up the case Dec. 18; a decision is due next month. If ITC finds there was no harm to Boeing, the DOC decision goes away.

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Boeing’s outstanding year

Dec. 27, 2017, © Leeham Co.: Boeing had an outstanding year.

For the first time since 2013, it booked more sales of the 787 than it produced, the so-called book:bill ratio.

The bridge for the 777 Classic to the 777X was all but filled, a point of controversy for the past several years.

Total net orders through November were 633, almost twice that of Airbus through the same period.

This excludes orders announced at the Dubai Air Show which have yet to be booked.

The only lump of coal, coming just before Christmas: Airbus won a major deal from Delta Air Lines for 100 A321neos plus 100 options.

Other events propelled Boeing to an outstanding 2017.

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How Boeing, Embraer benefit from a combination


Dec. 26, 2017, © Leeham Co.: Potential synergies exist between Boeing and Embraer which may be important to development of the next new, clean-sheet airplane for both companies.

E195-E2, Embraer’s largest airliner. A Boeing combination could lead to a new family of larger jets.

Last week, both firms acknowledged a Wall Street Journal report that talks have been held about a combination of some kind. No details were reported about what this would look like. The Brazilian president was quick to say the government, which holds veto power over any merger or acquisition of Embraer, won’t approve any deal that means EMB ceases to be a Brazilian company.

Joint ventures or minority ownership structure appears possible.

What are the potential benefits for Boeing and Embraer?

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History undermines Boeing claim of C Series impact: 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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Holiday schedule

Dec. 22, 2017: By and large, LNC will be taking the period between today through Jan. 2 off for paywall and news reporting.

We will publish year-in-review and 2018 outlook articles throughout this period, which were prepared in advance.

There could be some action at the US Department of Commerce and the US International Trade Commission with respect to the Boeing-Bombardier complaints. There are some filing deadlines during this period that may warrant attention and reporting.

And, as always, if there is a major breaking news story requiring our reporting, we’ll be there.

Otherwise: Merry Christmas and Happy New Year.

US Commerce confirms tariff on C Series; parties await ‘harm’ determination

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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.

  • 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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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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Embraer’s improved E190-E2, analysis. Part 2

By Bjorn Fehrm

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December 18, 2017, © Leeham Co.: Embraer is expecting certification soon for the first E2 E-Jet, the E190-E2. We covered our analysis of the changes from the original E190 to the E190-E2 in Part 1.

We now continue with the economic analysis. To check where the E190-E2 stand versus its competition, we include the Bombardier CS100 in the analysis.

  • The E-Jet E2 introduces a new wing, new engines and an advanced Fly-By-Wire system. Jointly these bring the fuel consumption of the E-Jet on par with the latest competition.
  • Complementing the lower fuel costs are reduced maintenance costs. This is an important step to keep up with competing aircraft.
  • Heavier engines and a larger wing increase the Maximum Take-Off Weight (MTOW) of the E190-E2. This increases underway and landing fees. If the extra range of the E2 is not needed, the higher fees can be avoided with the selection of a lower MTOW version.

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