Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Pontifications: No sale for Boeing in Bombardier complaint
By Scott Hamilton
May 29, 2017, © Leeham Co.: I’m having a really hard time buying into Boeing’s arguments in the complaint about alleged price dumping by Bombardier in its deal with Delta Air Lines.
I say this despite the fact that Boeing lawyers at least four times directly and twice indirectly cited “trade publication” Leeham News and Comment in support of its case. While flattering to be used as an authoritative source, Boeing’s testimony doesn’t support the claim that Bombardier acted improperly, in my view (nor that of AirInsight, which also reviewed the testimony). There are, of course, scads of exhibits and confidential information not available for public review that could, if available for public dissemination, might change opinion.
The thing is, Boeing is known among journalists and analysts for its occasional descent into hyperbole. Or, as one reporter I talked to put it, this is an example of Cirque du Soleil acrobatics. It is with some amusement that I note Cirque du Soleil is, like Bombardier, headquartered in Montreal.
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Delta shoots down Boeing’s CSeries dumping claim
May 23, 2017, © Leeham Co.: Delta Air Lines shot down Boeing’s claim that Bombardier “dumped” the CSeries order, in testimony last week before the US International Trade Commission.
Boeing filed a complaint April 27 that Bombardier sold the CS100 to Delta for $19.6m, well below its production cost, a price that constitutes “dumping.”
Bombardier CS100.
Boeing seeks tariffs of nearly 80% on the importation of the airplanes to Delta.
Boeing’s complaint is that the Delta deal made it impossible for Boeing to offer the 737-700 at a competitive price.
Is Bombardier a stalking horse in Boeing complaint?
Analysis
May 17, 2017 © Leeham Co.: Is Boeing’s complaint against Bombardier over the Delta
Delta Air Lines CS100.
Air Lines CSeries deal merely a stalking horse for future action against Airbus?
This is the theory of one person LNC spoke with on the sidelines Tuesday at the annual Airfinance Journal Conference in New York.
Testimony in the Bombardier case begins this week.
Pontifications: Bombardier’s challenges beyond Boeing complaint
By Scott Hamilton
May 8, 2017, © Leeham Co.: The fallout and speculation continues after Boeing filed a complaint April 27 over Bombardier’s deal for 75+50 CSeries with Delta Air Lines.
The complaint was filed with the US government and the International Trade Commission.
Our stories are here, here and here.
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Pontifications: Boeing complaint against Bombardier no surprise
By Scott Hamilton
May 1, 2017, © Leeham Co.: The Boeing Co. filed a complaint with the US Commerce Department and the International Trade Commission charging the Bombardier “dumping” the CSeries in the US to the detriment of Boeing and its 737.
Brazil, on behalf of Embraer, another competitor to Bombardier and the CSeries, previously filed a complaint with the World Trade Organization over similar charges that the Canadian and Quebec governments improperly subsidized BBD when they bailed out Bombardier for the CSeries.
The federal and provincial governments provided about US$1.5bn in investments in a new company that segregated the CSeries from Bombardier. A quasi-government pension fund took an investment in BBD’s rail division, also for more than US$1bn.
Neither move is a surprise.
At the time, the Canadian investments in Bombardier and the CSeries pretty much transformed the CSeries into a government program, managed by BBD.
Boeing targets Bombardier for “dumping” CSeries in US
April 27, 2017, © Leeham Co.: The Boeing Co. late today filed a petition with the US government, charging Bombardier with “dumping” the CSeries in its deal last year with Delta Air Lines for 75+50 CS100s. Delta can convert the order to the larger CS300, which competes with Boeing’s 737-700/7 MAX.
Boeing claims Bombardier sold the airplanes for about $20m, against a cost to build the airplanes of about $33m.
Delta Air Lines ordered the Bombardier CS100. Boeing claims the low price constitutes “dumping,” as defined in regulations.
The 1,039 page complaint cites as one of its references Leeham News and Comment. A redacted, 147 page version may be downloaded here: BBD Complaint 042717.
A Wall Street Journal article and Financial Times article summarize the complaint.
Boeing’s press statement is below the jump.
Delta Air Lines competition
Boeing competed in the Delta competition, offering a combination of used Boeing 717s and, LNC believes, new 737-700s. The fully amortized -700s can be offered at a very low price, compared with the new 737-7 MAX (which at that time was the 125-seat, two-class version, not the 149-seat configuration it has since become). Boeing beat Bombardier in a hot contest at United Airlines, predating the Delta deal, by offering the -700 at a rock-bottom price believed to be in the $24m range, a price Bombardier could not then match. (A United official denied the $24m price to LNC, but others cited this number.)
Since the United deal, Bombardier received investments from the Quebec provincial and federal governments specifically tied to the CSeries, and more than US$1bn from a quasi-government pension fund for a stake in Bombardier’s rail unit. The investments are widely considered to be bailouts that prevented Bombardier from declaring bankruptcy due to cost overruns and delays from the CSeries and Global corporate jet development programs.
Bombardier took a US$500m “onerous contract charge” in connection with the Delta order and one from Air Canada.
Rival Embraer immediately cried foul and alleged the government monies violate World Trade Organization rules. Bombardier says the financial structures comply with WTO rules. Brazil, at the behest of Embraer, filed a formal complaint with the WTO. Boeing, while not filing its own WTO complaint, joined in the action, according to press reports at the time.
Boeing’s action today so far is limited with the US government.
CSeries wrapping up London City certification
By Bjorn Fehrm
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Introduction
March 27, 2017, © Leeham Co.: Bombardier (BBD) CSeries did the last flights of a six-month London City Airport certification last week. The CS100, when certified for London City, will more than double the available payload/range out of the airport. In fact, it can reach New York direct with 40 business passengers on-board, something it demonstrated when it left the airport for JFK on the Saturday.
Figure 1. CS100 taking off for a validation flight at London City Airport. Source: Bombardier.
The aircraft was designed for this performance level from the outset. By designing the CSeries with engines and aerodynamics for the larger CS300, the smaller CS100 became a stellar take-off performer, providing short-field capabilities for London City and other urban airports.
Despite the design for London City, it took Bombardier six months to certify CS100 for the airport. We spoke to CSeries VP Rob Dewar about the challenges and the changes needed to the aircraft to meet the demands of London City.
Summary:
- CS100 doubles the payload-range performance out of London City Airport (LCY)
- Validation flights by SWISS pilots in the week confirmed CSeries suitability for LCY. SWISS should know; it has flown the CSeries predecessor (BAE 146) for years into London City.
- The adaptation for the airport has not degraded normal performance. CSeries performance is better than announced and brochure performance will soon see its second upgrade.
- To finish of the validation flights, BBD flew the difficult westward leg London City-New York JFK direct, with a payload representing 40 passengers in business class.
CDB Leasing aims for 500-600 aircraft portfolio
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Introduction
March 16, 2017, © Leeham Co.: China’s evolving commercial aerospace and aviation industry has high-profile companies such as AVIC and COMAC, and its expanding supplier based, combined with joint ventures with Western companies is well known.
Less well known is the growth in the aircraft leasing business. Increasingly, Chinese lessors are showing up on the order lists of the Big Four aircraft manufacturers. Still, there remains a bit of a mystery about the lessors and dynamics within China.
LNC spoke with the newly appointed CEO of CDB Leasing during the ISTAT conference last week in San Diego.
Peter Chang has been in the Western leasing business for decades, employed in key positions with Aviation Capital Group, ILFC and Aircastle—usually with responsibility for China.
He was named CEO of CDB in December, a move that was announced during the January Dublin conferences of Airlines Economics and Airfinance Journal. More key personnel announcements were made during ISTAT.
In an exclusive interview, LNC asked Chang about the origins of CDB, other Chinese lessors, the current policy of restricting flow of Chinese cash outside the country, the Boeing 737-10 and the Bombardier CSeries.
Here is this interview.
Boeing-Bombardier complaint could affect competition in coming Delta neo-MAX RFP
Commentary
May 1, 2017, © Leeham Co.: Boeing’s complaint against Bombardier’s CSeries transaction with Delta Air Lines, and a request for millions of dollars in antidumping and penalties might be coming at a bad time.
Was the Boeing 787 program marked by “launch customer pricing” or “dumping”? This may depend on program or unit accounting. Boeing photo.
“Boeing requests that the Department initiate an antidumping investigation and impose antidumping duties on Aircraft from Canada in an amount sufficient to offset unfair pricing above.”
If Boeing is successful in its request of the US government and International Trade Commission to impose duties before the first CS100 is delivered to Delta next year, the cost of the airplane will balloon from the $19.6m Boeing calculates (and which BBD denies) to at least $33m.
It’s unclear from the complaint who would pay this penalty—Bombardier, maintaining the price to Delta, or would Delta have to pay the reset price?
Regardless, this kerfuffle can’t be welcome news to Delta, which already has a ruffled relationship with Boeing due to its opposition to the ExIm Bank and orders for Airbus aircraft.
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24 Comments
Posted on May 1, 2017 by Scott Hamilton
Airbus, Boeing, Bombardier, CFM, CSeries, Delta Air Lines, Embraer, Leeham News and Comment, Pratt & Whitney
737 MAX, 737-10, 737-900ER, 787, 7M7, A320ceo, A320NEO, A321ceo, Airbus, Boeing, Bombardier, CFM, CS100, CSeries, Embraer, LEAP, Pratt & Whitney