Monday, January 29, 2018

A Pyrrhic Victory for Bombardier

          By Brian Orlotti

The US International Trade Commission (ITC) has unanimously ruled that the C-Series airliners which Montreal, PQ based Bombardier Aerospace intends to sell to Atlanta, GA based Delta Air Lines do not "injure US industry," despite accusations of “price-dumping” from rival Chicago, IL based Boeing Company.

While Bombardier executives, Quebec politicians, aerospace industry officials and unions are declaring victory, other signs point to it being a pyrrhic one for Canadian aerospace workers.

As outlined in the January 29th, 2018 Aviation Week post, "C Series US Assembly Line Still Planned Despite Trade Victory," the original complaint by Boeing to the US Department of Commerce had been made in April 2017. Boeing had argued that the Canadian and British governments had unfairly subsidized the C-series’ development, allowing Bombardier to sell it at far below cost.

In response, the Department of Commerce imposed a 292% per cent tariff on U.S. imports of C-Series aircraft.

The ruling triggered political shock waves in both Canada and the United Kingdom, both home to large Bombardier facilities and thousands of its employees. Bombardier and the Quebec government vehemently protested the decision and the Trudeau government threatened to retaliate by cancelling its planned purchase of 18 Boeing FA-18E/F Super Hornet fighters.

While many industry watchers considered the ruling Bombardier’s death knell, the company struck back by allying with European aerospace powerhouse Toulouse, France based Airbus SE,  a European multinational aerospace powerhouse.

As outlined in the October 16th, 2017 post, "A Game Changer for Canada: Airbus Takes a Majority Stake in Bombardier's C Series Program," in exchange for Airbus acquiring a virtual majority (50%) stake in the company, Bombardier would gain access to Airbus’ global procurement, sales, marketing and customer support networks. Airbus, in turn, would greatly expand its Canadian presence, gaining greater access to civilian and government contracts.

Bombardier then, in an attempt to circumvent the tariffs, set about to establish a US assembly line for the CS-100 in Mobile, Alabama. Delta Airlines had stated that it would not take delivery of CS100s from the Canadian line in Mirabel, QC but instead wait for aircraft assembled on the US line, expected to be operational by 2019.

Although the threat of the import tariff has now been lifted, Bombardier says it is moving forward with plans to deliver US-assembled aircraft to US airlines “as soon as possible, following regulatory approvals and the completion of the Alabama final assembly line.”

Delta Airlines has welcomed the ITC decision, but has not indicated whether it will take delivery of CS100s from the Canadian line beginning in April as originally planned.

In addition, and as outlined in the January 15th, 2018 Skies magazine post, "Bombardier considering Downsview sale," Bombardier has announced that it is considering selling its massive aircraft manufacturing facility in Downsview, Toronto as part of its five-year turnaround plan, threatening some 3,500 jobs.

The Downsview facility is dedicated to manufacturing the Q400 turboprop and Global business jets.

Given the expected shedding of even more Canadian jobs to come, and uncertainty over Bombardier’s rival’s next moves, celebrations may be premature.

So while Bombardier’s reprieve may be a good thing for Bombardier, but is it good for Canada?
Brian Orlotti.

Brian Orlotti is a regular contributor to the Commercial Space blog.

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