Friday , October 7 2022

Boeing's commercial dispute with Canada ends with Airbus, Alabama as the winner



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This week, a new $ 300 million airbus assembly plant broke ground in Mobile, Alabama and is the culmination of a commercial conflict that Boeing launched with Canada nearly two years ago.

The controversy initiated by a commercial complaint filed by Boeing in April 2017 alleged that the Canadian government subsidies were used to damage its business in the US.

Here's how we got here

In 2004, Canadian Bombardier, the manufacturer of private jets and a small regional-line aircraft, decided it was time to jump into the big leagues. It was time to build a reaction jet composed of advanced coal to compete against the Airbus-Boeing duopoly. More specifically, the Canadian aircraft, called Bombardier C Series, would compete against the smaller variants of the Airbus A320 and Boeing 737 cash cow.

During the next decade, the story about Bombardier's C series program was one of the cost overruns, developmental delays and slow sales. Bombardier reported a loss of $ 4.9 billion during the third quarter of 2015, including a $ 4.400 million dollar fee largely associated with the C series program.

At the time of the announcement, Chief Executive Officer of Bombardier, Alain Bellemare, admitted that his company was "overwhelmed" by the many development programs they had on their plate.

An economically weakened bomber ended up taking a $ 1 million bailout from the provincial government of Quebec. In return, provincial taxpayers assumed a 49.5% stake in the C. series.

Although the first C Series prototype had hit the air in 2013 and soon gained a critical success for its performance capabilities, Bombardier was still struggling to find an important airline willing to buy in bulk. Especially an important American airline.

Bombardier

In early 2016, Bombardier and Boeing headed in a competition for United Airlines orders. Boeing won. United ordered 40 Boeing 737-700 in January this year and an additional 25 in March. An industry analyst told Business Insider that Boeing gave United a 70% discount in the March order as a means to close Bombardier.

The futility of Bombardier would finally end in April 2016 when the band that he had searched for a long time landed; an order for the 75 rays of the C series of Delta Air Lines.

It is the accredited business of saving the C series program and it is the agreement that Boeing set in the war way.

The commercial dispute of Boeing

In April 2017, Boeing filed a complaint with the US Department of Commerce and the US International Trade Commission alleging that the Order of the C Series of the Delta was only possible at abnormally low prices supported by Canadian government grants.

The US International Trade Commission agreed and in September this year it recommended a tariff of 219.63%. A week later, the Department of Commerce added another 79.82% rate.

In total, Bombardier and Delta faced a 299.45% rate on any C-series aircraft built by Canada exported to the U.S..

Delta's first Airbus A220, formerly known as the C. Series.
Airbus

Bombardier responded in a statement, calling on the government "absurd and divorced from reality." The aircraft manufacturer based in Montreal also left Boeing, accusing him of manipulating US commercial laws to curb competition.

Bombardier and Delta argued that the Boeing business could not have been hurt by the deal simply because Boeing did not actually have a similar product in capacity in Series C.

"Boeing does not have a product manufactured in America, because it canceled the production of its only aircraft in this size range: 717 – more than 10 years ago," said Delta in a statement at that time.

According to the Atlanta-based airline, the only alternative proposed by Boeing at the CS100 was to offer a lot of Brazilian Embraer E190 regional aircraft in the second hand.

Faced with the possibility of losing the most important order in the history of the C series program, Bombardier became the greatest enemy of Boeing, Airbus.

Read more: The CEO of Airbus reveals why the company will be protected during an economic crisis.

Less than a month after the tariff announcement, Bombardier delivered 50.01% of its airplane program to Airbus with initial cash investment unfinished by the European aviation giant.

As part of the deal, Airbus announced that the C series would also be produced at its assembly plant in Mobile, Alabama.

Fortunately for Bombardier, the US International Trade Commission reached the proposed rate in January 2018, ending the dispute.

The factory in Alabama

In the summer of 2018, the Bombardier C Series was no longer. It was recognized as the Airbus A220 and it was folded into the Airbus product line.

Airbus and Bombardier executives along with the Governor of Alabama break ground to the new A220 mobile assembly plant.
Airbus

Although many saw the proposal to build Canadian jets in Alabama as a stratagem to influence trade regulators. Indeed, Airbus was seriously ill.

Quickly until January 2019, the CEO of Airbus and Bombardier, along with Governor Ivey of Alabama, focused on a sunny Wednesday to break the final assembly line A220 to Mobile.

The $ 300 million facility will mount airplanes destined for American customers of A220 such as Delta and JetBlue. It is expected that the first installment of the mobile factory will be in 2020.

It is also the last chapter of the long multinational saga that is Bombardier C.

Stay tuned for more.

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