Boeing-Inspired Anti-Dumping Whacks Bombardier’s C-Series Jet Deal
Do we have a case of genuine material injury to U.S. jobs or do we have a case of commercial shenanigans in Boeing’s application to the U.S. Department of Commerce reported imposition of triple digit duties on Bombardier’s sale of new C-Series jets to number two U.S. airline Delta Air Lines?
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Boeing had called for countervailing duties of 79.41% to offset what it described as harmful Canadian subsidies to Bombardier. It also identified a “dumping margin” of 80.5%, based on the unpublished prices at which it claims Bombardier sold the C-Series planes to Delta, for a combined border charge of just under 160% on the Bombardier jets.
Delta, placed an order for 75 of the 100- to 150-seat single aisle C-Series jets some 18 months ago, according to Reuters. While the list price starts at $79.5 million, new project early sales typically enjoy substantial discounts to generate interest in the program and generate an early start to production. In that respect, initial launch discounts are common in the airline industry — whether they constitute dumping is debatable. It may be simplistic, but if all airlines do it then no one airline should be penalized.
Boeing claims that Delta received the planes for $20 million each, well below an estimated cost of $33 million and below what Bombardier charges in Canada. So far inconclusive, the numbers suggest — possibly, if correct — extreme discounts and some action may be valid.
However, dumping prices are usually imposed on products imported into a country. In this case, Delta’s order is to be manufactured on a new assembly line at Airbus’ factory in Mobile, Alabama, technically making it a U.S. airplane.
But this assembly option has arisen only in recent months following Airbus’ surprise move last October buying a majority stake in the struggling C-Series program.
At root, this could be a large part of the issue.
Boeing must see Airbus’ move onto its home turf as a significant threat, particularly as Boeing does not have a product line to counter the C-Series sector. Bloomberg states the C-Series is smaller than most variants of the Boeing 737 Max, the upgraded version of Boeing’s stalwart regional airliner. The same goes for most of Airbus’ A320 family of jets, which Bloomberg observes debuted some 10 years later in the late 1980s.
Both the C-Series and the A320neo, the newest version of Airbus’ single-aisle workhorse, are powered by the geared turbofan engine made by Pratt & Whitney, a division of United Technologies Corp, further enhancing the C-Series’ U.S. credentials. Although the C-Series has struggled since its launch, the sector has considerable potential, particularly in Asia, both Airbus and Boeing recognize they need an offering in the sector.
Boeing, for its part, is actively pursuing a merger with Brazil’s Embraer, a move the Brazilian government has under review but seems broadly supportive of (providing Embraer remains an independent entity).
A close tie-up — or better still, some form of merger — with Embraer would give Boeing its place in the 100- to 150-seat single aisle regional jet market and allow it to go head to head with Airbus and Bombardier. So here, in all probability, is the crux of the issue. Boeing cannot show material damage from C-Series sales to Delta, as it does not currently have a product seriously in that sector, but if their merger with Embraer goes ahead with the E-Jet E2 series they will be fighting for the same market, in the U.S. and elsewhere. If they can tie Airbus-Bombardier up in legal knots long enough over the Delta deal by the time appeals are heard, they could have scooped up the stalled Delta deal and others that may arise in the meantime.
Ironically, Boeing could be said to be using protectionist legal instruments to steer business to a Brazilian manufacturer at the expense of American jobs in Alabama.
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The case may not be clear against Boeing, but there is certainly the whiff of commercial motivation rather than genuine anti-dumping concerns.
what does the sale of Embraer mean for Boeing stock?