Delta sticks with Bombardier jet order, vows not to pay duty
Delta Air Lines Inc.’s chief executive officer says the company will not pay the 300-per-cent tariff to import 75 Bombardier Inc. CSeries jets, and still plans on going through with the aircraft order.
“We intend to take the aircraft,” chief executive Edward Bastian told analysts on a quarterly results conference call on Wednesday, adding that there may be a delay in aircraft deliveries, which are scheduled to begin in the spring.
“We think the aircraft needs to come to market, we believe it will come to market and we believe Delta will get it at the agreed contractual price. We’re not going to be forced to pay tariffs or do anything of the ilk so there should not be any concern on our investors minds in that regard.”
The U.S. Department of Commerce’s decision to hit Bombardier with a 220-per-cent preliminary countervailing duty and 80-percent preliminary anti-dumping duty on all imports of the CSeries aircraft has left the viability of Delta’s order for 75 jets — the largest order for the aircraft — in question.
Delta’s order for the CSeries jets is at the heart of the trade complaint launched by the Boeing Co., alleging that massive government subsidies have allowed Bombardier to dump the aircraft into the U.S. market at an “absurdly low” cost.
Analysts, as well as Bombardier and Delta, have repeatedly stressed that the duties imposed by the Commerce Department are preliminary and that the final decision by the U.S. International Trade Commission will be the most significant step in this case. Boeing will have to prove to the ITC that it was harmed as a result of the CSeries sale.
Bastian said Delta has various other plans in place should the final determination rule in Boeing’s favour, but did not elaborate. Still, he remains doubtful that Boeing will be able to show the ITC — which requires a higher burden of proof — that it suffered harm, when no U.S. manufacturer offers a product that competes with the CSeries.
“When we went through the (request for proposals) and selected the CSeries, Boeing competed very hard for the order, except they were competing not with their own product,” he said, pointing to Boeing ’s offer of used Brazilian Embraer E-190 jets coming from a trade-in with Air Canada.
“As you look through this and try to see how exactly a harm case is going to be developed, particularly to justify the type of tariffs that are being contemplated, to us it’s unrealistic and a bit nonsensical.”
Richard Aboulafia, a U.S.-based aviation analyst, said if the ITC does end up ruling in Boeing’s favour, Delta would likely have to rely on a challenge at the World Trade Organization should it still want to pursue the CSeries order.
“I think Delta would have to count on Canada doing the heavy lifting at the WTO because, obviously, they can’t take the planes until this is resolved,” Aboulafia said.
Meanwhile, Boeing announced Tuesday that it launched a public relations campaign to raise awareness in Canada of the company’s “significant presence and annual impact on the nation’s economy.” The company said in a news release that the public outreach campaign will be run on traditional and digital media outlets. asiekierska@postmedia.com Twitter.com/alicjawithaj