Bombardier jet takes hit
US slaps 220% import duties on C Series plane
MONTREAL: Bombardier Inc’s allnew jetliner, which cost at least US$6bil (RM25.3bil) to develop, just got harder to sell in the world’s largest aviation market.
The US Commerce Department slapped import duties of 220% on the C Series plane Tuesday, citing improper subsidies after a complaint by Boeing Co. The preliminary determination threatens to upend Bombardier’s planned deliveries next year to Delta Air Lines Inc, which ordered at least 75 jets with a list value of more than US$5bil.
The US penalties create a new hurdle for Bombardier chief executive officer Alain Bellemare, who is trying to turn the company around after the C Series came in more than two years late and about US$2bil over budget. With the exception of a two-aircraft order from Air Tanzania in December, Bombardier hasn’t booked a major sale of C Series jets since the Delta deal in April 2016.
“We believe the key area of concern will be what Delta does with its order,” Walter Spracklin, an analyst at RBC Capital Markets, said in a note to clients.
“Moreover, the impact on other US-based airlines will also be in question under such a ruling.”
The US government’s decision on the aircraft added to the pressure on Bombardier. Separately, the company missed out on a potential merger of its rail unit with that of Siemens AG. Hours before the Commerce Department’s announcement, Siemens and France’s Alstom SA agreed to join their rail businesses in a deal that gives rise to a European transportation giant better able to counter competition from China.
The Bombardier-Boeing spat is roiling trade relations just as the US tries to renegotiate the North American Free Trade Agreement with Canada and Mexico. “Even our closest allies must play by the rules,” US Commerce Secretary Wilbur Ross said in announcing the decision on Canadian jets with 100 to 150 seats. Canada “strongly disagrees” with the US probes into its aerospace industry, Foreign Affairs Minister Chrystia Freeland said in a statement.
“This is clearly aimed at eliminating Bombardier’s C Series aircraft from the US market,” said Freeland, who was scheduled to dine with US Trade Representative Robert Lighthizer in Ottawa on Tuesday during the third round of Nafta talks.
The import duties could be reversed by the US International Trade Commission (USITC) if the trade tribunal determines that Boeing wasn’t injured by Bombardier’s jet programme. That decision is expected to be made next year.
Prime Minister Justin Trudeau has said the Canadian government won’t buy Boeing military jets unless the company drops its case against Bombardier.
The Montreal-based manufacturer said Boeing was “seeking to use a skewed process to stifle competition and prevent US airlines and their passengers from benefiting from the C Series”. The aircraft entered commercial service last year in Europe.
“The magnitude of the proposed duty is absurd and divorced from the reality about the financing of multibillion-dollar aircraft programmes,” Bombardier said in a statement.
Boeing has accused Bombardier of selling its biggest jet in the US at less than fair value, while benefiting from unfair government subsidies in Canada.
The US planemaker has argued that the C Series wouldn’t exist without the assistance, noting that Bombardier received money from the Canadian and Quebec governments to develop the aircraft and further aid from both in recent years to shore up the company’s finances.
“TheUSDepartmentofCommerce today affirmed that Bombardier has taken massive illegal subsidies in violation of existing trade law,” Boeing said in an emailed statement. The process is part of “the longstanding, transparent course for examining and addressing situations where products are ‘ dumped’ into the United States at below-cost prices for the purposes of gaining market share.”
The Commerce Department is expected to decide by Oct 4 whether to also impose anti-dumping duties on the C Series. On that matter, Boeing is seeking duties of about 80%.
Delta noted the decision is “preliminary” and said the real ruling will come early next year, when the International Trade Commission makes a final determination of whether any US manufacturer will be harmed by imports of the plane. In June, the ITC made a preliminary ruling that Boeing, maker of the 737 narrow-body, may have been harmed by Bombardier.
“We are confident the USITC will conclude that no US manufacturer is at risk because neither Boeing nor any other US manufacturer makes any 100-110 seat aircraft that competes with the CS100,” Delta said in a statement. — Bloomberg