A Bombardier official says the company is optimistic about the final outcome of a preliminary ruling on a trade complaint against Bombardier and its C Series passenger jet program.
The federal Commerce Department issued a preliminary ruling in favor of Boeing’s complaint to the International Trade Administration that Bombardier is “dumping” – selling its new, narrowbody passenger jet at below the cost of manufacturing – in the United States, threatening domestic commercial passenger jet manufacturers such as Boeing.
The favorable ruling for Boeing was expected, but not the steep duties Commerce proposed: 219.63 percent of the value of each C Series jet Bombardier sells into the U.S.
“The magnitude of the proposed duty is absurd and divorced from the reality about the financing of multibillion-dollar aircraft programs,” Bombardier said in a statement.
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Bombardier Inc. spokesman Simon Letendre said Wednesday there would be no immediate effect from the ruling on Bombardier or its operations, including its 1,600-employee site in Wichita.
“In terms of our operations we’ll continue to produce the C Series … and flight testing will continue in Wichita,” Letendre said.
In Wichita, the company manufactures Learjet business jets, flight tests all the company’s aircraft including the C Series, and services all manner of Bombardier business jets.
Boeing’s complaint stems from a 2016 Delta Air Lines order for 75 firm and 50 optional C Series CS100 and CS300 aircraft. Bombardier isn’t scheduled to begin delivery of those planes until early 2018.
Boeing alleged that Delta is receiving those planes at far below Bombardier’s cost, and that subsidies from the Canadian and Quebec governments enabled Bombardier to win the key order from a U.S. airline.
The rub is that Boeing no longer manufactures a plane that seats between 100 and 150 passengers. Boeing vice chairman Ray Conner said in testimony to the trade commission that it did compete for the Delta contract by offering a mix of used Embraer regional jets and Boeing 717s, the latter of which it hasn’t manufactured in a decade.
Still, in its complaint, Boeing asserts that the discounted deal represented a “material injury” to its business.
“The sale from Bombardier to Delta caused immediate economic harm,” said Bob Novick, an attorney for Boeing, in testimony before the International Trade Commission in May. “First, it’s significantly depressed prices and those depressed prices will affect future competitions. Second, it deprived Boeing of sales opportunities at Delta in the 100 to 150 seat market.”
A final determination by Commerce is not expected until Dec. 19. The International Trade Commission also has to make a final determination on Feb. 1, 2018. If either body rules the opposite of the other, then no tariffs, or “countervailing duties,” will be imposed.
“What we’re really focused on is a final decision from the International Trade Commission that is going to be on whether there was any harm to Boeing,” Letendre said. “On that point we are very confident the ITC will side with Bombardier.”
In a note to investors Tuesday, Cowen analyst Cai von Rumohr said because the Commerce Department typically rules on trade disputes involving “undifferentiated commodities, the Boeing case will be more complicated and likely more difficult to prove.”
Von Rumohr also wrote that the support of Delta as well as Spirit and JetBlue airlines should have some positive influence for Bombardier in a final decision.