Shock and awe at Bombardier

Avatar for Lisa GordonBy Lisa Gordon | January 26, 2018

Estimated reading time 4 minutes, 51 seconds.

In a move that surprised industry analysts, the U.S. International Trade Commission (USITC) has sided with Bombardier Inc., rejecting Boeing’s injury claim relating to the sale of Bombardier C Series jets in the United States.

In a surprise decision, the U.S. International Trade Commission has overturned duties of close to 300 per cent on Bombardier’s CS100 aircraft. Bombardier Photo

The decision was released on Jan. 26 following a unanimous vote by the four-member USITC panel in Washington, D.C. It means that punitive duties of 292 per cent, as previously assessed by the U.S. Department of Commerce, will not be enforced on jets imported from Canada to customers south of the border.

Bombardier stock prices rose by nearly 20 per cent after the decision was announced.

Bombardier and Airbus executives met in Montreal earlier today, prior to the U.S. International Trade Commission’s decision. Bombardier Photo

A written opinion detailing the reasoning behind the USITC vote is due to the Department of Commerce by Feb. 9, according to Peg O’Laughlin, public affairs officer for the USITC. Following a redaction process to remove any proprietary business information, a public version is expected to be released by March 2.

Boeing launched a trade complaint against Bombardier last year, claiming that the Canadian and Quebec governments unfairly subsidized the C Series and then sold it to U.S. operator Delta Air Lines at “absurdly low” prices.

Boeing said it was “disappointed” by the USITC decision and that it would review the panel’s conclusions once released. Boeing Photo

Last December, the U.S. Commerce Department subsequently affirmed final determinations in the investigation, assessing a duty of nearly 300 per cent on each C Series sold in the U.S. The issue quickly became a brewing trade crisis set against the backdrop of North American Free Trade Agreement (NAFTA) renegotiation talks, which are currently underway.

However, it is the outcome of today’s USITC vote that determines whether the taxes will be enforced. The panel’s four members — all pre-Trump appointees — and their unanimous vote have ensured that no antidumping duty or countervailing duty orders will now be issued.

“Today’s decision is a victory for innovation, competition, and the rule of law,” said Bombardier in a statement published shortly after the decision. “It is also a victory for U.S. airlines and the U.S. travelling public. The C Series is the most innovative and efficient new aircraft in a generation. Its development and production represent thousands of jobs in the United States, Canada, and the United Kingdom.

Bombardier C Series aircraft have been praised by a list of customers that will almost certainly grow in the coming months, especially given Airbus’ involvement in the program. Bombardier Photo

“We are extremely proud of our employees, investors and suppliers who have worked together to bring this remarkable aircraft to the market. With this matter behind us, we are moving full speed ahead with finalizing our partnership with Airbus. Integration planning is going well and we look forward to delivering the C Series to the U.S. market so that U.S. airlines and the U.S. flying public can enjoy the many benefits of this remarkable aircraft.”

Delta Air Lines released a statement saying it is pleased by the ruling that rejected “Boeing’s anti-competitive attempt to deny U.S. airlines and the U.S. travelling public access to the state-of-the-art 110-seat CS100 aircraft when Boeing offers no viable alternative. The airline looks forward to introducing the innovative CS100 to its fleet for the benefit of Delta’s employees, customers and shareowners.”

Boeing merely said it was “disappointed” by the USITC decision and that it would review the panel’s conclusions once released.

Senior Bombardier executives met with their Airbus counterparts in Montreal earlier on Jan. 26 to discuss plans to integrate the C Series into the European OEM’s network.

 

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