Business dispute between Boeing and Canada ends with Airbus (Alabama) winner

This week, a new Airbus jet badembly plant, worth $ 300 million, was inaugurated in Mobile, Ala. 39, is the culmination of a commercial dispute between Boeing and Canada almost two years ago.

The dispute arising out of a commercial complaint filed by Boeing in April 2017 alleged that Canadian government subsidies had been used to harm its operations in the United States.

This is how we got here

In 2004, Bombardier of Canada, manufacturer of private jets and small regional aircraft, decided that it was time to get into the big leagues. It was time to build a state-of-the-art carbon composite jet airliner to fight the Airbus-Boeing duopoly. Specifically, the Canadian aircraft, dubbed Bombardier C Series, would compete with the smaller variants of the family of Airbus A320 and Boeing 737.

Over the next decade, the Bombardier C Series has been characterized by cost overruns, development delays and slow sales. Bombardier reported a loss of $ 4.9 billion in the third quarter of 2015, given a $ 4.4 billion charge primarily related to the C Series program.

At the time of the announcement, Bombardier President and CEO Alain Bellemare admitted that his company was "overwhelmed" by the many development programs put forward.

Bombardier, financially weakened, ended up getting a $ 1 billion bailout from the provincial government of Quebec. In return, provincial taxpayers took a 49.5% interest in Series C.

Although the first C-series prototype was launched in 2013 and was quickly hailed by its performance, Bombardier was still struggling to find a major airline willing to buy in bulk. Especially a big American airline.

In early 2016, Bombardier and Boeing clashed at a contest for getting orders from United Airlines. Boeing won. United ordered 40 Boeing 737-700s in January of the same year and another 25 in March. An industry badyst told Business Insider that Boeing gave United a 70% discount on the March order to block Bombardier.

The futility of Bombardier would finally end in April 2016 with the long sought sale. an order for 75 Delta Air Lines C Series jet aircraft.

This is the deal credited for saving the C Series program and it's the deal that allowed Boeing to go the war.

Boeing's commercial dispute

In April 2017, Boeing filed a complaint with the United States Department of Commerce and the United States International Trade Commission alleging that the order for the Delta C Series was made possible only by abnormally low prices supported by grants from the Canadian government.

The US International Trade Commission accepted and recommended in September of that year a tariff of 219.63%. A week later, the Commerce Department added 79.82% additional tariffs.

In total, Bombardier and Delta faced a 299.45% tariff on any Canadian-built C Series aircraft exported to the United States.

Bombardier responded in a statement, calling this decision "absurd and divorced from reality". The Montreal-based aircraft maker also attacked Boeing, accusing it of manipulating US trade laws to stifle competition.

Bombardier and Delta both claimed that Boeing's business could not have been affected by the transaction simply because Boeing did not have a product in its range of similar capacity to that of the C series.

"Boeing has no American-made product to offer because it has canceled the production of its only aircraft of this size – the 717 – more than 10 years ago," Delta said in a statement.

According to the Atlanta-based airline, Boeing's only alternative to the CS100 was to offer it a bunch of used Brazilian Embraer E190 regional jets.

Facing the possibility of losing the most important sequence in the history of the C Series program, Bombardier has transformed Boeing's biggest enemy, Airbus.

Read more: Airbus CEO Reveals Reasons Why Business Will Be Protected During Economic Downturn.

Less than a month after the rate announcement, Bombardier sold 50.01% of its popular airliner program to Airbus, without any initial cash investment from the European airline giant. 39; aviation.

As part of this agreement, Airbus announced that the C Series would also be produced at its Mobile badembly plant in Alabama.

Fortunately for Bombardier, the US International Trade Commission canceled the proposed tariff proposal in January 2018, ending the dispute.

The factory of Alabama

In the summer of 2018, the Bombardier C Series was no longer. It was renamed Airbus A220 and integrated into the Airbus product line.

Many have seen the proposal to build Canadian jet aircraft in Alabama as a ploy to influence trade regulators. It turns out that Airbus was extremely serious.

In January 2019, the CEO of Airbus and Bombardier, along with Governor Ivey of Alabama, met on a sunny Wednesday to inaugurate the final A220 badembly line at Mobile.

The facility, with a budget of $ 300 million, will bademble aircraft destined for North American customers of the A220, such as Delta and JetBlue. The first delivery of the mobile plant is expected to take place in 2020.

This is also the last chapter of the long multinational saga that is Bombardier's C series.

Stay tuned for more.