Despite enjoying the longest bull market run in aviation history, Bombardier’s commercial aircraft division was in a weak position when the day started on 26 September. A cash-critical production ramp-up for the CSeries was plagued by delays, while Bombardier’s sales staff still had not proved – nearly a decade after the programme’s launch – that the small narrowbody family can be sold for a profit.
And then it got worse – much worse. By the end of the day, the CSeries programme was facing the gravest crisis yet in its already difficult history.
Following Boeing’s call for a 226% mark-up in combined duties over allegations of illegal subsidies, the US administration’s Department of Commerce slapped a preliminary 220% tariff on the 75 CS100s due for delivery to Delta Air Lines. If the preliminary tariff decision is made final, the CSeries may be finished.
Bombardier can still appeal against the US government’s ruling in international forums, but uncertainty surrounding the outcome will cloud its future.
The airframer acknowledged in financial statements that it had sold the CSeries at a loss to Delta in April 2016, while it secured financial bail-outs from the Quebec provincial government and the federal treasury in Ottawa.
A year later, Boeing capitalised on the newly-elected US President Donald Trump’s protectionist agenda to bring a legal hammer down on Delta’s CSeries deal.
Boeing’s objections to Bombardier’s loss-making Delta sale – after racking up $30 billion in deferred production costs on the 787 while securing billions in state tax credits for the 777X – can be viewed as aggressive, hardball tactics or rank hypocrisy.
For the CSeries, however, it does not matter. Unless doubt surrounding the tariffs is removed completely and swiftly, Bombardier is likely to lose the Delta order and gain a gaping hole in the programme’s production schedule for the next two years.
Bombardier has delivered an excellent aircraft, but it did not engineer a product that can compete with the industrial scale and financial power of Airbus and Boeing, or against government policies that protect them.
In a few years, the Comac C919 will be ready for delivery. If Boeing is worried about the Canadian government’s willingness to back the CSeries, China’s resources for promoting its narrowbody pose a vastly greater threat. The CSeries maybe just the first victim caught in the crossfire.
Source: Flight International
