The C-Series Saga: Boeing vs Bombardier (Part 2)

How can you grow your network without cannibalizing existing routes? The Bombardier CS100 and CS300 allow airlines to capture “Point to Point” traffic without hurting their”hub and spoke” networks. (Photo: John Jamieson, July 30th, 2012, YVR)

By September 2017, the United States’ Department of Commerce was ready to release its primary ruling on Boeing‘s trade complaint. As we discussed in part 1, an air of economic uncertainty, largely created by the events of the 2016 Presidential Election, seemed destined to play a part in Boeing‘s complaint resolution.

Fresh off a polarizing election, Donald Trump’s “America First” campaign message was still publicly heralded. While the stance was being lauded in certain parts of the United States, the impending threat of American protectionism was starting to make an impact on the international market.

While one could argue that Boeing was merely taking advantage of favorable conditions, Bombardier officials could not have expected the severity of the DOC’s ruling.

On September 26th, 2017 the United States Department of Commerce imposed a 220% import tariff on Delta‘s C-Series Aircraft.

With Air Canada in the midst of a transition period (from the ERJ-190 to the CS-300), the CRJ-900 has become the aircraft of choice for many of AC’s new transborder services. (Photo: John Jamieson, May 1st,2018, YVR)

Taking into consideration the fact that Boeing had only called for a 79 percent import tariff, the DOC’s decision seemed like a gross over-reaction. Despite the fact that the initial ruling would likely be challenged, and examined by the US International Trade Commission (USITC), it drew a major reaction from Canadian enthusiasts.

While many analysts quickly pointed out that Boeing would have to prove that the discounted order had hurt their (Boeing‘s) business, the instability in Washington was concerning.

Shortly after the announcement it was reported that, should the preliminary decision become final, Delta would be forced to pass the aircraft on to Aeromexico, an airline which it has a 49% stake in, to avoid paying the import taxes.

A few weeks after their initial ruling, the DOC brought more bad news down on Bombardier.

On October 6th, the US DOC added an extra 79.82 percentage points onto their initial 219.63 percent duty tariff ruling. This effectively brought the import duties to 300 percent, making the Delta order considerably more expensive for the airline.

YYJ 05 14 036
Currently, Delta uses its fleet of ERJ-175 aircraft for medium haul thin routes and regional services. The aircraft allows Delta to offer a mainline experience without having to upgauge the aircraft. (Photo: John Jamieson, May 14th, 2018, YYJ)

The initial rulings were certainly a blow to Bombardier. The PR impact could not be overlooked. Bombardier was already struggling to sell its flagship aircraft and they had now been accused of potentially dumping the aircraft in order to gain an American launch customer. Irrespective of the final result, Boeing certainly had an interest in generating negative publicity and doubt about the viability of the C-Series program.

Crucially for Bombardier, the limitations placed on Department of Commerce meant that they would only be able to recommend import tariffs. The decision to ultimately enforce import tariffs would be made by the bipartisan US International Trade Commission. Boeing would have to prove that the success of one of their products had been suitably harmed by Delta‘s discounted order. As we discussed in Part 1, while Boeing may disagree, many aviation experts concluded that the US manufacturer didn’t have a truly comparable aircraft; Bombardier would need to cling to this glimmer of hope.

In the meantime, as Delta and Bombardier planned their next moves, Airbus started entering the picture. The European conglomerate was fully aware that they didn’t have an aircraft which could compete with the CS100, however, because they had an outside view of the Delta-Boeing-Bombardier dispute they could be more proactive than reactive.

Less than 2 weeks after the DOC’s revised ruling, Airbus announced that it had acquired a majority stake in Bombardier‘s C-Series program. By agreeing to hand over a 50.1 percent stake in the program, Bombardier‘s flagship aircraft would be able to benefit from the Airbus Group‘s economies of scale. In a Bombardier Press Release, it was reported that the valuation of the program could be expected to double via the customers and resources available to Airbus. This became a major turning point in the C-Series Saga. Airbus had positioned themselves perfectly to capitalize on Boeing‘s temper tantrum.

Despite previously offering a product which could fill the Regional Jet-Mainline crossover market, Airbus knew Bombardier‘s C-Series had an edge over their A318 and A319 jets. (Photo: John Jamieson, February 24th, 2018, YVR)

One of the key benefits from the Airbus-Bombardier partnership quickly became a focal point of their counter claim: Airbus‘ final assembly and delivery center located in Mobile Alabama. Should it become necessary, the assembly and delivery of Delta’s C-Series 100 aircraft could be facilitated out of the Mobile plant.

In the weeks that followed this mega-announcement, Boeing tried to save face by releasing a statement which bordered on contradicting their initial complaint. In a statement made in early December (2017) Boeing officials asjusted their initial complaint so that it included adding tarriffs on imported C-Series parts. Unbeknownst to Boeing this seemingly simple adjustment to their initial claim would grow into a major talking point which would help swing the pendulum back into Bombardier‘s favor.

In short, Boeing’s attempt to sneakily slide in an extra condition failed. Aviation experts instantly realized that Boeing had placed themselves on the opposing side of their initial argument. The Airbus Production Site in Alabama was seen as a major site of American jobs. Were Boeing to demand a tariff on Airbus/C-Series parts, they would be negatively impacting the growth of American jobs, something they had “supposedly” been fighting for in the first place. Additionally, since Boeing imports a significant percentage of parts for their own Dreamliner, Boeing would have been forced to pay import taxes themselves; something they had either overlooked or had hoped people wouldn’t notice.

An interesting question to ponder: Has David (Bombardier) defeated Goliath (Boeing)? My final take may surprise you. (Photo: John Jamieson, July 8th, 2014, YVR)

As the Department of Commerce prepared to make their final decision, the end of the C-Series Saga seemed on the horizon. In many experts minds, the safety of C-Series program had already been secured.

Despite the pendulum clearly swinging in favor of Bombardier, the Department of Commerce wasn’t interested in budging on their initial ruling. The department’s final ruling called for import duties of 292% on each Delta C-Series imported into the United States; in 4 months the partisan committee had only seen fit to reduce their initial ruling by 7 percent. With Boeing arguably regaining some momentum, it would be up to the USITC to make the final decision.

With the fat lady ready to sing, the climax of the C-Series saga finally arrived. On January 26th 2018, 5 weeks after the DOC’s final ruling and almost 2 years after the initial order was completed, Bombardier’s C-Series program finally got a break. The United States International Trade Commission panel unanimously struck down the commerce department’s 292% duty tariff clearing the way for Bombardier to begin work on fulfilling Delta’s mega-order. The question of whether or not Bombardier had used illegal government subsidies to complete the order no longer mattered. The USITC correctly deemed that Boeing had not been sufficiently harmed. Bombardier hailed the decision as a “victory for innovation, competition, and the rule of law”


While the whole point of this 2 part series was to celebrate the C-Series’ victory in their  battle with the United States’ Boeing Company, an Op-Ed by Airways Magazine columnist Rohan Anand, made me question my initial reaction.

In his piece, Rohan suggests that while the C-Series as an aircraft will endure and grow through the partnership with Airbus, Bombardier’s efforts to take on the world’s two largest aircraft manufacturers has arguably failed; Bombardier was essentially forced to sell a controlling stake of their flagship aircraft to one of their competitors.

In a way, Boeing’s intentions to hurt Bombardier succeeded as the manufacturer was forced to part with a controlling interest in their revolutionary product. While I still feel the events surrounding the Delta order made for a compelling story, the ending may have always been predictable.

What do you think?

I’d love to know your thoughts on the C-Series Saga!

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