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Boeing loses trade case over Bombardier passenger jets

 

In a surprise decision, the U.S. International Trade Commission has ruled against aerospace giant Boeing in a bitter trade case it brought against Bombardier over passenger jets its Canadian rival sold to Delta Air Lines.

 

The 4-0 decision is defeat for Boeing, which had argued that Bombardier’s trade practices were illegal and harmful to its business and means that nearly 300 percent duties recommended by the Trump administration last year won’t be applied to the planes.

The trade commission was tasked with determining whether Boeing was or could be harmed by Bombardier.

“Today’s decision is a victory for innovation, competition, and the rule of law,” Bombardier said in a statement. The Canadian company had argued that Boeing did not have a comparable plane to offer Delta.

Boeing closed little changed, while Delta gained 0.7 percent. Bombardier shares jumped more than 15 percent.

The dispute was over the sale of Bombardier’s roughly 100-seat C Series jets, which Boeing complained to the U.S. government were sold to Delta below their cost of production and that the program received illegal subsidies from Canadian government.

In a statement, Boeing said it was “disappointed” by the decision.

“Those violations have harmed the U.S. aerospace industry, and we are feeling the effects of those unfair business practices in the market every day,” the company said.

The bitter trade dispute between the two aircraft manufacturers escalated. It has also added to tensions between the U.S. and Canada, as the Trump administration seeks to renegotiate terms in the North American Free Trade Agreement, or NAFTA.

Delta, the second-largest U.S. airline, has been stuck in the middle of the dispute. Delta CEO Ed Bastian has repeatedly said the airline won’t pay the tariffs and called the duties “absurd.”

The airline has not taken delivery of the C Series jets yet, so it had not been subjected to the tariffs. Delta said it opted for the Bombardier jets because Boeing offered it no feasible alternative.

“Delta is pleased by the ITC’s ruling rejecting Boeing’s anticompetitive attempt to deny U.S. airlines and the U.S. traveling public access to the state-of-the-art 110-seat CS100 aircraft when Boeing offers no viable alternative,” Delta said. “The airline looks forward to introducing the innovative CS100 to its fleet for the benefit of Delta’s employees, customers and shareowners.”

Delta Air Lines in 2016 agreed to buy at least 75 planes from Bombardier.

In a twist, however, last October, European aerospace giant Airbus, Boeing’s chief rival, said it would take a majority stake in the C Series program and said the planes could be manufactured in Alabama, where Airbus already makes narrowbody jets.

Bombardier’s CEO Alain Bellemare told CNBC after the ruling that he just met with his Airbus counterpart about the integration plan and that it was not yet clear when and from where the Canadian company’s planes would be manufactured and delivered.

“We’re committed to creating jobs in the U.S.,” he said.

The dispute may not be over. Boeing could appeal to the International Court of Trade in New York. The U.S. government could take the case to the World Trade Organization.

Boeing said it would “continue to document any harm to Boeing and our extensive U.S. supply chain that results from illegal subsidies and dumped pricing.”

The decision was surprising, said Richard Aboulafia, vice president at Teal Group because it broke with the Commerce Department’s recommendation for tariffs.

“Whether you’re sympathetic to Boeing or not, you have to admire the process,” he said.

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