Bombardier’s C-Series 100, came in behind schedule and millions over budget. After good reviews, an extreme U.S. tariff has chilled potential sales and put the company in difficulty

Bombardier’s C-Series 100, came in behind schedule and millions over budget. After good reviews, an extreme U.S. tariff has chilled potential sales and put the company in difficulty
Photo Credit: Ryan Remiorz/Canadian Press

U.S.- Canada trade dispute: Bombardier sale due to U.S. tariffs?

According to reports, Canada’s leading aerospace firm, Bombardier, is considering selling parts of its aerospace operation.

The Canadian firm is facing massive U.S. tariffs of almost 300 per cent on its new C-series passenger jet as a result of a recent trade challenge by Boeing.

Bombardiers development of the mid-size C-Series commercial jet ended up far over budget, and with lackluster sales, has put the company in financial difficult. This has been compounded by the recent U.S. trade action targeting the new plane. The potential duties have effectively shut out Bombardier’s new 100-140 seat C-Series jetliner from the big U.S. market.

Feb. 2016 Alain Bellemare, right, president and CEO of Bombardier Inc., and Calin Rovinescu, president and CEO of Air Canada, sit in the cockpit of a CSeries jet. Air Canada will buy 45 CSeries jets, but international sales have been slow, and now chilled by Boeing’s tariff challenge
Feb. 2016: Alain Bellemare, right, president and CEO of Bombardier Inc., and Calin Rovinescu, president and CEO of Air Canada, sit in the cockpit of a CSeries jet. Air Canada will buy 45 CSeries jets, but international sales have been slow, and now further chilled by Boeing’s tariff challenge, putting Bombardier into a financial crunch © Paul Chiasson/Canadian Press

In an effort to improve cash flow, reports say that Bombardier may be selling part or all of its Q-400 turboprop division, and the CRJ jet both of which are in the smaller 50-60 seat market.

Both however are also in competition with other planes. The turboprop competes with a European model by ATR- owned by Airbus and Leonardo SpA, a plane which dominates the turboprop market. The CRJ competes with small jets made by Embraer of Brazil.

Embraer for its part launched a World Trade Organisation challenge against Bombardier over government subsidies in 2016. The WTO later ruled that both companies  benefited from improper subsidies.

A Q-400 operated by British carrier GlyBe
A Q-400 operated by British carrier FlyBe. Bombardier may be trying to sell the turboprop and CRJ jet divisions to generate cash flow. © Bombardier

Boeing’s complaint to U.S. regulators said that the Canadian company was unfairly subsidised by the Canadian federal and provincial governments and was also dumping the C-Series by marketing them in the U.S. at far below cost. Bombardier recently made a deal to sell 75 of the C-Series jets to Delta airlines.

Although Boeing does not make a jet in the C-Series range, the move is generally thought to be a punitive and blocking manoeuvre to prevent Bombardier from growing and becoming a competitor in future.

Parties possibly interested in the Bombardier divisions may be Airbus, or possibly China.

Meanwhile the Canadian government has postponed a multi–billion dollar purchase of new Boeing Super-Hornet jet fighters for its air force. The move is in retaliation of the Boeing trade challenge against Bombardier.

As a result Canada has been eyeing Australia’s used Hornet planes as a stop-gap measure toward eventual fleet replacement.

Royal Australian Air Force FA-18 Hornets fly over Melbourne in 2002. Canada is considering buying the used aircraft, but because the U.S.-built fighters are classified as advanced warplanes. the Trump administration would have to sign off on the sale.
Royal Australian Air Force FA-18 Hornets fly over Melbourne in 2002. Canada is considering buying the used aircraft, but because the U.S.-built fighters are classified as advanced warplanes. the Trump administration would have to sign off on the sale. © Reuters

However, not only are the Australian planes nearly as old as Canada’s CF-18’s, any deal would require U.S approval of transfer of U.S made “advanced warplanes”.

Some experts say given the current state of heated rhetoric between Canada and the U.S involving Boeing and Bombardier, the Trump administration’s attitude toward foreign trade, and the current difficult North American Free Trade negotiations one might not expect any favours from the U.S. in approving an Australian sale to Canada.

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