Wednesday, September 27, 2017

Why Big, Bad Boeing Is Picking on Bombardier: Staying big and dominant is part of the long game

The Wall Street Journal
By Alex Frangos
Sept. 27, 2017 2:23 p.m. ET

Why is Boeing picking on the little guy? Because that is how you stay big and dominant.

Boeing scored a victory Tuesday when the Commerce Department placed a 220% tariff on the import of Bombardier CSeries jets from Canada, 75 of which are on order by Delta Air Lines .

It would seem to be a curious fight for Boeing to start. The jet giant doesn’t produce airplanes that directly compete with the CSeries, which seat 100 to 145 passengers. And there is clear blowback. Canadian Prime Minister Justin Trudeau has said the dispute could scuttle a potential Royal Canadian Air Force order for Boeing-made F/A-18 Hornet fighters.

Boeing accuses Bombardier of dumping—or selling aircraft for less than the cost of production. But this is a widespread industry practice that Boeing itself employs on its jet programs.

In the early years of a new plane, manufacturers sell below cost and hope that efficiencies on the production line improve enough so that later planes make up for the upfront losses. Boeing’s 787 program, which delivered its first plane in 2011, accumulated $29 billion in losses before it started turning a profit on each plane only last year, notes Robert Stallard of Vertical Research Partners.

Boeing’s other complaint is Bombardier’s receipt of government funds, which it says is an unfair advantage. Though not exactly the same, Boeing enjoys the fruits of its relationship with Washington, as evidenced by its furious lobbying campaign with President Donald Trump to preserve the U.S. Export-Import Bank, which it uses to finance aircraft sales.

So why go at it? The long game demands it. Boeing may regret not doing more to keep a dysfunctional pipsqueak that has become Airbus at bay 30 years ago. Though Bombardier is hardly a budding giant, there are others on the horizon, including China’s Comac and Russia’s Irkut Corp.  Brazil’s Embraer would seem to be the beneficiary from this fight if it can sell its similar-sized jets instead of Bombardier. The Brazilians and others would have to be ready for action, however.

Boeing is sending the message that any attempt to sell any passenger aircraft, even if it doesn’t compete with Boeing’s offerings, on its home turf will be met with a punch in the nose.

Original article can be found here ➤

1 comment:

  1. Bombardier is, was and has always been a "corporate welfare bum". Canada has poured billions of dollars into this dysfunctional company and we'll never get a cent back.