Wednesday, November 15, 2017

Tensions Mount Over Bombardier’s CSeries Deal With Airbus: Boeing and Embraer renew pledges to pursue legal challenges over Canadian plane maker’s project

The Wall Street Journal
By Robert Wall
Updated Nov. 13, 2017 11:28 a.m. ET

DUBAI—Struggling Bombardier Inc.’s move to give Airbus SE control of its CSeries plane project has driven rivals to renew their pledges to pursue legal complaints against the Canadian aircraft maker.

Both Boeing Co. , which already had the CSeries in its crosshairs before the involvement of its chief rival, and Brazil’s Embraer SA said this weekend they would stick with their legal challenges against Bombardier’s program. Embraer also warned Bombardier and Airbus against working on the project before the deal had won antitrust approval.

The stakes are high, with the Airbus-Bombardier tie-up seen by some as the biggest shake-up of the commercial jetliner business in 30 years.

Through the deal, Airbus would gain majority control of a joint venture building the single-aisle CSeries—a struggling program that the European company thinks could have big potential. Airbus forecasts a market of about 6,000 planes and expects the CSeries to win the lion’s share of deals in the 100 to 150-seat segment.

At the Dubai Air Show—the first industrywide get together since the deal was announced in October—tensions over the project were on display.

Boeing has challenged Bombardier’s pricing of the CSeries, saying it was being sold to Delta Air Lines Inc below cost, with its complaint prompting U.S. authorities in September to propose a 300% import tariff on the plane.

In Dubai, Boeing’s commercial airplanes chief, Kevin McAllister, reiterated the U.S. company’s objections, saying the issue was one of “clear price dumping.”

Fred Cromer, Bombardier’s president for commercial aircraft, said Boeing would struggle to demonstrate it was harmed, since the U.S. manufacturer doesn’t offer a plane that competes with the 100-seat CS100 that Delta is buying.

President of Bombardier Commercial Aircraft Fred Cromer speaks at the Dubai Air Show in Dubai on Sunday.

“We think that [proving harm] is very challenging,” Mr. Cromer said at the air show.

Bombardier has said it was looking to assemble CSeries planes at an Airbus facility in Mobile, Alabama, to circumvent the tariffs if they stick.

Embraer was also resolute, with the firm’s commercial airplanes boss, John Slattery, saying the Airbus deal wouldn’t undermine Brazil’s World Trade Organization challenge of the CSeries program for alleged subsidies provided by the Canadian government.

“The case will continue,” he said in an interview at the air show.

Bombardier’s Mr. Cromer said the Canadian company was “fully compliant” with trade rules.

Mr. Slattery also said Embraer would be watching closely to ensure Airbus officials don’t try to start selling CSeries planes before competition regulators give the deal a green-light. Antitrust approval is expected in late 2018.

“Until antitrust immunity is granted, the Airbus marketing team cannot be involved in the aircraft. That will be something my team and I will be keeping a close eyes on,” he said.

Analysts say the Airbus deal could be a big boost for the CSeries because it brings certainty to the future of a jet series that has struggled to land new orders amid concerns about Bombardier’s financial health.

Mr. Cromer said Bombardier could work with Airbus in a limited way before antitrust approvals were in hand. The two companies can jointly plan how to build the CSeries assembly facility in Mobile. That would position them to start construction once regulatory approvals are in place and have the facility operational about a year later.

Under that schedule, CSeries deliveries to Delta may be delayed until the new facility is running to try to avoid tariffs. Mr. Cromer said Bombardier would have to shuffle some delivery positions in 2018 to other customers.

The aircraft maker forecasts 40 to 45 CSeries deliveries in 2018.

Since Bombardier announced the deal with Airbus, it said it had won a commitment for up to 61 more CSeries orders from a European customer. Mr. Cromer wouldn’t identify the client, but said interest in the plane “continues to build.”

Original article can be found here ➤

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