Bombardier fires back at Boeing in jet pricing fracas

Bloomberg

Boeing Co.’s allegations that Bombardier Inc. sold C Series passenger jets at unfairly low prices are ‘absurd,’ the Canadian planemaker said, raising the volume in an increasingly noisy relationship between the US and Canada. Boeing’s contention that Delta Air Lines Inc. purchased jets for $19.6 million apiece, ‘is plain wrong,’ Bombardier spokesman Bryan Tucker said in an interview. “We can’t disclose the actual price because it’s confidential, but it’s not $19.6 million. The allegations are absurd.”
His comments boosted the heat in the latest front of an expanding US-Canada trade fracas. Tensions between the neighbours have intensified since President Donald Trump took office vowing to renegotiate the North American Free Trade Agreement and put “America First.” Washington recently imposed duties on Canadian lumber, reigniting a longstanding dispute, and Trump has complained about Ottawa’s protections for dairy farmers.
Chicago-based Boeing on Thursday lodged a complaint with the US International Trade Commission, saying Bombardier set a ‘new, low price ceiling’ by selling Delta C Series jets for less than each plane’s $33.2 million manufacturing cost. Boeing wants the commission to recommend that the Commerce Department impose duties on the Canadian jet builder.
The C Series comes in two configurations. A 100-seater lists for $79.5 million while a 150-seat variant goes for $89.5 million. Discounts from catalog prices are customary in the industry. Bombardier’s commercial arrangements are in “compliance with the laws and regulations of the jurisdictions in which we operate,”
the Montreal-based company said in
a statement.

Contract Provision
Bombardier’s 2016 results included an “onerous contract provision” of $492 million stemming from 127 C Series purchase agreements — including the planes sold to Delta. Bombardier’s chief financial officer said the provision was linked to “negative anticipated margins” that Bombardier was obligated to book under international accounting rules. Fred Cromer, who runs the commercial aircraft unit, told Bloomberg News a year ago that the company had used “aggressive” pricing to win the Delta deal, without providing specifics.
In December, Bombardier Chief Executive Officer Alain Bellemare said the company wanted to move away from discounting.
Boeing said Bombardier was able to offer the rock-bottom pricing because of government assistance. The Canadian government earlier this year pledged C$372.5 million ($273 million) to Bombardier to finance two jet programs including the C Series. Quebec’s provincial government invested $1 billion in the jetliner last year. A US Commerce Department spokesman declined to comment on Boeing’s complaint beyond saying that the agency gives all petitions a thorough review.
Bombardier’s widely traded Class B stock tumbled 5.4 percent to C$2.11 at the close in Toronto, the biggest decline in two weeks. Boeing rose less than 1 percent to $184.83.