Bombardier dumping puts new 737 at risk, says Boeing

Bloomberg

Boeing Co. warned that its 737 Max 7 passenger jet may not survive if Bombardier Inc. continues to sell aircraft below
fair-market value, as the two planemakers square off in a case that’s putting profits and diplomatic ties on the line.
“Our Max 7 is at extreme risk,” Kevin McAllister, the head of Boeing’s commercial airplanes division, told a panel at the US International Trade Commission during a daylong hearing. “If you don’t level the playing field now, it will be too late.” The ITC, a quasi-judicial body that’s expected to issue a final ruling late next month, heard arguments on whether American industry was harmed by Bombardier’s sale of its new C Series jet at what
Boeing calls an unfairly low price to Delta Air Lines Inc. Boeing alleges Bombardier can undercut offerings on the US market because of subsidies in Canada.
The Max 7 is the smallest of Boeing’s upgraded 737 airplanes. It and the C Series can carry similar passenger loads, depending on how they’re configured.
Boeing won the first round in its fight with Montreal-based Bombardier when the US Commerce Department in October sided with the Chicago-based company in a preliminary ruling, ordering tariffs of about 300 percent. The ITC process runs in parallel and will decide if the tariffs become permanent.

Critical Ruling The ITC ruling is critical
to Bombardier’s medium-term profitability as it prepares to deliver the planes to Delta, which has vowed not to pay the 300 percent tariff. In April 2016, the No 2 US airline ordered 75 of Bombardier’s CS100 jets in a deal with a list value of $5.6 billion before customary discounts.
“Boeing did not lose this sale to Bombardier,” Greg May, Delta’s senior vice president for supply chain management and fleet strategy, told the panel. “When we chose to add the CS100 aircraft to our fleet, Boeing simply did not and does not have the right-sized aircraft.” May called Boeing’s filing of the complaint to be “absurd.”
Bombardier executives testified that sales conversations with other US carriers have essentially frozen since Boeing filed its complaint following the Delta order.
Ross Mitchell, VP for commercial operations at Bombardier, said Delta was looking for a plane size that Boeing didn’t have and that the airline received low pricing because it was an adopter of the C Series in the US. Boeing “could not offer an aircraft that met Delta’s needs,” he said. “There was not and could not have been any lost sale to Delta.”
Canada’s ambassador to the US, David MacNaughton, testified that a ruling in favour of Boeing would disrupt supply chains in the aerospace industry and cost American jobs, since a significant portion of the C Series is made in the US. Boeing’s McAllister said Bombardier offered its
C Series at “used-airplane prices,” putting pressure on competitors to slash prices. The British government has warned Boeing it could lose UK defense contracts.