Bombardier jets hit with 220 percent US duty

Bloomberg ­­­­­­­­­­­­­­­

Bombardier Inc.’s all-new jetliner, which cost at least $6 billion to develop, just got harder to sell in the world’s largest aviation market.
The US Commerce Department slapped import duties of 220 percent on the C Series plane, citing improper subsidies after a complaint by Boeing Co.
The preliminary determination threatens to upend Bombardier’s planned deliveries next year to Delta Air Lines Inc., which ordered at least 75 jets with a list value of more than $5 billion.
The US government’s decision on the aircraft added to the pressure on Bombardier. Separately, the company missed out on a potential merger of its rail unit with that of Siemens AG. Hours before the Commerce Department’s announcement, Siemens and France’s Alstom SA agreed to join their rail businesses in a deal that gives rise to a European transportation giant better able to counter competition from China.
The US penalties create a new hurdle for Bombardier Chief Executive Officer Alain Bellemare, who is trying to turn the company around after the C Series came in more than two years late and about $2 billion over budget. With the exception of a two-aircraft order from Air Tanzania in December, Bombardier hasn’t booked a major sale of C Series jets since the Delta deal in April 2016.
“We believe the key area of concern will be what Delta does with its order,” Walter Spracklin, an analyst at RBC Capital Markets, said in a note to clients.
“Moreover, the impact on other US-based airlines will also be in question under such a ruling.”

Trade Tensions
The Bombardier-Boeing spat is roiling trade relations just as the US tries to renegotiate the North American Free Trade Agreement with Canada and Mexico. “Even our closest allies must play by the rules,” US Commerce Secretary Wilbur Ross said in announcing the decision on Canadian jets with 100 to 150 seats. Canada “strongly disagrees” with the US probes into its aerospace industry, Foreign Affairs Minister Chrystia Freeland said in a statement.
“This is clearly aimed at eliminating Bombardier’s C Series aircraft from the US market,” said Freeland, who was scheduled to dine with US Trade Representative Robert Lighthizer in Ottawa during the third round of Nafta talks.
The import duties could be reversed by the US International Trade Commission if the trade tribunal determines that Boeing wasn’t injured by Bombardier’s jet programme. That decision is expected to be made next year.
Prime Minister Justin Trudeau has said the Canadian government won’t buy Boeing military jets unless the company drops its case against Bombardier.
The Montreal-based manufacturer said Boeing was “seeking to use a skewed process to stifle competition and prevent US airlines and their passengers from benefiting from the C Series.” The airraft entered commercial service last year in Europe.
“The magnitude of the proposed duty is absurd and divorced from the reality about the financing of multibillion-dollar aircraft programmes,” Bombardier said.
Boeing has accused Bombardier of selling its biggest jet in the US at less than fair value, while benefiting from unfair government subsidies in Canada.
The US planemaker has argued that the C Series wouldn’t exist without the assistance, noting
that Bombardier received money from the Canadian and Quebec governments to develop the
aircraft and further aid from both in recent years to shore up the company’s finances.
The Commerce Department is expected to decide by October 4 whether to also impose anti-dumping duties on the C Series. On that matter, Boeing is seeking duties of about 80 percent.

Bombardier news
disappoints PM May

Bloomberg

It’s no wonder Theresa May says she’s “bitterly disappointed” by the US Commerce Department’s decision to impose punitive import duties on Bombardier Inc.’s new jetliner. It hurts the UK prime minister in several ways at once.
First, it’s a blow to a big employer: More than 4,000 work for the company in Belfast, Northern Ireland, where the plane’s wings are built.
Second, Northern Ireland is a sensitive area for British
politics: It is only because May’s Conservatives have
the support of 10 lawmakers from the region that she’s able to govern.
Third, it’s a personal embarrassment: After spending
political capital at home to try to build a close relationship with Donald Trump, she raised the issue with him both by phone and in person, with no obvious result.
The opposition Labour Party, while offering support to the government’s position that the US ruling is wrong, was quick to point out that the news doesn’t bode well for the proposed free-trade deal with the US that Trump and May have both made much of.
“Try telling Bombardier workers this morning that post Brexit we’ll be striking ‘easy’ free-trade agreements with the US” the party’s Northern Ireland spokesman, Owen Smith, said on Twitter.