Aerospace & Defense

Boeing and Bombardier trade row reaches critical stage

Key Points
  • The U.S. International Trade Commission is expected to rule on the Boeing versus Bombardier trade spat
  • Boeing claims Canada's Bombardier is benefiting from illegal subsidies
  • The ruling is seen as a test of President Donald Trump's "America First" pledge
No strong evidence that Boeing's orders have been adversely impacted by Bombardier: Pro

The trade spat between Boeing and Bombardier has entered a critical phase with a decision expected soon by the U.S. International Trade Commission (ITC).

Boeing has accused its Canadian rival of benefiting from government subsidies, allowing it to sell its new C-Series planes to U.S. buyers at below cost.

The particular case arose from Bombardier's 2016 deal to sell 75 C-Series jets to Delta Air Lines. Boeing claims Delta bought the planes at $20 million each, enjoying a hefty discount from the list price of $33 million. Those figures have not been confirmed by either Bombardier or Delta.

At the hearing Monday, Boeing said that Bombardier's use of Canadian public cash had allowed it to discount its planes to the point that Boeing's new 737s were not as competitive in the U.S.

Bombardier countered that Boeing's hefty order book suggested otherwise and that Boeing was making money "hand over fist."

Some analysts have suggested Boeing was emboldened to take legal action after Washington laid out its "America First" ethos for trade.

The U.S. Commerce Department has already ruled in Boeing's favor. In October, it slapped a 300 percent tariff on the Bombardier C-Series jets.

Head of Aviation at IHS Markit, John Sneller, said Tuesday that the ITC findings should be revealed Tuesday and there is some chance that the tariff ruling could be overturned.

"Discounting of airlines is not unusual. This is probably a little more aggressive than you would normally see. So up to 50 percent for a large order is not unusual. This is closer to 60 or 70 percent," he said.

"Also the evidence isn't very strong that Boeing's order book has been affected adversely," Sneller told CNBC.

Airbus-Bombardier joint venture discussed by Trump and Canadian PM Trudeau

The situation has been further complicated by Boeing's traditional rival, Airbus, who recently bought Bombardier's C-Series program for just one dollar.

Sneller said the deal would allow Bombardier to build the C-Series jets at Airbus's Alabama plant in the United States which may, in turn, allow the program to escape punitive tariffs.