Why Boeing Charged Bombardier with Dumping Aircraft in the US
Bombardier initially found it difficult to sell its C-Series jets due to the huge cost overruns. The aircraft manufacturer overspent billions of dollars in manufacturing the CS100, and it had to write down $4.4 billion.
In 2015, the Canadian government provided $3.4 billion in support. This support included $1 billion from Quebec’s provincial government, which took a 49.5% stake in the C-Series in return.
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Delta Air Lines’ huge order
However, the respite for Bombardier came in 2016, when Delta Air Lines (DAL) placed a huge order for the CS100. The airline placed an order for 75 C-series jets. The list price for each CS100 aircraft is $79.5 million, but it typically sells for a 50% discount.
According to Boeing (BA), Delta Air Lines received a 70% discount for the jets, purchasing the CS100 for $19 million apiece. This discount was made by the subsidies. Subsequently, Boeing alleged that Bombardier was dumping the aircraft in US markets. According to Boeing, the complaint is an effort to maintain a level playing field and to abide by trade laws.
Boeing asserts that Airbus had used the same dumping techniques in the 1990s when it was finding it difficult to sell aircraft.
Investors can gain exposure to Boeing through the iShares US Aerospace & Defense ETF (ITA), which holds 9.5% of its portfolio in the stock.
Next, we’ll examine how the order could impact Boeing’s relationship with the Canadian government.