Delta Air Lines on Wednesday took a firm stand against Boeing in its trade dispute with Canada’s Bombardier, offering a public glimpse of the strain the case has created between the two U.S. aviation giants. A pending Delta order for larger narrowbody jets may be at stake.
Delta Air Lines on Wednesday took a firm stand against Boeing in its trade dispute with Bombardier of Canada, offering a public glimpse of the enormous strain that the case has created between the two U.S. aviation giants.
Delta chief executive Ed Bastian insisted that in the end, “We don’t expect to pay any tariffs, and we do expect to take the planes.”
The case centers on Delta’s purchase last year of 75 CSeries jets from Bombardier. Last week the U.S. Department of Commerce, acting on a complaint from Boeing, slapped 300 percent tariffs on Bombardier’s planes, quadrupling the price of the jets for Delta or any other U.S. airline.
On a quarterly earnings call, Wall Street analysts asked for assurance that Delta won’t be forced to honor its contract with Bombardier and take delivery of that order if forced to pay the proposed tariffs.
In response, Bastian declined to say if the sales contract provides the airline with an out.
“I can’t tell you how it’s going to eventually work out,” Bastian said. “We will not pay those tariffs, and that is very clear. We intend to take the aircraft. … There may be a delay in us taking the aircraft as we work through the issues with Bombardier.”
He said that Delta expects that eventually, though, it will get its planes “at the agreed contractual price.”
Bastian hinted that a political solution to the impasse may be the eventual way out.
The case is “triggering a lot of discussions at political levels, not just within the aerospace field,” he said.
Bastian made clear he considers the preliminary rulings in the case to be in error because he sees no harm to Boeing from Delta’s purchase last year of the Bombardier jets.
Delta had sought bids for a 100- to 110-seat aircraft. Since Boeing no longer makes a jet that size, it offered Delta some used E190 jets made by Embraer of Brazil that it had obtained in a trade during a sale of its own jets to Air Canada.
“It is very difficult for Boeing or any U.S. manufacturer to claim harm with a product that we purchased that they did not offer and they don’t produce,” Bastian said. “As you look through this and try to see how exactly a harm case is going to be developed, particularly to justify the type of tariffs that are being contemplated, to us, it’s unrealistic, a bit nonsensical.”
Delta is the second-largest airline in the world behind American, and observers in the industry are shocked that Boeing has chosen to block the airline from buying the aircraft it wants.
A senior executive in the airplane leasing world, who asked for anonymity because he buys planes from Boeing and has also sold planes to Delta, said he was very surprised to see Boeing pushing the case as it has.
“To take on Delta, long term, seems asinine to me,” the executive said. “It’s crazy to go after a customer, an airline as successful as Delta.”
“There’s no love lost between Delta and Boeing executives right now, that’s for sure,” he added.
That could have further repercussions: Delta is currently considering another large order for about 75 narrowbody jets and will choose between Boeing’s 737 MAX and the Airbus A320neo.