The U.S. International Trade Commission held a daylong hearing on whether American industry was harmed by the Bombardier CSeries sale to Delta.
Boeing and Canada’s Bombardier squared off Monday in a case that’s putting profits and diplomatic ties on the line.
In a daylong hearing before the U.S. International Trade Commission, Kevin McAllister, the head of Boeing’s commercial-airplanes division, argued that Bombardier’s sale of its CSeries jets at what he said are below fair-market prices poses an existential threat to Boeing’s 737 MAX 7.
“Our Max 7 is at extreme risk,” McAllister told the trade panel. “If you don’t level the playing field now, it will be too late.”
Boeing’s push to have tariffs imposed on sales of the CSeries threatens to block Delta Air Lines from taking delivery of the 75 CSeries jets it ordered in 2016.
But Greg May, Delta’s senior vice president for supply-chain management and fleet strategy, said Boeing’s filing of the complaint is “absurd.”
“Boeing did not lose this sale to Bombardier,” May 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.”
And Ross Mitchell, vice president for commercial operations at Montreal-based Bombardier, said Delta was looking for a plane size that Boeing didn’t have. He said Bombardier gave Delta low pricing because it was an early adopter of the CSeries in the U.S.
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.”
The ITC, a quasi-judicial U.S. federal body that is expected to issue a final ruling late next month, heard arguments on whether American industry was harmed by the Bombardier CSeries sale to Delta. Boeing alleges Bombardier can undercut offerings on the U.S. market because of subsidies in Canada.
The MAX 7 is the smallest of Boeing’s upgraded 737 airplanes. It can carry a similar passenger load to the larger of two CSeries models, the CS300. Delta ordered the smaller CS100 model.
Boeing won the first round in this trade fight with Bombardier when the U.S. Commerce Department in early 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.
The case became more complex in mid-October when Boeing rival Airbus stepped in, committing to buy a majority stake in the CSeries program and to set up a second production line in Mobile, Alabama, to assemble CSeries planes for U.S. carriers, including Delta.
Boeing argues that this move is merely a ploy to circumvent the tariffs. Bombardier responded at the hearing Monday that the joint venture with Airbus is important to the CSeries program’s survival.
The ITC ruling is critical to Bombardier’s medium-term profitability. Depending on the outcome of this case, it is ready to start deliveries to Delta next year. But Delta has vowed not to pay the 300 percent tariff.
Bombardier executives testified that sales conversations with other U.S. carriers have essentially frozen since Boeing filed its complaint following the Delta order.
Canada’s ambassador to the U.S., David MacNaughton, testified that a ruling in favor of Boeing would disrupt supply chains in the aerospace industry and cost American jobs, because a significant portion of the CSeries is made in the U.S.
Boeing’s McAllister said Bombardier offered its CSeries at “used-airplane prices,” putting pressure on competitors to slash prices.
“Customer demand for reduced prices is greater than ever,” he said. “The harm is real right now.”
While President Donald Trump is unlikely to intervene in the case, the dispute is a test of his pledge to enforce U.S. trade laws more strictly while encouraging foreign investment. The case has bruised U.S. relations with Canada and the U.K., which also builds part of the plane. Canadian Prime Minister Justin Trudeau this month canceled an order of Boeing fighter jets in retaliation.
The British government has warned Boeing it could lose U.K. defense contracts as well. Prime Minister Theresa May has said she was “bitterly disappointed” by the tariffs.