This week, a brand new $300 million Airbus jetliner assembly plant broke ground in Mobile, Alabama and it’s the culmination of a trade dispute Boeing launched with Canada nearly two years ago.
The dispute initiated with a trade complaint filed by Boeing in April 2017 alleged that Canadian government subsidies were used to harm its business in the US.
Here’s how we got here
In 2004, Canada’s Bombardier, the maker of private jets and small regional airliner, decided it was time to make the jump into the big leagues. It was time to build an advanced carbon composite jetliner to compete against the Airbus-Boeing duopoly. More specifically, the Canadian plane, dubbed the Bombardier C Series, would compete against the smaller variants of the cash cow Airbus A320-family and Boeing 737.
For the next decade, the story around the Bombardier C Series program was one of cost overruns, developmental delays, and slow sales. Bombardier reported a loss of $4.9 billion during the third quarter of 2015 including a $4.4 billion charge largely associated with the C Series program.
At the time of the announcement, Bombardier CEO Alain Bellemare admitted that his company was “overwhelmed” by the multiple development programs in had on its plate.
A financially weakened Bombardier ended up taking a $1 billion bailout from the Quebec provincial government. In return, the provincial taxpayers took a 49.5% stake in the C Series.
Even though the first C Series prototype had taken to the air in 2013 and was soon earning critical acclaim for its performance capabilities, Bombardier still struggled to find a major airline willing to buy in bulk. Especially a major US airline.
In early 2016, Bombardier and Boeing went head-to-head in a competition for orders from United Airlines. Boeing won. United ordered 40 Boeing 737-700s in January of that year and an additional 25 in March. One industry analyst told Business Insider that Boeing gave United a 70% discount on the March order as a means to shut Bombardier out.
Bombardier’s futility would finally end in April 2016 when it landed the sale it had long sought; an order for 75 C Series jets from Delta Air Lines.
It’s the deal credited with saving the C Series program and it’s the deal that set Boeing on the warpath.
Boeing’s trade dispute
In April 2017, Boeing filed a complaint with US Commerce Department and the US International Trade Commission alleging that the Delta C Series order was only made possible abnormally low prices supported by Canadian government subsidies.
The US International Trade Commission agreed and in September of that year recommended a 219.63% tariff. A week later, the Commerce Department added another 79.82% tariff.
In total, Bombardier and Delta faced a 299.45% tariff on any Canadian-built C Series plane exported to the US.
Bombardier responded in a statement, calling the ruling “absurd and divorced from reality.” The Montreal-based airplane manufacturer also hit out at Boeing, accusing it of manipulating US trade laws to stifle competition.
Bombardier and Delta both argued that Boeing’s business couldn’t have been hurt by the deal simply because Boeing didn’t actually have a product in its lineup similar in capacity to the C Series.
“Boeing has no American-made product to offer because it canceled production of its only aircraft in this size range – the 717 – more than 10 years ago,” Delta said in a statement at the time.
According to the Atlanta-based airline, Boeing’s only proposed alternative to the CS100 was to offer it a batch of second-hand Brazilian Embraer E190 regional jets.
Facing the possibility of losing the most important order in the C Series program’s history, Bombardier turned Boeing’s greatest foe, Airbus.
Less than one month after the tariff was announced, Bombardier handed 50.01% of its prized airliner program to Airbus with zero upfront cash investment coming from the European aviation giant.
As part of the deal, Airbus announced that the C Series will also be produced at its assembly plant in Mobile, Alabama.
Fortunately for Bombardier, the US International Trade Commission struck the down the proposed tariff in January 2018, ending the dispute.
The Alabama factory
By the summer of 2018, the Bombardier C Series was no more. It had been rebranded as the Airbus A220 and folded into the Airbus product lineup.
While many saw the proposal to build the Canadian jets in Alabama as a ploy to sway trade regulators. Airbus, as it turns out, was dead serious.
Fast forward to January 2019 as the CEO of Airbus and Bombardier along with the Governor Ivey of Alabama gathered on a sunny Wednesday to break ground for the A220 final assembly line in Mobile.
The $300 million-facility will assemble aircraft destined for the A220’s North American customers such as Delta, and JetBlue. The first delivery from the Mobile factory is expected to be in 2020.
It’s also the latest chapter in the long multinational saga that is the Bombardier C Series.
Stay tuned for more.