Bombardier Was Prepared to Build an Especially Small Plane for United Airlines
Bombardier was so intent on winning an order for United that it was willing to build a smaller version of its C Series jet for the carrier. Boeing Co. has accused Bombardier of selling its planes at artificially cheap prices. Bombardier
Bombardier Inc. was so keen to win a United Continental Holdings Inc. order last year that it offered to shrink its marquee jetliner beyond the smallest existing size.
The proposed “CS100 Lite” model was meant to cater to United’s wish for a shorter plane, Ross Mitchell, vice president of commercial operations at the Canadian planemaker, said in a statement Thursday. He spoke at a hearing before the U.S. International Trade Commission, where Boeing Co. has accused Bombardier of selling its planes at unfairly low prices.
Hours after Mitchell and other members of the Bombardier delegation addressed the commission, the U.S. Commerce Department started a widely expected probe into whether 100- to 150-seat planes from Canada “are being unfairly dumped,” according to a statement from the agency. Bombardier has called the allegations “absurd,” and the Canadian government said it would defend the Montreal-based company’s interests.
Mitchell’s comments provided a glimpse of the negotiations behind aircraft sales, which are under a microscope because of the trade complaint. United eventually agreed to buy 65 heavily discounted Boeing 737-700 jets after considering the C Series and an aircraft made by Brazil’s Embraer SA. Later in 2016, the airline converted most of the order to the larger 737 Max without assigning a delivery date, after changing its fleet strategy for domestic flying.
“In the early stages of our discussions, United told us the CS100 was too big for its needs,” Mitchell said in his prepared remarks. “In response, we offered a smaller version, the CS100 Lite. Our competition throughout was the even smaller Embraer 190. At the very end, however, Boeing swooped in and offered United a deal too good to refuse — not on a 100-seat aircraft, but on larger 737-700s that do not compete with the CS100.”
Bombardier’s C Series comes in two versions. The CS100 can seat 108 to 133 passengers, according to the Montreal-based company’s website. The CS300 can carry 130 to 160.
The main focus of Boeing’s complaint involves a different U.S. carrier: Delta Air Lines Inc., which last year agreed to buy at least 75 of the C Series planes. That deal was valued at $5.6 billion based on list prices, before discounts that are customary for aircraft purchases.
Boeing is asking the International Trade Commission to find that it has suffered injury to its business at the hands of Bombardier and to recommend that the Commerce Department impose duties on the Canadian company.
Canadian Foreign Minister Chrystia Freeland said the government was “reviewing current military procurement that relates to Boeing” and said a trade challenge by the company “is clearly aimed at blocking Bombardier’s new aircraft, the C Series, from entering the U.S. market.”
Boeing’s petition mentions two investments in Bombardier by Caisse de Depot et Placement du Quebec, Canada’s second-largest pension fund manager — including the $1.5 billion purchase of a 30 percent stake in the company’s rail unit last year.
That transaction “was completed after extensive due diligence and in consultation with outside advisers,” the Caisse said Thursday in a statement. “Both the price paid and the terms of the deal are highly commercial in nature and in no way conferred a subsidy to the company.”
–With assistance from Julie Johnsson Michael Sasso and Greg Quinn
©2017 Bloomberg L.P.