Aerospace & Defense

Canada Retaliates Against Boeing Over Trade Case -- UPDATED

The government of Canada is opening the bidding on a contract for 88 military fighter jets to replace its aging fleet of CF-18s, and one likely bidder already faces a formidable hurdle. Contract terms spell out that “any bidder responsible for harming Canada’s economic interests will be at a distinct disadvantage,” according to a statement Tuesday by Defense Minister Harit Sajan.

That statement unquestionably targets Boeing Co. (NYSE: BA), which lodged a complaint with the U.S. International Trade Commission (ITC) earlier this year charging Canada’s Bombardier with dumping 75 of the company’s CS-100 passenger jets in a contract with Delta Air Lines.

A ruling in Boeing’s favor was handed down by the ITC’s Enforcement and Compliance Division, and the U.S. Department of Commerce will hold a hearing on the ruling next week. If it affirms the preliminary ruling, the ITC will issue its final ruling on February 1, 2018. A week later the ITC will issue the order and a 300% tariff, if it is affirmed all along the way, will be imposed on each of the 75 planes imported into the United States. Delta has said that it will not pay the tariff, endangering the entire order.

Canada has already withdrawn an order for 18 new Boeing F/A-18E Super Hornets and will instead purchase 18 used Super Hornets from Australia to top up its fleet and meet the Royal Canadian Air Force’s commitments both to NATO and the North American Aerospace Defense Command (NORAD).

The order for 88 new fighters was expanded from an initial plan to order 65. Bids will be reviewed in late 2019 and early 2020, and the government expects to award the contract in 2022 with first deliveries in 2025.

A report at Bloomberg News ¬†indicates that Bombardier is lining up U.S. politicians, vendors and customers to support its claim at next week’s hearing that more than 50% of the parts for the CS-100 are made in the United States before final assembly is done in Montreal.

Delta Air Lines, which is expected soon to announce an order for 100 new single-aisle aircraft, along with options for up to another 100, may also put some pressure on Boeing to withdraw its complaint if Boeing wants to win the larger order from arch-rival Airbus.

UPDATE: According to a report by Jon Ostrower at CNN, Delta is set to announce an order for 100 single-aisle Airbus A321neo passenger jets later Wednesday or at Thursday’s investor’s day meeting. Boeing had countered with its 737 MAX 10. The agreement also means that Boeing’s trade case against Bombardier will continue. Worse for Boeing, the order along with options on another 100 Airbus planes fills Delta’s needs for new single-aisle airplanes well into the future.

Meanwhile, Boeing stock posted another 52-week high Wednesday morning of $295.83. The 52-week low is $153.06, and the consensus 12-month price target is $289.79.

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