Gadfly

Boeing's Double Standards Are Truly Something to Behold

It's not just Bombardier. All passenger jet-makers have had some kind of helping hand.
From
Photographer: Todd Korol

Trade disputes have a way of bringing out the worst in people. Perhaps that’s because they’re fought by lawyers (sorry, lawyer friends!) but it’s also because hypocrisy is rarely far away. Take Boeing Co.’s complaint against Bombardier Inc.

On Tuesday, the U.S. Commerce Department slapped massive import duties on Bombardier’s C Series jet, which Boeing says benefited from subsidies and was sold far below cost to Delta Air Lines Inc.

Well, duh. If aerospace companies had never received financial assistance of one kind or other from governments, precious few large commercial aircraft would ever have been built.

Passenger jets take years to develop and the costs run into the billions. When the first planes are ready for delivery finally, airline customers typically aren’t willing to pay what the aircraft cost to build, in part because they’re taking a risk that it might suffer technical teething troubles.

These massive financial risks are a chief reason why Boeing and Airbus SE control an effective duopoly in large commercial aircraft, with all the (anti)competitive benefits that entails.

Boeing’s beef with Bombardier concerns the CS100 jet, which has slightly more than 100 seats, a market niche that Boeing executives were once pretty sniffy about, possibly with good reason.

Bombardier ran into all kinds of financial difficulties developing and trying to sell the innovative C Series, which led to a $1 billion bailout by Quebec in 2015. Bombardier persisted, yet no sooner had Delta thrown it a lifeline by placing a firm order for a few dozen C Series jets, Boeing fired off a complaint to the U.S. government.

Boeing’s fear, as its legal complaint makes clear, is that one day Bombardier will become a much stronger competitor. But Boeing’s aircraft sales are eight times larger than Bombardier's today. Taking legal action makes Boeing seem like both the playground bully and the class snitch.

Imposing tariffs is also potentially self-defeating for the U.S. True, the C-Series is a nominally Canadian aircraft but the engines and other components are made on the other side of the border. So rather than protecting American workers, Boeing might end up harming them. If Canada retaliates by refusing to buy military equipment from Boeing, that won’t help U.S. workers either.

Meanwhile, the accusation that Bombardier is selling planes below cost seems to ignore the fact that Boeing has done similar.

Building planes always involves a learning curve. Boeing ran up more than $32 billion in losses bringing the 787 Dreamliner to market and it's only now starting to recoup some of that money as it becomes more skilled at building them. Helpfully, those losses enabled Boeing to delay paying federal income taxes. Indeed, U.S. taxpayers have provided Boeing with plenty of assistance over the years -- be it in the form of tax breaks or multi-billion dollar military contracts.

There are numerous and interminable World Trade Organization disputes involving aviation companies and the only sensible conclusion is that nobody is entirely blameless when it comes to government support. It would be better if Boeing concentrated on out-competing Bombardier with innovative products, rather than accusing a comparative minnow of cheating.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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