Boeing warned Monday that its 737 Max 7 passenger jet may not survive if Bombardier continues to sell planes in the U.S. below fair-market value.
"Our Max 7 is at extreme risk," Kevin McAllister, chief executive officer of Boeing Commercial Airplanes, told a panel at the U.S. International Trade Commission. "If you don't level the playing field now, it will be too late."
The Max 7 is the smallest of Boeing's upgraded 737 airplanes. The company has accused Bombardier of dumping its narrow-body C Series jet, which in some configurations can carry a similar passenger load, on the U.S. market at below-market prices and taking unfair subsidies from the Canadian and Quebec governments. The International Trade Commission, a quasi-judicial body, is hearing arguments in the case and is expected to give its final ruling next month.
Canada's ambassador to the U.S. said a ruling in favor of Boeing would disrupt supply chains in the aerospace industry and cost American jobs, as portions of the C Series are made in the U.S.
But McAllister said Bombardier is offering its C Series at "used-airplane prices," putting pressure on competitors to lower prices. "Customer demand for reduced prices is greater than ever," he said. "The harm is real right now."
Boeing won the first round in its fight with Bombardier over the C Series jets. The U.S. Commerce Department sided with the Chicago-based company in a preliminary ruling in October and ordered tariffs of about 300 percent. The International Trade Commission process runs parallel to one run by the Commerce Department and will decide if the tariffs become permanent.
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.
A decision in Boeing's favor "would put U.S. jobs in jeopardy," Canadian Ambassador David MacNaughton said Monday. "There is no reason to believe that an affirmative determination would lead Boeing to create any more jobs to compensate for this loss to the U.S. workforce."
The International Trade Commission ruling is critical to Bombardier's medium-term profitability as it prepares to deliver the planes to Delta Air Lines, which has vowed not to pay the 300 percent tariff. In April 2016, the No. 2 U.S. airline ordered 75 of Bombardier's CS100 jets. The order has a list value of $5.6 billion before customary discounts.
Bombardier hasn't disclosed the price for Delta, nor has it revealed its unit costs in building the aircraft. Losing the case would make other U.S. carriers hesitant about buying the C Series and could prompt Delta to drop the order, analysts have said.
Bombardier, a crown jewel of Canadian manufacturing, has billed itself as a major U.S. employer in the run-up to the trade commission hearing. It employs about 7,000 workers in 17 American states.
Boeing's complaint represents a departure from airline industry practice, where battles over government subsidies are generally conducted by diplomats or at the World Trade Organization in Geneva. Boeing for years shied from mounting a frontal assault on Airbus, its chief global rival, for fear of angering U.S. airlines or sparking retaliation by European governments.
"No one's ever used the trade laws in this way," said Edward Alden, a trade expert at the Council on Foreign Relations. "This is really a watershed case, to go against Bombardier in this way. It's a sledgehammer."
Information for this article was contributed by David J. Lunch of The Washington Post.
Business on 12/19/2017