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Brazil has filed a World Trade Organization (WTO) complaint against Canada, over subsidies to Bombardier. Brazil has been threatening to file an official complaint since Bombardier Inc. won a major CSeries order (75 aircraft) from Delta Airlines Inc. last year.
The Skinny
In 2016, Bombardier received $2.5 Billion US in government support – $1 Billion (from Quebec government) for its C-Series program and another $1.5 Billion (from Caisse de dépôt et placement du Québec, the largest pension fund in the province) towards its rail business. Earlier this week, Canadian federal government announced another $372.5 million to Bombardier, in interest-free loans. The bulk of this loan however, is to support Bombardier’s Global 7000 business aircraft program.
Shortly after the 2016 funding announcements, Bombardier won a 75 aircraft order from Delta, beating its competition, Embraer. Brazil alleges that the heavy funding in Canadian subsidies played a major role in Embraer losing out on the Delta deal. Brazil also believes that the subsidies allowed Bombardier to offer the CSeries aircraft at artificially low prices, thus undercutting the competition.
Canada and Brazil have been part of bitter trade disputes within the aerospace sector, over several years in the 90’s. If that is any indicator, this new complaint could go down the same route – several years of litigation.The 2017 WTO complaint is linked here.
Bombardier’s CSeries aircraft program status report suggests a total order of 358 aircraft (CS100 and CS300) with only 2 CS100 delivered and 356 backlog.
Source: C Series program status report Sep 30, 2016 (www.bombardier.com)
My Thoughts
Both Bombardier and Embraer are major players in the world, along with Boeing and Airbus who get government support. Bombardier is a source for many well paying Canadian jobs and I can see why Canada is keen on supporting their interests. Despite the monetary support, Bombardier is still struggling as a company and the CSeries aircraft haven’t sold enough to bolster the bottom line. If the latest WTO complaint is accepted and moves ahead, I foresee Canada fighting it tooth and nail!
Featured Image Credit: http://commercialaircraft.bombardier.com
