For years the Canadian company Bombardier has endeavored to design and build a state-of-the art, single-aisle passenger aircraft. With its C Series, it looks as though it has succeeded, which is good news for the flying public and airlines. Boeing, however, is not happy.
After Delta Airlines placed an order for 75 of Bombardier's new C Series, Boeing charged Bombardier with unloading the planes in the U.S. at below-cost prices. In fact, it has now asked the U.S. International Trade Commission to lay anti-dumping and countervailing duties against the C Series.
To prevail, Boeing must show it has been injured by unfair trade practices. But the real risk of injury in this case is not to Boeing, which earned record profits per share in the second quarter and has increased its yearly earnings forecast, but to consumers and to future innovation.
Bombardier's new C Series represents a real step-change for passengers. Its seats are two inches wider than Boeing's single-aisle aircraft. Addressing another frequent passenger complaint, the C Series' overhead bins were designed so each passenger can stow a roller-suitcase. In an age when baggage fees draw the ire of the flying public, that is a real plus. The bins are also lower so passengers can more easily access them. Even the windows are larger, much larger, and configured to maximize the chance to take in the view.
On top of that, C Series is powered by a revolutionary new engine from the historic American engine manufacturer Pratt & Whitney. These new engines reduce the C Series' noise footprint by 50 to 75 percent, greatly enhancing the flying experience for passengers. It also means more options for carriers who are dealing with various cities' noise restrictions. On top of that, the innovative materials used in the C Series, along with the new engine, ensures better fuel burn and fewer emissions. For these and other reasons a pilot review in Aviation Week earlier this year proclaimed the C Series an "icon in its class."
So why is Boeing upset? Because they don't have an aircraft that can compete. Delta was looking for an aircraft with a seating capacity of about 100 seats. Boeing doesn't make a plane in this size. In fact, Boeing has been focused on building bigger planes, such as the 787. For over a decade, Boeing ignored the market for 100-seat airplanes after the commercial failure of the 717, successor to the MD90, MD80-series, and DC-9, which Boeing acquired on its path to commercial aerospace market dominance. So all Boeing could offer Delta was used 717, a less efficient, less environmentally friendly and less passenger friendly aircraft.
Bombardier had taken a different path, anticipating a market demand for a 100 seat aircraft.
Boeing now claims that the C Series will take sales from its 737 aircraft. But this is untrue, as the 737's smallest version has 138 seats, making it still too large for many flights. As Delta explained in opposing Boeing's claim, larger planes with empty seats and higher fuel consumption would force carriers to either raise prices or stop flying some routes. Either way, consumers would lose.
Delta's decision makes sense based on today's market dynamics. Delta inherited a wide range of models following its merger with Northwest, including aircraft from Boeing, Bombardier, Embraer, and Airbus. But Boeing's current offering of new aircraft simply did not fit Delta's mission profile – a critical element of building an economically strong and successful airline. Boeing continues to be one of a handful of companies that makes excellent large passenger jets. But Delta needed something smaller, and Bombardier's fine new product fit the bill.
All of this makes Boeing's claims that it is being damaged by Bombardier's alleged unfair practices seem hollow. Boeing has never been in competition for lower capacity narrow-bodied aircraft – that market space is almost entirely served by manufacturers such as Bombardier and Embraer.
Far from being damaged by alleged dumping, Boeing is misusing legal trade remedies to damage Bombardier's ability to serve the smaller passenger craft market. That may be a good strategy to protect Boeing's bottom line, but consumers are the big losers.
Boeing does not have a well-structured and fact-based case that it has been damaged by Bombardier. It is trying to capitalize on current trade skepticism in a bid to undermine Bombardier, perhaps to allow it time to get back into a market it chose to abandon.
Boeing's path to future success should not be paved with shaky and unfair trade accusations designed to undermine innovative companies. A Boeing victory in this case would be a loss for innovation, the environment, the flying public, and competitive airlines.
Darryl Jenkins is an airline analyst with more than 30 years of experience in the aviation industry.
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