Boeing Sticks Its Foot In It
Consolidation of the commercial airliner business has been happening since the first passenger-carrying biplanes rattled across the landscape. In the middle of the last century, there were dozens of viable manufacturers innovating and doing their best to cater to a rapidly evolving industry.
But being the best has never been a guarantee of business success and Douglas Aircraft was a classic example. The DC-3 was hands down the most successful design of its time but Douglas was unable to leverage that into a dominating position in the jet era. The DC-8 was a rushed response to the Boeing 707 and while it had its fans as a “pilot’s airplane” it never seriously challenged the 707.
On the other hand, the DC-9 was a tremendously successful design that didn’t end commercial service in the U.S. until 2014 when Delta finally retired the steam-gauge workhorses after 50 years of service.
So it’s more than a little ironic that Delta’s choice for replacing the DC-9, whose derivatives ended up being built by Boeing until the middle of the last decade, is the Bombardier CSeries. It ordered 75 with an option for 50 more and nobody is denying it got a smoking deal on what current operators of the type say is a really good airplane.
That choice turned into one of the biggest shifts in dynamics in the aerospace industry in decades. It also sets the stage for a major battle of giants.
Boeing started the spat by trying to keep Bombardier’s little jets out of the U.S. It’s quickly turned into full-scale warfare with arch-enemy Airbus and the battleground will be the U.S. It also really annoyed Canada, which may not sound like a big deal but it has a role to play in all this.
Boeing convinced the Department of Commerce to slap an unprecedented 292 percent tariff on the CSeries that Delta ordered in a transparent appeal to economic nationalism.
Bombardier responded by turning the CSeries program over to Airbus with the idea of building Delta’s planes at Airbus’s Mobile, Alabama, facilities. They would be late, but Delta would eventually get them.
Then, in a decision that surprised every aviation pundit, the U.S. International Trade Commission unanimously rejected the Department of Commerce tariffs, saying since Boeing doesn’t make 100- to 150-seat airliners (since it stopped making the DC-9-derived 717), Boeing couldn’t be harmed by the CSeries sale to Delta.
The whole thing changed.
Delta can now get its aircraft on time and Bombardier has wisely committed to continuing the arrangement with Airbus because that will blunt any further challenges on U.S. deals that Boeing might mount. Cash will be flowing and the CSeries will be in service in the U.S. sooner rather than later. Airbus can be ready to crank out CSeries in Mobile as Delta's U.S. competitors, comforted by the big safety net the association with Airbus offers in the future support of the type, watch the efficient new jets start playing in their sandbox.
Boeing hasn’t commented on the trade commission decision and says it’s waiting for the full reasoning before it decides on a response. It might appeal but the decision was unanimous and the odds of success don't look good. At best it would be a delaying tactic but Airbus and Bombardier seem to have that covered.
In the meantime, Boeing is talking to Embraer about taking over its airliner business in a Hail Mary rearguard action. While Embraer has a solid track record in the small airliner business, any deal with the Brazilian company will not include any defense work because the government of Brazil, which holds a veto vote on the Embraer board of directors, is not about to give up those capabilities to a foreign power.
There are no such constraints on the Bombardier/Airbus deal and that may be a factor in Canada’s long-overdue purchase of $20 billion worth of fighters.
Until the CSeries fracas, Boeing was considered the odds-on favorite to win that contract with the last production run of its Super Hornet but the trade dispute has all but ruled that out according to Prime Minister Justin Trudeau.
So, in its attempt to swat a fly, Boeing has inadvertently stuck its hand down the throat of a lion. Time will tell how many fingers it loses.
I wonder what Donald Douglas would think.