BUSINESS

Bombardier Lands Large Plane Order As WTO Launches Probe Into Subsidies

A good-news, bad-news sort of day for the civil transport company.

09/29/2017 10:59 EDT | Updated 09/29/2017 13:12 EDT
A Bombardier turboprop passenger plane sits in a hangar at the Bombardier facility in Toronto, Ont., Wed. July 25, 2012. Bombardier Inc. announced the largest potential Q400 turboprop order Friday on the same day that the World Trade Organization formally established a panel to review CSeries subsidies.

MONTREAL — Bombardier Inc. announced the largest potential Q400 turboprop order Friday on the same day that the World Trade Organization formally established a panel to review CSeries subsidies.

The Montreal-based company said SpiceJet will become the launch customer for its largest turboprop after placing a firm order for 25 high-density Q400s, with an option for 25 others.

If all 50 planes are purchased by the Indian airline, it would be Bombardier's biggest-ever sale of Q400s.

Bloomberg via Getty Images
Alain Bellemare, president and CEO of Bombardier Inc., speaks during a discussion at the U.S. Chamber of Commerce aviation summit in Washington, D.C., Thurs. March 2, 2017.

The establishment of a dispute settlement panel comes a month after consultations with Canada failed to resolve Brazil's complaint that government subsidies for the aircraft are inconsistent with Canada's WTO obligations.

No panel members have yet been appointed in what could be a lengthy process.

The WTO review comes in the midst of preliminary duties being imposed on CSeries exports to the United States by the U.S. Department of Commerce. Bombardier was hit this week with nearly 220 per cent countervailing duties. It expects a large anti-dumping duty to be announced on Wednesday.

The preliminary duties, which far exceed what petitioner Boeing demanded, will be decided in the coming months.

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US$3 billion in subsidies


Brazilian rival Embraer said the WTO panel will examine more than US$3 billion in subsidies received from the governments of Canada and Quebec.

"We believe that the decision of the Commerce Department reinforces the Brazilian government's claim in the panel opened today at the WTO," Embraer CEO Paulo Cesar Silva said in a news release.

He said the government subsidies have allowed Bombardier to sell the CSeries at artificially low prices, that distort the global market and harm competitors.

The latest on the Boeing-Bombardier dispute:

Bombardier couldn't be immediately reached for comment, but it said in August that it was disappointed by Brazil's request.

The company has said it was ready to respond, adding that the investments and contribution programs comply with all WTO and international trade rules.

SpiceJet originally signed a letter of intent last summer to purchase 86-seat Q400s, but has agreed to buy the 90-seat aircraft, pending certification by regulatory authorities.

"This order confirms the airlines' increased capacity needs on regional routes with high passenger demand and demonstrates the increased profitability potential that this unique turboprop configuration has to offer," stated Fred Cromer, president of Bombardier Commercial Aircraft.

Amit Dave / Reuters
A SpiceJet passenger aircraft takes off from Sardar Vallabhbhai Patel international airport in Ahmedabad, India May 19, 2016. The company has ordered up to 50 Q400 turboprop aircraft from Bombardier.

SpiceJet chairman Ajay Singh said the order will enhance service to smaller towns and cities in one of the world's fastest-growing regional markets.

"We have worked hard over the years to put these smaller towns on the country's aviation map and will strive to keep that momentum going in the times to come," he said in a news release.

SpiceJet operates 20 78-seat Q400s for use on domestic and international routes.

Bombardier has received firm orders for 610 Q400 aircraft that are assembled in Toronto.

The full SpiceJet order would have a list-price value of US$1.7 billion, although it's typical for purchasers to get discounts for large orders.

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