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Thread: Will Boeing vs Bombardier dispute jeopardise F/A-18 or F-35 sales to Canada?

  1. #1
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    Will Boeing vs Bombardier dispute jeopardise F/A-18 or F-35 sales to Canada?

    With the recent reports of USA proposing vast tariffs on the sale of Bombardier C-series airliners to US airlines, will Canada be prepared to order fighters from Boeing or Lockheed?

    I cannot see how Canada could order F/A-18 aircraft from Boeing when the company has called for tariffs that will make it impossible to sell the C-Series into the US market. I don't really understand the Boeing position since the company will lose a sale worth perhaps $5 billion plus if Canada does not order 24 F/A-18's while the Delta order for 75 aircraft would not be worth $5 billion if Delta switched to Boeing 737.

    Is Boeing being dumb here? Is the USA being dumb here? After all Canada could opt for Rafale/Gripen/Typhoon if need be.
    Sum ergo cogito

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    Canadian politicians will use this as an excuse to switch back to F35. Period.

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    I don't really understand the Boeing position since the company will lose a sale worth perhaps $5 billion plus if Canada does not order 24 F/A-18's while the Delta order for 75 aircraft would not be worth $5 billion if Delta switched to Boeing 737.

    Is Boeing being dumb here? Is the USA being dumb here? After all Canada could opt for Rafale/Gripen/Typhoon if need be.
    Boeing just squished a future threat and competitor.

    A few years ago there were a few articles and even discussions on how Boeing didn't really care any more about the fighter market and how their biggest strength is the transport and airline segment. So it's no big surprise that Boeing is willing to throw away any fighter sales to Canada, especially since their military procurement is horrible and no future sales are a given, and instead guarantee that their airliner market is blocked from another competitor.

    Cheers,

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    Get_it... Boeing don't offer a competitor to the current C-Series range. The smallest 737 would have a significantly higher number of seats and have much higher operating costs than the CS100 ordered by Delta (as a 717 replacement).Attempting to squish Bombardier's competitive offering in 100-110 seat market in the hope of forcing US airlines to buy larger, far less efficient aircraft (when what is needed is a 100-110 seat aircraft) will damage the profitability of US airlines.

    I take your point that Boeing is trying to stifle competition. Do you think Delta will be inclined to buy narrow body aircraft in the future? I think Airbus has a significant lead in narrow body product at the moment with the A320NEO (until Boeing can deliver its successor to the 737MAX post 2025). I don't think Delta will buy Boeing narrow bodies until then. If Boeing is going to go to great lengths to damage Delta's interests, I don't see Delta buying Boeing wide bodies if they have an alternative either. Airbus offers alternatives to both the B787 and B777.

    I don't think Boeing can prevent Bombardier getting the C-Series to succeed simply because they offer no similar product. USA is not the only market for lower capacity narrow bodies.
    Sum ergo cogito

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    Boeing has taken no action against Embraer which makes the E195.

    Maybe that is because Embraer is not selling E195s cheaper than it cost to build them.

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    I take your point that Boeing is trying to stifle competition. Do you think Delta will be inclined to buy narrow body aircraft in the future? I think Airbus has a significant lead in narrow body product at the moment with the A320NEO (until Boeing can deliver its successor to the 737MAX post 2025). I don't think Delta will buy Boeing narrow bodies until then. If Boeing is going to go to great lengths to damage Delta's interests, I don't see Delta buying Boeing wide bodies if they have an alternative either. Airbus offers alternatives to both the B787 and B777.
    What does Airbus have to do with any of this? There is no logical reason to associate the dispute between Boeing and Bombardier with a future decision by Delta to order Boeing aircraft. Delta as a business will order whatever aircraft is most appropriate and cost effective for its route structure (which incidentally in Delta's case often involves used aircraft and not new purchases)

    As for your claims on the A320NEO, if you look at orders since both were available to order it is pretty comparable. They are close enough in capability that individual airline price, fleet and routes play a bigger role than capability.

    Canadian politicians will use this as an excuse to switch back to F35. Period.
    Any potential SH order is about interim lift. While it may aid Boeing in the upcoming competition to replace the whole fighter fleet if the SH is already present it is just that, a competition. Given current capability, price, production capability and RCAF preference the F-35 is certainly the best option but in Canada those previous metrics mean little...

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    Boeing has taken no action against Embraer which makes the E195.

    Maybe that is because Embraer is not selling E195s cheaper than it cost to build them.
    I think that initial production costs always exceed sales revenue where airliners are concerned. For example it took Airbus 8 years before the cost of manufacturing an A380 dropped below the revenue received for the aircraft. Same selling at a loss situation (cost of producing an aircraft exceeded sales revenue from that aircraft) was the case with the Boeing 787. Same situation doubtless applies to Bombardier with CS100 production. And Mitsubishi with MRJ production. And Embraer with E195 production.

    It takes time for production to reach the point at which it becomes profitable. Until then all aircraft that are produced are produced at a loss.
    Sum ergo cogito

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    Delta as a business will order whatever aircraft is most appropriate and cost effective for its route structure...
    Isn't that precisely why they ordered the CS100?
    Sum ergo cogito

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    The Canadian PM has said he won't buy F-18s from a company working against the Canadian firm. (Though if you think about it, could that threat could be seen as being an unfair practice? ).

    Realistically, can they scuttle the deal or are they pretty well married to more Hornets to keep commonality?
    Or, is that threat just a way to cancel the order...(and not order a replacement)...while avoiding looking like he's anti-defense?
    There are two sides to every story. The truth is usually somewhere between the two.

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    Quote Originally Posted by Spitfire9
    I don't really understand the Boeing position since the company will lose a sale worth perhaps $5 billion plus if Canada does not order 24 F/A-18's while the Delta order for 75 aircraft would not be worth $5 billion if Delta switched to Boeing 737.
    Defense is secondary to Boeing. Their main business is commercial airplanes and they will go above literally anything to protect it. Current CS-series isn't a direct competitor to Boeing, but future larger versions of it will be hence why they don't like it.

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    Quote Originally Posted by Spitfire9 View Post
    Isn't that precisely why they ordered the CS100?
    But you have yet to make the link between Boeing and Delta. Has Delta released a public statment condemning Boeing for their actions? In the end Delta really doesn't care about what Boeing does.

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    Same selling at a loss situation (cost of producing an aircraft exceeded sales revenue from that aircraft) was the case with the Boeing 787.
    Yes. But Boeing took it to new heights with the 787 program. Search for 787 deferred cost. About $27 billion.

    This will bite them in the future imho.
    Last edited by eagle; 2nd October 2017 at 03:58.
    How can less be more? It's impossible. More is more.
    Yngwie Malmsteen

  13. #13
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    Canada will also have to pay for it's missile defence. I doubt it can afford both or not one of them.
    http://nationalpost.com/opinion/john...-defend-canada
    John Ivison: 'U.S. policy is not to defend Canada' in the event of a missile attack, general says

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    But you have yet to make the link between Boeing and Delta.
    No? I draw to your attention to the fact that Delta ordered a Canadian product with (I imagine) absolutely no tariffs under the NAFTA arrangement because the management of Delta saw this as the best option for new lift. Boeing (a beneficiary of extraordinary tax breaks, as I understand, from the state(s) in which it has manufacturing plants) objected to the mode of financing of Bombardier. Result: if a massive tariff is applied to C-Series aircraft imported into the USA - unexpectedly - all the time, effort and cost incurred by Delta in negotiating a deal with Bombardier will have been wasted. Much more importantly Boeing's actions will have prevented Delta from re-equipping with metal suited to their needs ie will cost Delta an awful lot of $$$.

    Has Delta released a public statement condemning Boeing for their actions? In the end Delta really doesn't care about what Boeing does.
    Forget the public statement. Refer to what I wrote above. OK, I'm British, so inclined to understatement, but I think Boeing will be off Delta's Christmas card list for quite some time.
    Sum ergo cogito

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    Canadian politicians will use this as an excuse to switch back to F35. Period.
    Agreed. Unless this opens a can of worms where Canada chooses to distance itself, albeit unwillingly, from US kit. If USA causes the Canadian aircraft industry sufficient avoidable problems it should not be surprised if Canada feels pushed to resort to other sources of supply. It is not as if Boeing and Lockheed were the sole purveyors of non-Eastern bloc effective supersonic fighters. Is military aviation commonality worth accepting the suppression of your civil aviation industry?
    Sum ergo cogito

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    Quote Originally Posted by Spitfire9
    Agreed. Unless this opens a can of worms where Canada chooses to distance itself, albeit unwillingly, from US kit. If USA causes the Canadian aircraft industry sufficient avoidable problems it should not be surprised if Canada feels pushed to resort to other sources of supply. It is not as if Boeing and Lockheed were the sole purveyors of non-Eastern bloc effective supersonic fighters. Is military aviation commonality worth accepting the suppression of your civil aviation industry?
    This is a trade dispute between the Boeing & Bombardier (supported by their respective govts) - nothing to do with Lockheed Martin.

    The only way LM gets dragged in, is if the affair expands into a general trade war against the US. In which case, why stop at fighter jets - bilateral trade is wide & deep (defence being only a small part). They could go ahead and block US corporations from all Canadian state contracts (with the US likely responding in kind).

    Alternatively, Canada could lodge an appeal with the WTO, and let a neutral party investigate & rule on the matter.

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    Or alternatively, Bombardier goes to the bank, get a loan and payback the subsidies it got from the Canadian gov at a time where help was justified.
    I'am on the opinion that Boeing just can't accept that Bombardier delays any reimbursing at a time when there is not much more justification for it. State loans can't simply constitute any hidden capitalization, otherwise there are no free-market (hence the malus on the 20M$ Import price).
    I don't think that the dispute has any underlay or deeper problems.
    Last edited by TomcatViP; 2nd October 2017 at 19:26.

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    @ Vnomad:

    it is not boeing but US Commerce Department who decided to impose a tax on Bombardiers jets.. so, if an official US government body starts to do so, LM as a US company may just as well have to pay the bill.. that is, if Canada maintains its stand

    as for "repaying subsidies",

    https://leehamnews.com/2017/07/20/bo...ns/#more-24180

    looks like Boeing sells its Dreamliner too cheap?

    and let's not speak about the F-35... the development paid for by the US government, is it a subsidy? If it's not included in the aircarft price paid by foreign buyers, it looks like it...

  19. #19
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    Quote Originally Posted by TooCool_12f
    it is not boeing but US Commerce Department who decided to impose a tax on Bombardiers jets.. so, if an official US government body starts to do so, LM as a US company may just as well have to pay the bill.. that is, if Canada maintains its stand
    Why specifically Lockheed Martin? If Canada intends to respond by initiating a trade war and going after US companies that aren't party to the dispute - there's a whole gamut of them across industries, from GE to GM, that do business in Canada.
    Last edited by Vnomad; 2nd October 2017 at 21:27.

  20. #20
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    No? I draw to your attention to the fact that Delta ordered a Canadian product with (I imagine) absolutely no tariffs under the NAFTA arrangement because the management of Delta saw this as the best option for new lift. Boeing (a beneficiary of extraordinary tax breaks, as I understand, from the state(s) in which it has manufacturing plants) objected to the mode of financing of Bombardier. Result: if a massive tariff is applied to C-Series aircraft imported into the USA - unexpectedly - all the time, effort and cost incurred by Delta in negotiating a deal with Bombardier will have been wasted. Much more importantly Boeing's actions will have prevented Delta from re-equipping with metal suited to their needs ie will cost Delta an awful lot of $$$
    Delta currently operates approximately 480 Boeing aircraft. Bombardier will never be a tier one supplier to Delta. While Delta can support Bombardier they will always do what is best for their company which may very well be walking away from the CS100 order should the Boeing's case be validated.

    Forget the public statement. Refer to what I wrote above. OK, I'm British, so inclined to understatement, but I think Boeing will be off Delta's Christmas card list for quite some time.
    Do you think Delta has a Christmas card list and that Boeing cares whether they are on it... With 480 Boeing aircraft in the Delta fleet Delta is tied to Boeing support for many years.

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    and let's not speak about the F-35... the development paid for by the US government, is it a subsidy? If it's not included in the aircraft price paid by foreign buyers, it looks like it...
    First, Canada is a member of the JSF program, and continues to pay their membership fees, including US$30 million in April.

    Second, what does a commercial development of airliners have to do with the development of military aircraft.

    From the WTO

    III. Article 1

    A. Text of Article 1

    Article 1: Product Coverage

    1.1 This Agreement applies to the following products:

    (a) all civil aircraft,
    (b) all civil aircraft engines and their parts and components,
    (c) all other parts, components, and subassemblies of civil aircraft,
    (d) all ground flight simulators and their parts and components,

    whether used as original or replacement equipment in the manufacture, repair, maintenance, rebuilding, modification or conversion of civil aircraft. (2)

    1.2 For the purposes of this Agreement “civil aircraft” means (a) all aircraft other than military aircraft and (b) all other products set out in Article 1.1 above.
    https://www.wto.org/english/res_e/bo...craft_01_e.htm

    So the WTO agreement does not cover military aircraft except where stated below
    6.2 Signatories agree that pricing of civil aircraft should be based on a reasonable expectation of recoupment of all costs, including non-recurring programme costs, identifiable and pro-rated costs of military research and development on aircraft, components, and systems that are subsequently applied to the production of such civil aircraft, average production costs, and financial costs.

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    Boeing has taken no action against Embraer which makes the E195.

    Maybe that is because Embraer is not selling E195s cheaper than it cost to build them.
    They all do when they release new products.

    But the US is just doing this to set the precedent now. They are worried about Chinese and Russian wide bodies in the future. Not sure why they would worry about Canada and Russia. They just want to compliment the industry with some niche products.

    China should be treated separatly. They are rank mercantalists who would flood the world with jets just because.

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    @Ozair

    Of course on paper, you can make Boeing out to look like the innocent party.

    But we all know that Boeing is on the military industrial gravy train.

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    Does Delta even busy the small jets?
    Aren't most of its regional flights done by contract carriers (Skywest and the like)?

    As far as Boeing being off Delta's Christmas card list, as a former Delta employee, I can attest to their lack if generosity.
    No, card, snack or management thanks while working the holidays.

    At our local base, an extremely poorly run operation. I dare say your average McDonalds is better run
    There are two sides to every story. The truth is usually somewhere between the two.

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    @tomcat

    State loans can't simply constitute any hidden capitalization, otherwise there are no free-market (hence the malus on the 20M$ Import price).
    The "free market" when it comes to the parties involved, especially Boeing, doesn't exist. It doesn't exist for any of them. Its all a wishy washy half assed corporate state crony racket.

    Why Ex-Im Really Is Boeing's Bank.
    http://www.nationalreview.com/corner...-bank-policies

    Its a total racket for all of them. Boeing, the behemoth of the industry, with the addition of its military industrial gravy train division, and its own government garanteed bank, is 200% in the wrong here. Sure technically Bombardier bent the rules. But everyone does. It was nothing out of the ordinary.

    Boeing is bully. And a hypocrite. Full stop.

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    Just to get back to the question of whether this debacle will affect the prospects of Canada ordering an American Boeing fighter, I think it will have a big effect on Boeing's prospects of winning an F/A-18 order. Not so sure what effect it will have on F-35 prospects. Could result in a larger order for F-35 in the absence of an F/A-18 order. Could result in the Canadian government re-examining the F-18 replacement program.

    Any Canadians reading know what the Canadian reaction is likely to be?
    Sum ergo cogito

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    Just to get back to the question of whether this debacle will affect the prospects of Canada ordering an American Boeing fighter, I think it will have a big effect on Boeing's prospects of winning an F/A-18 order. Not so sure what effect it will have on F-35 prospects. Could result in a larger order for F-35 in the absence of an F/A-18 order. Could result in the Canadian government re-examining the F-18 replacement program.

    Any Canadians reading know what the Canadian reaction is likely to be?
    There is a whole thread devoted to the Canadian replacement. In a nutshell,

    Already occurred
    Liberal Govt campaigns on promise of no F-35 and wants open and honest competition
    Wins election but realises it is illegal to exclude F-35
    Liberal Govt claims existing Hornet cannot meet requirements and are old, makes baseless case for interim aircraft including silencing Canadian Military personnel from talking publically (bring in interim, delay open competition till later)
    Liberal Govt continues to fund F-35 SDD program and protect Canadian manufacturing jobs
    Liberal Govt tries to sole source SH (despite campaigning for competition)
    Boeing and Bombardier have their spat
    Canada looking at RAAF Hornets to plug non existant fighter gap

    IMO Future
    Canadian Govt locked in to open competition
    Canada buys F-35 after long protracted process as it has the best mix of capability, interoperability, price and protection of Canadian Industry.

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    As I said in list #9, the PM is looking for an excuse not to buy the F-18, then he'll say the F-35 is too expensive. The old procrastination ploy is what UK politicians have done for decades.

    My prediction is Canada will do a New Zealand and effectively do away with a combat air force.
    If there is trouble, they'll count on NATO and the U.S.

    If they need to "top off" their supply of Hornets, they'll go with ex-RAAF machines or ex-USN ships.
    I recall reading as a kid when they bought their F-18s, they consciously decided not to buy attrition aircraft, they effectively said "If we need more, we'll get free ex-USN aircraft".
    After all, that ploy worked when they got two batches of F-101s following their conservative government cancelling the Arrow.
    Last edited by J Boyle; 3rd October 2017 at 03:13.
    There are two sides to every story. The truth is usually somewhere between the two.

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    All western airplane manufacturers have a pretty good idea how to predict the cost to build an airplane. Rule of thumb is 60% of cost is purchased equipment, 30% labor and the remainder is QA and profit. And the same techniques can be used to predict the cost of your competitor's airplanes. NASA Glenn even wrote a handbook so anyone can do it. https://www.nasa.gov/pdf/263676main_...k-FINAL_v6.pdf

    Key drivers are the amount of money needed to develop the product and the Bank's (and Board of Directors') tolerance for how long it takes to repay the loan and start generating a profit.

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    I recall reading as a kid when they bought their F-18s, they consciously decided not to buy attrition aircraft, they effectively said "If we need more, we'll get free ex-USN aircraft".
    I've previously posted a paper that is available here, www.disam.dsca.mil/pubs/Vol%2013_1/OMB.pdf that talks about the acquisition and confirms that Canada did purchase attrition aircraft. In the process for the final two contenders, the F-16 and F/A-18, they expected the F/A-18 would have a lower attrition rate than the F-16 and therefore require a smaller fleet (mainly from two vs on engine). The F/A-18 though was the higher priced option, almost a third higher, even with additional F-16 attrition replacements but the final selection factored in the better capability of the F/A-18A versus the F-16A as well as better industrial offsets.

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