The federal government will officially punish Boeing Co. for its trade dispute against Canada's Bombardier Inc., replacing the planned order of 18 new Boeing jets with the purchase of up to 30 second-hand fighters from the Australian military, sources said.
Government and industry sources said the Australia deal will be announced as early as next week, with the Royal Canadian Air Force needing 28 to 30 used F/A-18 fighter jets to meet its international commitments.
Defence Minister Harjit Sajjan has said Canada cannot meet all of its obligations to the North American Aerospace Defence Command (NORAD) and the North Atlantic Treaty Organization (NATO) with its current fleet of CF-18s, arguing new fighter jets are needed before the entire fleet is replaced in the next decade.
"We are going to fill that interim capability gap," he told reporters on Tuesday. "I look forward to making the announcement at the appropriate time."
The government's decision to buy Australian fighter jets stands to increase tensions with Boeing, which has repeatedly warned that billions of dollars in business activity in Canada are at stake in the ongoing dispute.
Speaking to The Globe and Mail in September, Boeing International president Marc Allen said the federal government should not forget that Boeing does $4-billion a year of business in Canada, with 560 suppliers and an overall impact of 17,000 jobs.
"If Canada kicks Boeing out, I think that will be deeply unfortunate for us both. It would be a deeply unfortunate outcome," he said. "It has to be a two-way street, there has to be this mutually beneficial relationship for it to be one that grows, one that both sides are happy and excited about."
In addition, industry sources said it remains an open question whether Ottawa will be saving money by buying second-hand Australian jets that are nearly as old as Canada's CF-18s.
The U.S. Department of Defence said in September that the contract for the Super Hornets could be worth up to $6.4-billion.
Sources said that in order to offer the same capabilities as 18 new Boeing Super Hornets, which were the federal government's first choice, the RCAF will need at least 10 additional second-hand fighter jets.
A Canadian delegation travelled to Australia in August to inspect the used aircraft. At the time, Prime Minister Justin Trudeau and his top ministers said Ottawa would not do business with Boeing as long as it was engaged in a dispute with Bombardier.
Boeing filed a trade complaint against Bombardier last April, alleging the Canadian plane maker used unfair government subsidies to clinch an important contract for 75 CS 100 planes to Atlanta-based Delta Air Lines at "absurdly low" sale prices.
Commerce sided with Boeing in rulings in September and October and slapped preliminary import duties totalling 300 per cent on C Series planes. That legal process continues with final rulings expected by the U.S. International Trade Commission early next year.
Bombardier denies any wrongdoing and says Boeing cannot prove it was harmed by the Canadian company's actions because it did not offer Delta any planes of its own.
Canada, Britain and Quebec, which all provided support to Bombardier to get the C Series to market, say their investments adhere to international rules.
"Boeing is underestimating what they are tackling. It's not just the company but countries" that they're targeting, Bombardier chief executive officer Alain Bellemare said at an investors conference in Boston last month. "Unfortunately, I think they're taking advantage of a [political] context that's favourable to them."
In October, Mr. Trudeau said he warned U.S. President Donald Trump that the trade dispute was blocking "any military procurements from Boeing." It has been the standard line in Ottawa for months that Boeing, having failed to act as a trusted or valued partner, has effectively been shut out of any new federal contracts.