The top U.S. trade agency has struck down punishing duties of nearly 300 per cent on imports of Bombardier Inc.'s C Series airliners into the United States – a surprise victory for the Canadian plane maker as attention now shifts to its plans to build the marquée aircraft in Alabama.
Bombardier shares punched up 15 per cent to $3.54 in afternoon trading on Friday on the Toronto Stock Exchange as uncertainty lifted about the C Series' prospects in the world's largest aircraft market. They last touched this level in early 2015.
The U.S. International Trade Commission (ITC) is a quasi-judicial federal agency that oversees U.S. trade actions.
It ruled on Friday that U.S. giant Boeing Co. and the country's aerospace industry were not injured or could not be injured by imports of Bombardier C Series planes. Its reasons will be released in February. The ruling, a victory for Bombardier and its government partners, is the final step in a U.S. investigation of Bombardier's 100- to 150-seat C Series following a petition by Boeing alleging that the plane benefited from massive state subsidies that allowed the airliner to be sold in the United States at less than fair value. It means duties totalling nearly 300 per cent imposed by the U.S. Department of Commerce on the C Series will be called off.
"Today's decision is a victory for innovation, competition and the rule of law," Bombardier said in a statement. "It is also a victory for U.S. airlines and the U.S. travelling public. The C Series is the most innovative and efficient new aircraft in a generation. Its development and production represents thousands of jobs in the United States, Canada and the United Kingdom."
Politically, the ruling is a blow to the Trump administration's protectionist agenda. It coincides with the sixth round of talks to renegotiate the North American free-trade agreement (NAFTA) unfolding at a Montreal hotel not far from Bombardier's headquarters. The United States is demanding changes to the pact that would tilt the deal in Washington's favour, while Canada and Mexico are fighting to preserve the continental free market.
"This shows an impressive level of resistance to political influence in the heart of the U.S. government," said Richard Aboulafia, an analyst with the Teal Group.
The Canadian government had intervened in Bombardier's favour by trying to negotiate a deal with Boeing and, when that did not work, supported the Canadian firm at the ITC. The decision buoyed British lawmakers, including Greg Clark, Secretary of State for Business, Energy and Industrial Strategy, and union leaders.
"We're absolutely over the moon," said Davy Thompson, a regional co-ordinator for the labour union Unite, which represents Bombardier workers in Belfast.
Union leader Jerry Dias, president of Unifor, celebrated the ruling as a sharp rebuke to U.S. President Donald Trump. "This really is about Trump's bullying tactics, pushing Canada around – same thing that's going on in the softwood lumber dispute, same thing that's going on in this hotel right now with NAFTA," Mr. Dias told reporters in a hallway outside the talks. "It's good to see that even within the U.S. internal system, that they're viewing the Trump administration and his tactics as foolish."
The ITC panel had appeared unsympathetic to Boeing's arguments at the hearing last month in Washington. The commissioners repeatedly grilled Boeing on its assertion it had been hurt by Bombardier, asking Boeing's representatives how they could argue that the company's 737 Max7 was in the same market segment as the C Series.
Boeing issued a statement on Friday that suggested it might appeal the decision or launch a new petition. It could lose military business in Canada and the Britain if it does.
"Boeing remains confident in the facts of our case and will continue to document any harm to Boeing and our extensive U.S. supply chain that results from illegal subsidies and dumped pricing," the company said. "We will not stand by as Bombardier's illegal business practices continue to harm American workers and the aerospace industry they support."
Threat of a new challenge underscores the urgency for Bombardier and Airbus SE, its new C Series partner, to finalize their tie-up and launch their planned C Series manufacturing line in Mobile, Ala. Bombardier has not had a U.S. C Series order since Boeing launched its trade challenge last spring, confirming in a Jan. 24 filing to the ITC that a "Boeing effect" was deterring potential U.S. customers.
"There is no returning to the status quo," Bombardier said in the filing. "The only way to counter the risk created by Boeing's petition is through a new U.S. final assembly line."
The key to new U.S. orders for the C Series now sits in Brookley Field, a vast former air force base next to Mobile Bay on the southern outskirts of Mobile.
By building the C Series at Airbus's manufacturing site in Mobile, the aircraft will become a domestic product that is not subject to import duties, Bombardier says. The company plans to spend $300-million (U.S.) to set up the assembly operations, and adds that most of the parts to be assembled there will be made in the United States.
The exact mix will be a balancing act. Too little U.S. work content and the company might not be able to dodge U.S. tariff barriers on the plane; too much and Quebec taxpayers who have provided public aid to Bombardier can complain they are subsidizing jobs in Alabama.
"We expect that with the building of a U.S. assembly plant, the whole trade dispute will be irrelevant," National Bank analyst Cameron Doerksen said in a note.
Bombardier's biggest U.S. C Series order is from Delta Air Lines, which ordered 75 planes in a deal that cemented the aircraft's market viability.
Bombardier says plans to assemble the C Series in Mobile are progressing steadily. But when The Globe and Mail toured the site last month, Airbus said no details had yet been worked out.
"The deal's not done yet … so we're in a holding pattern," said Kristi Tucker, Airbus Americas communications director. "We can't talk about details. We don't have them yet."
The Airbus assembly line gives some idea of how it might look. The pieces of the plane arrive partly assembled – the forward fuselage in Saint-Nazaire, France; the central fuselage in Hamburg; the wings in Broughton, Wales – and are fitted together in a massive hangar.
At the first station, the fuselage, still in two pieces, is fitted with galleys and washrooms. Moved by crane to a second station, the two parts are riveted together. At a third, the wings and landing gear are attached, and electric wiring is added to the cockpit. Then, workers roll it by hand to the fourth station, where the tailplane is added, while overhead bins, panels and seat tracks are fitted inside the cabin. At a final stop, the engines are installed.
For Ms. Tucker, a native of neighbouring Georgia who speaks with a southern drawl, it's a point of pride that Airbus has shown "the naysayers" the region can build technologically advanced machines.
"'Dumb hicks down in Alabama can't build airplanes,'" Ms. Tucker paraphrases the criticisms when Airbus set up in Mobile.
"There's unfortunately a stereotype about the South, which is so untrue."