The only reason Bombardier Inc. was able to win a major CSeries order from Delta Air Lines Inc. was because of potentially illegal government subsidies, according to a senior executive at Brazilian competitor Embraer SA.
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Embraer is considering its legal options, including a challenge to the World Trade Organization, Paulo Cesar Silva, the company’s president of commercial aviation, told trade publication Air Transport World (ATW).
“We are looking at the alternatives that we have in order to act against this. Could be the WTO, for instance,” Silva told ATW on the sidelines of the Regional Airline Association convention in Charlotte, N.C. this week.
Embraer spokeswoman Alyssa Ten Eyck confirmed that the quotes are accurate and reflect the company’s views.
In late April, Bombardier announced that Delta had placed a firm order for 75 CS100 aircraft with options for 50 more, making it the CSeries’ largest customer. The deal was touted as a “turning point” for Bombardier, which had struggled to generate new orders for the jetliner amid fierce competition from Embraer, Boeing Co. and Airbus Group SE.
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Silva told ATW that Embraer had competed “very aggressively” for the Delta order with its E190 jet, but ultimately lost out.
“Of course, we win and lose deals in the market,” Silva said. “My remarks and my complaint are given (because of) the way we lost this campaign.”
He pointed to the Quebec government’s US$1 billion investment in the CSeries program, as well as a request for another US$1 billion from the federal government that is currently under consideration.
“According to our experience in this campaign with Delta, clearly what was offered there was only possible because of the huge support coming from the government,” Silva said, adding that he believes Delta bought the CSeries below cost.
“We are very keen to compete on products — quality of products, efficiency, being on time, being on budget. However, it’s tough to compete against a government.”
According to our experience in this campaign with Delta, clearly what was offered there was only possible because of the huge support coming from the government.
Bombardier spokeswoman Marianella de la Barrera pointed out that the company has not yet received any money from either level of government.
“Even though the investments are still under discussion, we fully expect to be 100 per cent compliant (with trade rules),” she said.
“With respect to the actual transaction, Delta has said very publicly that they selected the CSeries on the merit of the aircraft being the best technology out there, so that’s how we won the deal. I think that’s a little bit of a hard pill for (Embraer) to swallow,” she said.
The Quebec government is still negotiating the terms of its contribution, with a deal expected by the end of June.
Meanwhile, Bloomberg News reported Friday that discussions with Ottawa have stalled over requests that the company eliminate its dual-class share structure and issue $1 billion in new stock.
Bombardier and Embraer have a long history of trade battles, with each company accusing the other of receiving illegal government subsidies and filing complaints against each other at the WTO.
The Office of the United States Trade Representative has also expressed concerns about the government support received by Bombardier, saying in its 2016 report that the U.S. “will continue to monitor carefully any government financing and support of the CSeries aircraft.”