Boeing Vs Bombardier Page |1

Boeing Vs Bombardier Page |2

Introduction
INDUSTRY OF AEROSPACE
All enterprises involved in airplane design, development, production, and maintenance were
included in the aerospace industry. The aerospace business was worth $838 billion in 2017.
Manufacturing of aircraft, engines, systems, and components accounted for 54% of this
market (see Exhibit 1), with the United States accounting for 49% and France accounting for
8.2%. (see Exhibit 2). The industry is controlled by Boeing and Airbus Group (Airbus). Boeing
and Airbus held 43.85 percent and 41.26 percent of the commercial aircraft market,
respectively (see Exhibit 3).
In 2017, a good year for the aerospace sector, 1,740 aircraft were delivered to market,
setting a new record number of aircraft supplied in a single year. The industry had a backlog
of 17,018 units, which equated to 9.8 years of manufacturing capability. 10 For the last
seven years, revenue passenger miles have increased by more than 5% every year, reaching
a peak of 7.6 percent in 2017. Passenger load (occupancy) was also above 80% for three
years. Cargo freight tonne-miles increased at a robust 9% rate over the year.
Boeing:
The headquarters of the world's largest aerospace firm was in Chicago, Illinois. Boeing was
founded in Seattle, Washington, in 1916. Institutional investors owned 69.9 percent of the
company's stock, while the general public held the remaining 22.8 percent. Boeing
Commercial Airplanes, Boeing Defence, Space & Security, and Boeing Global Services are the
three central business units of the firm. Its main production units were in the cities of
Everett and Renton in Washington, as well as North Charleston in South Carolina, with lesser
plants in Portland (Oregon), Los Angeles (California), and Salt Lake City in Utah (Utah). The
Boeing 737, 747, 767, 777, and 787 families were among its most popular commercial
aircraft.
In 2017, the firm made $93.4 billion in revenue and $8.4 billion in net income while
delivering 763 planes and receiving orders for 912 more. It has pending orders totalling
US$488.1 billion and cash reserves of $8.8 billion at the end of 2017.
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THE BOEING COMPANY CONSOLIDATED STATEMENT OF OPERATIONS, 2015–2017 (IN US$

MILLION)
12 Months Ended
Consolidated Statements of December 31, December 31, 2016 December 31,
Operations 2017 2015
Income Statement [Abstract]
Sales of products $ 83,204 $ 84,399 $ 85,255
Sales of services 10,188 10,172 10,859
Total revenues 93,392 94,571 96,114
Cost of products –68,365 –72,713 –73,446
Cost of services –7,631 –8,018 –8,578
Capital interest expense –70 –59 –64
Total costs and expenses –76,066 –80,790 –82,088
Gross profit 17,326 13,781 14,026
Income (loss) from Investments 204 303 274
Income from operating investments, 233 303 274
net
General and administrative expense –4,094 –3,616 –3,525
Research and development expense, –3,179 –4,627 –3,331
net
Gain (loss) on dispositions, net 21 –7 –1
Earnings from operations 10,278 5,834 7,443
Other income (loss), net 129 40 –13
Interest and debt expense –360 –306 –275
Earnings before income taxes 10,047 5,568 7,155
Income tax expense –1,850 –673 –1,979
Net earnings $ 8,197 $ 4,895 $ 5,176
Basic earnings per share $ 13.60 $ 7.70 $ 7.52
Diluted earnings (loss) per share $ 13.43 $ 7.61 $ 7.44
Source: Boeing, The Boeing Company 2017 Annual Report,
https://s2.q4cdn.com/661678649/files/doc_financials/annual/2017/2017-Annual-Report.pdf;
Boeing, The Boeing Company 2016 Annual Report,
https://s2.q4cdn.com/661678649/files/doc_financials/annual/2016/2016-Annual-Report.pdf;
Boeing, The Boeing Company 2015 Annual Report, accessed May 1, 2020,
https://s2.q4cdn.com/661678649/files/doc_financials/annual/2015/2015-Annual-Report.pdf.

Bombardier:
The Canadian airplane and train manufacturer began as a snowmobile manufacturer in
1942. After acquiring the aircraft manufacturing company Canadair Ltd. in 1986, Bombardier
moved its concentration to railway construction and aviation (Canadair). Manufacturing
facilities were located in Canada, Mexico, the United States, and the United Kingdom. Its
product portfolio comprised the CRJ (Canadair Regional Jet) regional jet family and the Lear
jet, Challenger, and Global business aircraft lines. In 2017, the corporation produced $16.2
billion in revenue while incurring a $553 million net loss from all activities. Bombardier's
business and commercial aircraft generated around $7.3 billion in revenue.
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BOMBARDIER INC. CONSOLIDATED STATEMENTS OF INCOME, 2016–17 (IN

US$ MILLION EXCEPT PER SHARE AMOUNTS)
2017 2016
Revenues 16,218 16,339
Cost of Sales 14,276 14,622
Gross Margin 1,941 1,717
SG&A 1,194 1,133
R&D 240 287
Share of income of joint-ventures and associates (175) (126)
Other expense (income) 11 (4)
Special items 426 485
EBIT 246 (58)
Financing expense 778 819
Financing income (56) (70)
EBT (478) (807)
Income taxes 77 174
Net Loss (553) (981)
Attributable to
Equity holders of Bombardier Inc. (516) (1022)
NCI (Non-controlling Interest) (37) 41
(553) (981)
Note: EBT = earnings before tax; EBIT = earnings before interest and tax.
Source: “Financial Results for the Fiscal Year Ended December 31, 2017,” Bombardier: Investor Relations,
https://bombardier.com/sites/default/files/documents/financial_reports//var/data/gallery/document/51/76/07/19/15/
Bombardier-Financial-Report-2017-en.pdf ;“Financial Report for the Fiscal Year Ended December 31, 2016,” Bombardier: Investor
Relations,https://bombardier.com/sites/default/files/documents/financial_reports//var/data/gallery/document/
17/57/27/87/14/Bombardier-Financial-Report-2016-en.pdf.

Aerostructures Corporate
Business Commercial
Transportation and Engineering and Total
Aircraft Aircraft
Services Elimination
Results of
operations
External revenues 8,519 4,913 2,382 398 6 16,218
Intersegment 6 48 – 1,172 (1,126) –
revenues
Total revenues 8,525 4961 2382 1570 (1220) 16,218
EBIT before special 712 416 (377) 157 (236) 672
items
Special items 295 25 8 7 91 426
EBIT 417 391 (385) 150 (327) 246
Financing expense 778
Financing income (56)
EBT (476)
Income taxes 77
Net loss (553)
BOMBARDIER INC. FINANCIAL RESULTS OF DIFFERENT SEGMENTS, 2017 (IN
US$ MILLION)
Note: EBT = earnings before tax; EBIT = earnings before interest and tax.
Source: “Financial Results for the Fiscal Year Ended December 31, 2017,” Bombardier: Investor Relations,
https://bombardier.com/sites/default/files/documents/financial_reports//var/data/gallery/document/
51/76/07/19/15/Bombardier-Financial-Report-2017-en.pdf ;
Boeing Vs Bombardier Page |5

EXHIBIT 1: COMPOSITION OF GLOBAL AEROSPACE INDUSTRY, 2017

Aircraft and Engine OEMs

7%
5%
Aircraft Systems and
7% 28% Components
Manufacturing

Civil and Military MRO and

Upgrades

27%

26% Missiles and UAV

Others

Note: OEM = original equipment manufacturer; MRO = maintenance, repair, and

overhaul; UAV = unmanned aerial vehicles.
Source: Compiled by the case author with data from Richard Aboulafia and Kevin Michaels, “The Global Aerospace
Industry: Size and Country Rankings,” AeroDynamic Advisory: Teal Group Corporation (presentation), July 16, 2018,
https://aerodynamicadvisory.com/wp-content/uploads/2018/07/AeroDynamic-Teal_Global-Aerospace-
Industry_16July2018.pdf

EXHIBIT 2: TOP FIVE AEROSPACE MARKETS IN THE WORLD, 2017

Ranking Country Industry Size (in US$ Billion)
1 United States 408.4
2 France 69.0
3 China 61.2
4 United 48.8
Kingdom
5 Germany 46.2
Source:
Compiled by the case author with data from Richard Aboulafia and Kevin Michaels, “The Global Aerospace Industry: Size
and Country Rankings,” AeroDynamic Advisory: Teal Group Corporation (presentation), July 16, 2018
https://aerodynamicadvisory.com/wp-content/uploads/2018/07/AeroDynamic-Teal_Global-Aerospace-
Industry_16July2018.pdf.

EXHIBIT 3: COMMERCIAL AIRCRAFT MARKET SHARE, 2017

259 Units,

14.9% 763 Units, Boeing

718 Units, 43.9%
Airbus
41.2%
Others

Source: Created by the author with data from “Record Global Aircraft Deliveries in 2017: Boeing Ahead of Airbus
Again, but Behind on Order Backlog,” CAPA [Centre for Aviation], January 24, 2018,
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https://centreforaviation.com/analysis/reports/record-global-aircraft-deliveries-in-2017-boeing-ahead-of-airbus-
again-but-%20behind-on-order-backlog-393914.

The Dilemma

Boeing and Bombardier aircraft manufacturers in the United States and Canada are involved
in World Trade Organization-adjudicated protectionist fights.
The most recent fight between Boeing and Bombardier exemplifies certain vital economic
concepts, elucidates the inherently political nature of protectionism, and highlights the
benefits of free trade even when some businesses suffer.
Boeing found itself in a difficult situation. The corporation might take appropriate legal
action to dispute the USITC ruling, which it claimed unfairly benefited its competition by
giving Bombardier a presence in the lucrative US aircraft manufacturing market.
However, Boeing had to evaluate the potential consequences of appealing the ruling. The
prior tariff of about 300 percent was fiercely contested by Canada and the United Kingdom
(UK) governments, where C Series planes were constructed. The Canadian government's
planned acquisition of McDonnell Douglas F/A-18 Hornet aircraft from Boeing had already
been halted. Boeing's appeal of the verdict might exacerbate the connection.
Source: Boeing vs. Bombardier
https://www.econlib.org/library/Columns/y2017/Lemieuxboeingvbombardier.html.
Boeing Vs Bombardier Page |7

The USITC decision had put Boeing in a bind. The corporation might appeal the USITC
decision, but it would need new grounds to do so. Boeing had several legal options for
resolving its issue.
US JUDICIAL INSTITUTIONS WITH JURISDICTION OVER TRADE MATTERS
The United States International Trade Commission
In a surprise decision, the U.S. International Trade Commission has ruled against aerospace
giant Boeing, in a bitter trade case it brought against Bombardier, over passenger jets its
Canadian rival sold to Delta Air Lines.
Source: https://www.cnbc.com/2018/01/26/boeing-loses-trade-case-over-bombardier-
passenger-jets.html#:~:text=In%20a%20surprise%20decision%2C%20the,sold%20to
%20Delta%20Air%20Lines.
United States Court of International Trade
With the row, trade tensions with the UK may have risen. An unexpected unanimous
decision by an independent US trade court on Friday determined that Canadian-made
Bombardier plane imports do not present unfair competition to American aircraft producer
Boeing.
Source: https://learngerman.dw.com/en/us-trade-court-rules-against-boeing-in-
bombardier-dispute/a-42328230#:~:text=US%20court%20rules%20against%20Boeing%20in
%20Bombardier%20dispute&text=The%20row%20threatened%20to
%20escalate,Bombardier%20plane%20imports%20from%20Canada
United States Court of Appeals for the Federal Court
We overturn the Court of Federal Claims' ruling for the aforementioned grounds. We
remand for further action in accordance with our ruling.
Appellant awarded costs.
BROKE DOWN AND REMANDED
Source: http://cafc.uscourts.gov/sites/default/files/opinions-orders/19-2148.OPINION.8-10-
2020_1633634.pdf
Supreme Court of the United States
Following a surprising decision by a U.S. trade panel that concluded the proposed imports
won't harm American industry, Bombardier Inc. can now begin exporting C Series jets to
Delta Air Lines Inc.
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Source: https://www.bloomberg.com/news/articles/2018-01-26/boeing-unharmed-by-
bombardier-jet-imports-u-s-panel-decides?leadSource=uverify%20wall#xj4y7vzkg
In January 2018, the North American Free Trade Agreement was still in force among Canada,
the United States. Chapter 19 of the trade agreement specified a formal procedure for
redressing disputes on anti-dumping and countervailing duties. How would that framework
affect this case if Boeing pursued it further?
Boeing Vs Bombardier Page |9

The World Trade Organization offered another platform to forward the dispute, but Boeing
would need the US government to launch it.
In a formal testimony before the UK House of Commons on December 13, 2017, Michael
Arthur, president of Boeing Europe and managing director of Boeing UK and Ireland, said
the procedure is purely legal and unrelated to politics: Bombardier engaged in textbook
dumping by selling airplanes below the cost of manufacturing to secure a marquee deal that
would increase sales. The CS300 competes with the 737-700 and 737 MAX 7 in the 100-150-
seat category, a $4 billion market with $1 billion in the US, according to Boeing, which has
maintained that the tariffs should remain in place even if the CSeries is constructed in
Mobile, Alabama, with a 75% US content.
Instead of selecting a Boeing model, Delta Air Lines acquired 100 Airbus A321neos and 100
further options on December 14, 2017. The next day, Boeing claimed that it had not
attempted to halt the proceedings before the US Commerce Department released its
conclusions, and the ITC had its final hearing on December 18 before voting on January 26 of
next year.
At the US ITC hearing on December 18, 2017, Delta acknowledged that it had requested a
guarantee from Bombardier that all the planes it had ordered would be put together in
Mobile. The 135-seat 737-7 has not received a sizable new order from a customer since
2013; however, Boeing acknowledged its interest in that market and stated that it might
accommodate an order for deliveries shortly by raising overall rates and shuffling
production slots.
David MacNaughton, the Canadian ambassador to the US, cautioned that the ITC's decision
could be in violation of WTO agreements if it was "based on exactly the kind of'speculation
and conjecture' that is banned under both US and international law."
The ITC commissioners appeared underqualified to industry observer Addison Schonland.
They missed opportunities to better understand fleet planning by asking why the MAX7 is
not a commercial success, even revamped, or why United would initially order the less
efficient 737-700 and then switch to the larger 737-900 within two months.
David MacNaughton, the ambassador of Canada to the United States, cautioned that a
favourable decision by the ITC "based on just the type of speculation and conjecture' that is
illegal under both US and international law." might violate WTO accords.
Addison Schonland, an industry observer, felt that the ITC commissioners lacked the
necessary expertise and missed opportunities to better understand fleet planning by failing
to inquire as to why the MAX7 is not profitable, even after being revamped, or why United
would initially order the less effective 737-700 and then switch to the larger 737-900 within
two months.
Source: CSeries dumping petition by Boeing. (2021, August 15). In Wikipedia.
https://en.wikipedia.org/wiki/CSeries_dumping_petition_by_Boeing
Boeing Vs Bombardier P a g e | 10

Decision:
International Trade Commission (ITC) of the United States disagreed. Boeing was not hurt by
Bombardier's prices, according to the federal agency with the authority to take action
against unfair trade practises. That choice, according to Bombardier, was "a victory for
innovation, rivalry, and the law."
Source: CSeries dumping petition by Boeing. (2021, August 15). In Wikipedia.
https://en.wikipedia.org/wiki/CSeries_dumping_petition_by_Boeing

Conclusion:
Although the entire procedure appears ludicrous, it is merely political. Aerospace firms, such
as Boeing vs. Bombardier or Airbus vs. Boeing, advocate for subsidies whose ultimate effect
on the global market is difficult to measure, and each firm criticizes the contributions of the
other. Instead of creating products consumers want, great corporations become adept at
playing the political game. The socialist catchphrases "fair trade" and "even playing field"
are continually used by these businesses and "their" governments.
Bureaucrats are unable to determine exact costs or subsidies. Allowing consumers to make
their own choices and letting the free market operate, regardless of competitors' actual or
perceived advantages or disadvantages, is the only known way to get rid of inefficient
manufacturers. The free market, not the fair or level market, is required.