800-pound gorilla thwarted by Bombardier's savvy move: Don Pittis

Giving away its prize asset, the CSeries aircraft, is Bombardier's smartest investment in years.

When you have to deal with a bully like Boeing it's important to have a big friend like Airbus

Tom Enders, CEO of Airbus, and Alain Bellemare, CEO of Bombardier, pose Tuesday in France. Bombardier's plan to donate a majority stake in its CSeries plane (right) to Airbus may be the Canadian company's shrewdest investment. (Regis Duvignau/Reuters)

Boeing's attempt to sabotage Bombardier's dazzling new jet is the best product review the CSeries has ever had.

And almost bizarrely, Bombardier's plan to donate a majority stake in the aircraft to the world's second largest aerospace company may be the Canadian company's shrewdest investment.

Don't take my word for it. Look at the Bombardier share price that shot up nearly 30 per cent the morning after the deal was announced before losing about half those gains.

Detested rivals

Shares in Airbus, Boeing's detested European rival, also rose on the news.

Both Airbus and Bombardier insisted their deal predated Boeing's attack on the new Bombardier plane.

That's just a little suspect, since one of the main advantages of the arrangement laid out by Bombardier CEO Alain Bellemare is that building the jets at the Airbus assembly plant in Alabama will eliminate the 300 per cent U.S. import tariff Boeing has lobbied for.

"The assembly in the U.S. can resolve the issue because then it becomes a domestic product and therefore a domestic product will not have the import tariff applied to this," said Bellemare as he and Airbus boss Tom Enders posed with one of the jets.
Members of the Swiss aerobatic team Patrouille Suisse fly in formation with a Swiss Bombardier CSeries aircraft. The fact that Boeing went to the trouble of attacking the Canadian aircraft proves it's a threat. (Denis Balibouse/Reuters)

For U.S. President Donald Trump, who has tangled with Boeing, those are jobs he can boast about.

It is not too strong to say that Boeing seemed to want to crush Bombardier's fresh jet technology. As a product endorsement, that must have been oddly gratifying for the Canadian engineers who spent so long planning and perfecting the aircraft.

Earlier in the long process those engineers got little but criticism for the aircraft's slow progress, its cost, its failure to gain certification and most recently its failure to sell. Of course if the Bombardier jet really had been a washout, Boeing would have left it to crash and burn.

Protectionist attack

But since Boeing's protectionist attack on the CSeries, comments by the world's aerospace experts have been overwhelmingly positive.

Those comments include the CSeries' brand new technology that outshines Boeing's attempts to scale down its own 50-year-old airframe. They celebrate its state-of-the-art quiet engines and the CS300's 100- to 150-seat capacity that fills a gap in airline fleets that neither Boeing nor Airbus can satisfy.

But even the very best reviews are useless unless the product sells, and in the 18 months since the fire-sale purchase agreement with the U.S. airline Delta — the deal threatened by Boeing's protectionist attack — Bombardier has sold none.

As to whether there has been a taxpayer contribution to the creation of Bombardier's new technology, the question is absurd, but so is Boeing's claim of having created its own technology without government help.

Maybe Canada should have echoed Boeing's technique, contributing to Bombardier's CSeries by ordering a fleet of overpriced military equipment.
Bombardier builds its CSeries planes at its plant in Mirabel, Que. The company plans to build the jets at the Airbus plant in Alabama to eliminate the 300 per cent U.S. import tariff Boeing has lobbied for. (Ryan Remiorz/Canadian Press)

Contrary to Boeing's free-competition argument, the U.S. 800-pound gorilla of the aerospace business was using classic rent-seeking behaviour — trying to appropriate wealth created by others — to act like a beach bully kicking sand in the face of a 98-pound weakling for the sole purpose of destroying a new and competitive piece of technology. 

It would be like private rocket company SpaceX forgetting all the lucrative NASA contracts when it uses future protectionist regulation to fend off better rockets because they had government support. The world would be the loser.

Using European and U.S. trade officials as proxies, Airbus and Boeing have bickered for years over which company is subsidized more through government investment, tax breaks and sales support. Each side had the arguments and the government support to hurt the other, leading to an uneasy truce.

By giving away a majority stake in the CSeries, Bombardier has obtained a champion. 

"It makes Boeing look like they've been playing tick-tack-toe against a chess master," one aerospace analyst told Bloomberg news.

Worth the cost?

But for Canadian taxpayers who have nurtured first Bombardier and then the CSeries through many hard times, the question remains: "Was it worth it?"

From the trillion-dollar rescue for Wall Street banks to government subsidies for companies like Amazon looking for a new home, the answer is never absolutely clear.
The interior of the much-delayed CSeries jet, seen in 2014. The CS300's 100- to 150-seat capacity fills a gap in airline fleets that neither Boeing nor Airbus can satisfy. (Bombardier)

This is one of the difficult questions for any government's industrial policy, but it is even more difficult for smaller countries like Canada trying to break into markets where other national champions rule the roost.

One answer is that when the U.S., Europe, China, Brazil and everyone else invests taxpayer cash to create global champions in competitive industries, there is a danger that those who fail to play the game will be left behind, exporting little but raw materials. The high-tech jobs and the industrial control will go elsewhere.

In the case of the Bombardier CSeries, backed by the clout of Airbus, there is every expectation that a superb piece of Canadian technology can now be sold to airlines around the world at a price that will cover its continued production, paying Canadian salaries for decades.

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Don Pittis

Business columnist

Based in Toronto, Don Pittis is a business columnist and senior producer for CBC News. Previously, he was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London.