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Bombardier up-to-date strategy

June 2, 2016

Embraer’s grousing over Bombardier’s deal with Delta Air Lines as the result of unfair competition continues, with threats of asking the Brazilian government to file a complaint with the World Trade Organization.

 

The Embraer (EMB) complaint is that the announced deal with the Quebec provincial government to provide US$1bn in financial investment in the C Series program, and the request by Bombardier to the federal government for another US$1bn amounts to subsidies that are illegal under WTO rules. Brazil can file a complaint with the WTO, taking Canada to “court,” so to speak.

 

The trouble is, as with the European Union/Airbus and USA/Boeing WTO complaints, review and deciding the complaint can take years (a decade has already passed in the Airbus/Boeing complaints). Even when a decision is made, it can be appealed. Even if the complaint is upheld, the WTO has no enforcement power.

 

Even if WTO blessing is given for the countries to impose penalties, these don’t have to be against the offending company’s products; penalties may be imposed against an unrelated industry’s products. Or not at all. In any case, by this time, Bombardier will be happily selling its airplanes and may even bought out Quebec and the Feds.

 

Bombardier’s sales to Delta and Air Canada were “likely below cost in an attempt to build momentum,” George Ferguson, senior air transport analyst at Bloomberg Intelligence, wrote in a research note last week.

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