Airbus and Bombardier Announce CSeries Partnership

Nean1 · Thu Oct 19, 2017 1:23 pm

ytz wrote:
PanAm788 wrote:
The biggest issue with the Cseries was price. That's a big reason why it couldn't sell (as well as an uncertain and evolving market size, a problem that Embraer also faces) and Airbus coming in solves the price issue. I'm not trashing the E2 by any means but by design (2x2 fuselage) it is less suited to take on the small narrow body role (100-150 seats). The Cseries can more economically scale up to 150 seats by virtue of having a wider cross section. The E2 simply can't do that.

The E2 is a warmed over E-Jet. It doesn't solve any of the issues it would have with mainline service. As you say....

Just to expand on that, 4 abreast above 100 makes for not too great turn times. And while Embraer definitely makes one of the best RJs out there, you're still left with smaller overhead bins which always cause all kinds of issues with carry-on....again impacting turn time.

Whatever disadvantages the CS100 had, the E2-190 and E2-195 have it far worse. The real MVP of that lineup is the E2-175. Small enough to pass scope.

The interior of the E2 aircraft is being revamped, improving what is already good:
- Greater comfort, no passengers in the middle (18.3 inch wide seats in economy class);
- Larger baggage capacity (1 bag per passenger, an increase of 40% in volume, best in class);
- Staggered individual seats allows first-class comfort without loss of luggage space in addition to facilitating reconfiguration for economy class.

Good try.

Chrisba320 · Thu Oct 19, 2017 1:25 pm

douwd20 wrote:
Chrisba320 wrote:
I have no doubt the C-series will be successful and I can't wait for my first flight on one of them.

You do because you hate Boeing? John Leahy, Airbus’s master salesman, dismissed the C Series as nothing more than a “cute little plane” offered in a narrow segment of the market where there was no demand. And now a miracle has happened and Airbus now believes demand of up to 6,000 C Series? But that is still unproved. The C Series has not won a new order for more than a year, while Airbus’s own slightly bigger A319neo has not clinched a deal for at least four years. Sounds like Airbus has another A380 on their hands but at least they got this white elephant for free.

Nowhere did I say I hate Boeing, I don't. Their planes carry me safely to many places around the world. But I definitely prefer travelling on an Airbus. Next time I go to Europe I'll travel via Zurich and see if I can catch a ride on one of Swiss' C-series.

WIederling · Thu Oct 19, 2017 1:29 pm

N212R wrote:
SomebodyInTLS wrote:
When Boeing has any kind of assembly or production in Europe, you can get back to us...

WHY does Boeing Group not have any kind of assembly or production in Europe while Airbus Group has such a large manufacturing "entity" in the US?

Because they prefer tax gifts to RLI? you have to actually work for RLI !
jokes aside.
US companies with a "personality" like Boeing invariably run into problems
when managing a workforce abroad. ( GM <> Opel is a perfect example.
when GM leaned more on Opel their productivity went down the drain.)

They appear more or less tone deaf to the foreign environment.
The reverse is much less problematic. Actually rather beneficial.

scbriml · Thu Oct 19, 2017 1:30 pm

PPVRA wrote:
But this muddy deal isn’t a clean cut sale so we will never really have a clear picture.

In what way is it "muddy" or not "clean cut"? It seems the picture is very clear, even if there are those that can't, or simply refuse, to see it.

tommy1808 · Thu Oct 19, 2017 1:41 pm

washingtonflyer wrote:
Even if it was, its not illegal to underprice your product in your own home market to fend off import competition. Since when did illegal activity become beneficial?

In much of the world it is illegal to sell below price if you do so to kill competition. Just like in most of the world tax breaks are not considered any less a subsidiary than direct cash payments.

The USA is a cute little bubble with a very unique legal environment that just happens to be a huge advantage in a home market if you are the only vendor.Things that would have been illegal almost anywhere else, like program accounting, could lead to tariffs applied to Boeing products in the future if the "but this is not illegal here" card to much. Wouldn´t it be fun if Boeing had to get naked in front of European courts and show exactly how the 787 is not sold under price, and how exactly the plan to get a reasonable margin and proof how they didn´t sell below price to win over Airbus.

Boeing mal be heading towards opening the biggest can of worms ever opened by a business.

best regards
Thomas

tommy1808 · Thu Oct 19, 2017 1:46 pm

WIederling wrote:
Because they prefer tax gifts to RLI? you have to actually work for RLI !
jokes aside. .

Well, not really a joke. An RLI is insignificantly better than a normal loan, Tax breaks are free money.

In a sense: Tax payer taking a risk for a private company is bad, tax payers handing over a truckload of cash apparently isn´t. Well, at least there is no risk .... of ever getting that money back.

best regards
Thomas

yowza · Thu Oct 19, 2017 2:01 pm

It looks like Boeing is on a bit of a charm offensive. Canadian social media channels are seeing a lot of this kind of thing: https://postimg.org/image/2eg1e0ko6j/
YOWza

ytz · Thu Oct 19, 2017 2:23 pm

yowza wrote:
It looks like Boeing is on a bit of a charm offensive. Canadian social media channels are seeing a lot of this kind of thing: https://postimg.org/image/2eg1e0ko6j/
YOWza

They already paid for the ad campaign. I'm guessing they'll drop it now.

Revelation · Thu Oct 19, 2017 2:25 pm

rheinwaldner wrote:
Revelation wrote:
If it were PERFECT, then BBD would have opened the 2nd line long before the Airbus investment. It is not PERFECT, it's a huge burden.

As long as BBD was the vendor, the demand did not warrant a 2nd line. BBD as a vendor was seen far too unstable, to unlock the potential of the aircraft. The opposite is true now.

Revelation wrote:
It's quite true that Airbus's marketing, support and supply chain assets add a huge amount to the program. Hopefully the customer demand for that size aircraft justifies the hope. So far both A and B have been betting that it does not.

Because as long as BBD was the vendor, the customer demand did not justify the hopes in this aircraft size. BBD as a vendor was seen far too unstable, to unlock the potential of the aircraft. The opposite can be expected from now on.

This deal did not create demand for 100-150 seat aircraft, it just made the CSLPA product more attractive with regard to filling the existing demand.

There's no doubt that having one FAL is more efficient. There's a lot of expensive capital equipment that has to be duplicated in the 2nd FAL instead of just running more hours at one FAL or growing on the same site. We've never heard of any intention that BBD had of setting up a 2nd FAL in the USA, even though they already have facilities for building business jets in the USA. Having the QC government as a partner made that a challenging prospect. The urge to spite Boeing now makes it more palatable, but doesn't make it more efficient.

Airbus has a tradition of setting up multiple FALs, but they have been for political rather than scaling reasons: splitting work between Germany, France, US (potential tanker deal), China. They would have been better off (for instance) moving all A380 work to XFW and moving all A32x work to TLS (or vice versa) but that wasn't politically acceptable. Boeing has 2 FALs for 787 but that was mainly done to undermine the unions that dominate Seattle.

Revelation · Thu Oct 19, 2017 2:26 pm

tommy1808 wrote:
WIederling wrote:
Because they prefer tax gifts to RLI? you have to actually work for RLI !
jokes aside. .

Well, not really a joke. An RLI is insignificantly better than a normal loan, Tax breaks are free money.

If tax breaks are free money, then you should go set up a corporation and grab some cash.

bmacleod · Thu Oct 19, 2017 2:29 pm

Guess we'll know for sure LH Cityline and HOP will be replacing its E190/195 sooner than later.....

https://en.wikipedia.org/wiki/Lufthansa_CityLine#Fleet
https://en.wikipedia.org/wiki/HOP!#Fleet

tommy1808 · Thu Oct 19, 2017 2:32 pm

Revelation wrote:
tommy1808 wrote:
WIederling wrote:
Because they prefer tax gifts to RLI? you have to actually work for RLI !
jokes aside. .

Well, not really a joke. An RLI is insignificantly better than a normal loan, Tax breaks are free money.

If tax breaks are free money, then you should go set up a corporation and grab some cash.

Well, of course you have to have money to get free tax payer money thrown after you.

best regards
Thomas

Revelation · Thu Oct 19, 2017 2:37 pm

tommy1808 wrote:
Revelation wrote:
tommy1808 wrote:

Well, not really a joke. An RLI is insignificantly better than a normal loan, Tax breaks are free money.

If tax breaks are free money, then you should go set up a corporation and grab some cash.

Well, of course you have to have money to get free tax payer money thrown after you.

best regards
Thomas

Actually, you have to develop property and create products that are subject to tax before you get a reduction in the tax rate you will be paying, but you knew this already...

In the process you spend money in the local economy, part of which goes to individuals and businesses that pay tax, but you knew this already.

RLI is provided before you spend a pfennig and comes with the full faith/credit of the government behind it so it makes it easier to finance the rest of the program, but you knew this already too.

If its benefits are inconsequential then Airbus and RR are idiots for continuing to ask for it, but they keep asking, so...

Now, back to the "Airbus and Bombardier Announce CSeries Partnership" topic, please.

WIederling · Thu Oct 19, 2017 2:39 pm

PPVRA wrote:
If Boeing sold 737s below cost, they would have had to take a financial charge, just like BBD did with the Delta deal. And that would leave evidence in the financial statements just like BBD couldn’t avoid.

We do know that Boeing sold about 400 787 frames well below cost.
The moment you hide your numbers in project accounting all bets are off.

An assay of dumping or not really is only possible with commodity items that are
swappable with local produce. like push bikes, photovoltaics, clothing, metal stock, ...

ytz · Thu Oct 19, 2017 2:39 pm

@Revelation

As I've said, clearly BBD screwed up and the deal is to save their hides.. To recover their full investment, the program needs to be worth $20 billion by 2025. That's risky but not unattainable in my books.

They are now going to have second FAL. That adds value. And Airbus' supply chain brings down cost. Add in sales momentum from Airbus. And I think they have shot.

Also, Jon Ostrower raised a good point:

https://mobile.twitter.com/jonostrower/ ... 1690317824

Bombardier has just got the tooling for a second line. They were going to build that in Montreal. Now? They can ship it to Mobile. Airbus will be delivering out of Mobile in 2020. You can put money on that.

Also, while I thought that a program sale meant sale of the supply chain, apparently this might not be the case. And BBD will remain a major supplier to the CSeries:

http://www.fliegerfaust.com/canada-cf18 ... 28640.html

I'm not sure how true this is, but if true, this is a much better deal for BBD than we all thought. And would explain why Airbus is not paying any cash. They may not be getting as much of the hard assets as thought.

Lastly, apparently the Chinese made a bid. And BBD isn't revealing it to shareholders. I suspect the program is worth far closer to how much they spent:

http://www.fliegerfaust.com/question-of ... 96663.html

I also suspect the Chinese probably wanted to move it all to China. That is probably when IQ vetoed it.

PS. Sylvain Faust is a decent source for Canadian aviation

crimsonchin · Thu Oct 19, 2017 2:41 pm

keesje wrote:
VeroVenia entered an identity crisis. The blogger famous for being selectively critical (everything Airbus), deleting everyone not agreeing (rubbish, it's my blog), and endless, selective self referencing, is now trying to rewrite history claiming he supported such aquisition all along.

https://verovenia.wordpress.com

It's VV's wonderland.

I was going to ask if anyone had checked up on VV, Saj Ahmad and Fleetbuzz, and hopefully kept all sharp objects out of their reach.

They must be foaming at the mouth seeing their two most loathed companies together, while their golden child, Boeing cries in a corner :rotfl:

tommy1808 · Thu Oct 19, 2017 2:46 pm

Revelation wrote:
Actually, you have to develop property and create products that are subject to tax before you get a reduction in the tax rate, but you knew this already...

In the process you spend money in the local economy, part of which goes to individuals and businesses that pay tax, but you knew this already.

RLI is given to you before you spend a pfennig and comes with the full faith/credit of the government behind it so it makes it easier to finance the rest of the program, but you knew this already too.

In other words: Free money for those that already have money. You just have to cough up the cash first and get reimbursed by the tax payer when you are up and running. A 10% tariff on the 777x is therefore in order.

best regards
Thomas

Revelation · Thu Oct 19, 2017 2:48 pm

WIederling wrote:
We do know that Boeing sold about 400 787 frames well below cost.
The moment you hide your numbers in project accounting all bets are off.

What???

Program accounting makes the numbers highly visible.

We know far more about what it costs Boeing to make a 787 than we know about how much it costs Airbus to make an A380.

Revelation · Thu Oct 19, 2017 2:50 pm

tommy1808 wrote:
You just have to cough up the cash first and get reimbursed by the tax payer when you are up and running.

No, you have to develop a property and/or produce and sell a product before you get a reduction in the tax rate you pay.

If you think this is a wonderful deal, you should set up an aviation enterprise in Washington State, they'd be glad to have you.

SheikhDjibouti · Thu Oct 19, 2017 2:50 pm

crimsonchin wrote:
I was going to ask if anyone had checked up on VV, Saj Ahmad and Fleetbuzz, and hopefully kept all sharp objects out of their reach.

They must be foaming at the mouth seeing their two most loathed companies together, while their golden child, Boeing cries in a corner

Scroll back to post #968
:stirthepot:

enzo011 · Thu Oct 19, 2017 2:54 pm

Revelation wrote:
RLI is provided before you spend a pfennig and comes with the full faith/credit of the government behind it so it makes it easier to finance the rest of the program, but you knew this already too.

If its benefits are inconsequential then Airbus and RR are idiots for continuing to ask for it, but they keep asking, so...

Now, back to the "Airbus and Bombardier Announce CSeries Partnership" topic, please.

In both cases money is spent by the company, whether it is through not paying taxes or by spending the loan money on a project. One you get the money before you pay taxes, the other you spend the money and don't pay the taxes, seems about the same to me if you are looking at the companies spending money.

Revelation · Thu Oct 19, 2017 2:57 pm

enzo011 wrote:
In both cases money is spent by the company, whether it is through not paying taxes or by spending the loan money on a project. One you get the money before you pay taxes, the other you spend the money and don't pay the taxes, seems about the same to me if you are looking at the companies spending money.

Seems about the same if you do not consider the element of time -- having someone help you start an enterprise is more valuable than having someone save you money once the enterprise is up and running. In the first case, you are in essence gaining a business partner, and in the case of that partner being a government that literally can/does print money and/or can always raise money via taxation, it gives you a lot of negotiating power with other lenders.

enzo011 · Thu Oct 19, 2017 3:00 pm

washingtonflyer wrote:
So, who is accusing Boeing of dumping?

Well at the moment no-one is, but if the definition of dumping applies to the C Series even if they are assembled by Airbus Inc. in Alabama because the tariffs will apply to the parts and not where it is assembled then Boeing will be in the same boat with their parts that are assembled outside of the US. Surely this would be applicable to both companies at that stage, right?

aerolimani · Thu Oct 19, 2017 3:04 pm

BREECH wrote:
aerolimani wrote:
There was no wad of cash being offered by Airbus. It's a cashless deal.

You are not seriously saying that "marketing and supply chain expertise" come free, are you? It's going to cost Airbus A LOT. "It's a cashless deal" is a mantra for Airbus shareholders who are not all that enthusiastic about "their" company spending money on what looks like a lost case. I also hope you don't think Airbus has only joined the project for CS. Airbus is obviously planning to buy out BBD altogether. Otherwise why guarantee jobs through 2041. All of that (and other things I can't even imagine) costs a lot of money.

As for shutting down Q400, BBD is not the one to decide ANYTHING anymore. They screwed up their chance at having an independent aircraft manufacturer. 50 orders is great, but those billion numbers are "list price". The real cash paid, as we know very well, can be less than half that. Your bet is as good as mine right now. But my bet is, adieu aux Q400es.

“Wad of cash” was your phrase, not mine. I never said Airbus wasn’t bringing value to the deal. However, the fact remains, they are not bringing hard cash. Whereas, it is written into the deal that BBD will have to spend up to $700 million over the next 7.5 years. How much Airbus spends will be entirely up to them. Depending on the outcome of the tariff case, they may not even need to open that FAL in Mobile.

So, are you trying to say that airbus will buy BBD because they want to kill the Q400? I think you are grossly overestimating the importance of ATR within Airbus, if you think they would spend that kind of money on killing ATR’s competition. I do think the Q400 program still has some value in it, for BBD. However, as much the Q400 may not be dead yet, ATR is really not struggling in competition with the Q400.

Besides, if Airbus wanted to takeover BBD Aerospace, why would they wait? Wouldn’t now be the time, when BBD is at its weakest?

And, yes, I do think the only thing A wants is the CSeries program. The promise to maintain the Quebec jobs has nothing to do with some theoretical future takeover of BBD. They have to promised to keep jobs because they were essentially negotiating with the formerly 50% owner of the CSeries program, the government of Quebec!

Airbus barely cares about ATR. They won’t even let them develop a larger version of the ATR72. If Airbus doesn’t want to spend that money, why would they want to spend vastly more to purchase BBD and kill off the Q400?

A believable reason to buy Bombardier Aerospace would be to acquire what’s actually valuable there, the business jet programs. Maybe Airbus wants to get into bizjets, but somehow, I doubt it.

enzo011 · Thu Oct 19, 2017 3:07 pm

Revelation wrote:
enzo011 wrote:
In both cases money is spent by the company, whether it is through not paying taxes or by spending the loan money on a project. One you get the money before you pay taxes, the other you spend the money and don't pay the taxes, seems about the same to me if you are looking at the companies spending money.

Seems about the same if you do not consider the element of time -- having someone help you start an enterprise is more valuable than having someone save you money once the enterprise is up and running. In the first case, you are in essence gaining a business partner, and in the case of that partner being a government that literally can/does print money and/or can always raise money via taxation, it gives you a lot of negotiating power with other lenders.

And yet if you are able to "spend" $10 billion on a new program but only have to pay taxes on some of it and in the end spend only $7 billion because of the tax breaks you get $3 billion for free. Both companies receive a benefit and if we want we can get into a dick measuring contest about which company is worse. Lets just say both use the rules to their advantage, these rules stop other manufacturers from seriously contesting against Boeing and Airbus, no matter how much we type that they can get the same benefits. There is 0% chance Embraer is getting the same tax breaks as Boeing in Washington or South Carolina and 0% chance they are getting the same loans from those EU countries that provide RLI to Airbus.

tommy1808 · Thu Oct 19, 2017 3:11 pm

Revelation wrote:
tommy1808 wrote:
You just have to cough up the cash first and get reimbursed by the tax payer when you are up and running.

No, you have to develop a property and/or produce and sell a product before you get a reduction in the tax rate you pay..

Boeing will have 8 Billion more in the bank at some point than they would otherwise have or will they not? Who would have that money if it isn´t in Boeing bank account? The Tax payer. Ergo: 8 Billion tax payer money are given to Boeing. Any additional tax coming from that 8 Billion are in no way different from an RLI, only that companies have to pay for that money, while Boeing in effect just has to carry an 8 Billion loan for a while, to have the tax payer pay that back for them.
You can spot the difference between a tax payer guaranteed loan, where the tax payer usually comes out on top (= investment) and a tax break, where the best outcome for the tax payer is Boeing never making a profit and hence never get the tax payer to repay the loan for them. In both cases job creation and tax revenue generating effects are the same.... only difference is that with an RLI the normal outcome is the taxpayer showing a profit, where as the tax payer can not win with a tax break.

But then again, Boeing´s government backed unfair competition practice is going to bite them in the ass in a big way. I do certainly hope that the EU considers a 100 mil tariff on each 777x for the first 80 Units , just to balance the playing field considering the shitload of free money Boeing is getting on top of that.

best regards
Thomas

washingtonflyer · Thu Oct 19, 2017 3:17 pm

enzo011 wrote:
washingtonflyer wrote:
So, who is accusing Boeing of dumping?

Well at the moment no-one is, but if the definition of dumping applies to the C Series even if they are assembled by Airbus Inc. in Alabama because the tariffs will apply to the parts and not where it is assembled then Boeing will be in the same boat with their parts that are assembled outside of the US. Surely this would be applicable to both companies at that stage, right?

I would argue on the dumping side, only if the parts were assembled in Canada. A Shorts brothers wing coming from the UK to the USA is a product of the UK - no duties. A Pratt and Whitney engine from Connecticut obviously has no duties.

What comes into play are those assemblies and sections manufactured or completed in Canada. Therein lies the rub. The scope of the order covers "all aircraft covered by the description above, regardless of whether they enter the United States fully or partially assembled". The question then becomes when is something that is "partially assembled" an aircraft?

Semi-completed fuselages like what you have going from Wichita to Seattle? Fuselages with the wingbox but without the wings? Simply aircraft sections that have not been joined together?

Assuming this goes to order, the customs attorneys are going to have a field day on the billables.

PPVRA · Thu Oct 19, 2017 3:27 pm

WIederling wrote:
PPVRA wrote:
If Boeing sold 737s below cost, they would have had to take a financial charge, just like BBD did with the Delta deal. And that would leave evidence in the financial statements just like BBD couldn’t avoid.

We do know that Boeing sold about 400 787 frames well below cost.
The moment you hide your numbers in project accounting all bets are off.

An assay of dumping or not really is only possible with commodity items that are
swappable with local produce. like push bikes, photovoltaics, clothing, metal stock, ...

There are no shenanigans going on in the 787 case. Boeing F’ed up and they’ve been paying dearly for it.

In contrast to BBD, whose deal with Delta was paid for by the Canadian taxpayer. They socialized the losses, unlike Boeing’s full “internalization” of their mistakes.

The issue with Program Accounting has more to do with financial reporting to shareholders and stakeholders, not so much sales campaigns.

WIederling · Thu Oct 19, 2017 3:44 pm

crimsonchin wrote:
keesje wrote:
It's VV's wonderland.

I was going to ask if anyone had checked up on VV, Saj Ahmad and Fleetbuzz, and hopefully kept all sharp objects out of their reach.

They must be foaming at the mouth seeing their two most loathed companies together,

while their golden child, Boeing cries in a corner

Karma. with friends like these you need no foe. :-)

SheikhDjibouti · Thu Oct 19, 2017 3:46 pm

washingtonflyer wrote:
A Shorts brothers wing coming from the UK to the USA is a product of the UK - no duties.

What comes into play are those assemblies and sections manufactured or completed in Canada.

I'm guessing the Short Brothers wing had some input from Canada, originally at least. Not necessarily raw materials (unless it's made out of Canadian lumber?). I'm thinking more about less tangible items, design, tooling expertise, whatever. But just supposing it incorporates genuine Canadian made rivets?
In such a case, do you stand by your statement "no duties"?

You can probably guess where I'm going with this already.

If we expand Short's input to the C-series program beyond just the wing, so that we have a situation where more Canadian parts are exported from Canada to Northern Ireland, assembled into larger sub-sections so that they represent a recognisably different product, and then re-exported from N.I to Mobile......

It's just a variation on taking rivets from Canada, and slipping them back into the US as part of another sub-assembly (the wing)

And yes, I am perfectly aware that US Customs isn't stupid and have rules to prevent circumvention just like this, which brings me back to; what if the Short Bros wing includes a handful of Canadian rivets? Or a thin smear of Maple Syrup holding two joints together somewhere? :lol:

p.s. thanks for your clarification on the European thing; I knew it had a sensible answer, and I knew you were the man to provide it.

Revelation · Thu Oct 19, 2017 3:57 pm

tommy1808 wrote:
Revelation wrote:
tommy1808 wrote:
You just have to cough up the cash first and get reimbursed by the tax payer when you are up and running.

No, you have to develop a property and/or produce and sell a product before you get a reduction in the tax rate you pay..

Boeing will have 8 Billion more in the bank at some point than they would otherwise have or will they not? Who would have that money if it isn´t in Boeing bank account? The Tax payer. Ergo: 8 Billion tax payer money are given to Boeing. Any additional tax coming from that 8 Billion are in no way different from an RLI, only that companies have to pay for that money, while Boeing in effect just has to carry an 8 Billion loan for a while, to have the tax payer pay that back for them.
You can spot the difference between a tax payer guaranteed loan, where the tax payer usually comes out on top (= investment) and a tax break, where the best outcome for the tax payer is Boeing never making a profit and hence never get the tax payer to repay the loan for them. In both cases job creation and tax revenue generating effects are the same.... only difference is that with an RLI the normal outcome is the taxpayer showing a profit, where as the tax payer can not win with a tax break.

Money you get at the point when you start an enterprise is more valuable than money you take out after the enterprise is up and running.

The whole reason we pay interest on loans is because there is a time value to money.

Tax breaks are just that, a reduction of the tax rate.

You state that the taxpayer would get the full amount if it wasn't being given as a break, and that's just not true in the real world: the enterprise can and does shop for low tax opportunities so the choice is not between full and partial rate, it is between partial rate and zero.

Enterprises all around the world can and do shop for low tax rates, even within the EU, believe it or not.

washingtonflyer · Thu Oct 19, 2017 3:59 pm

SheikhDjibouti wrote:
washingtonflyer wrote:
A Shorts brothers wing coming from the UK to the USA is a product of the UK - no duties.

What comes into play are those assemblies and sections manufactured or completed in Canada.

I'm guessing the Short Brothers wing had some input from Canada, originally at least. Not necessarily raw materials (unless it's made out of Canadian lumber?). I'm thinking more about less tangible items, design, tooling expertise, whatever. But just supposing it incorporates genuine Canadian made rivets?
In such a case, do you stand by your statement "no duties"?

You can probably guess where I'm going with this already.

You've got wing that is manufactured in the UK using some Canadian parts. That doesn't make it a Canadian product. If you take a piece of Indian steel sheet and turn it into a pipe in Indonesia, that product is and Indonesian pipe. It has been substantially transformed. Canadian rivets aren't subject to the duties - regardless of if they come into the USA as rivets or as part of a wing assembly.

SheikhDjibouti wrote:
If we expand Short's input to the C-series program beyond just the wing, so that we have a situation where more Canadian parts are exported from Canada to Northern Ireland, assembled into larger sub-sections so that they represent a recognisably different product, and then re-exported from N.I to Mobile......

Again, getting into the issue of substantial transformation. Remember, what is the scope of the investigation...an aircraft. Rivets, no. Engines, no. Rockwell Collins radios, no.

SheikhDjibouti wrote:
It's just a variation on taking rivets from Canada, and slipping them back into the US as part of another sub-assembly (the wing)

And yes, I am perfectly aware that US Customs isn't stupid and have rules to prevent circumvention just like this, which brings me back to; what if the Short Bros wing includes a handful of Canadian rivets? Or a thin smear of Maple Syrup holding two joints together somewhere?

There may be an issue with the wings, but that gets really technical.

PPVRA · Thu Oct 19, 2017 4:12 pm

SheikhDjibouti wrote:
washingtonflyer wrote:
A Shorts brothers wing coming from the UK to the USA is a product of the UK - no duties.

What comes into play are those assemblies and sections manufactured or completed in Canada.

I'm guessing the Short Brothers wing had some input from Canada, originally at least. Not necessarily raw materials (unless it's made out of Canadian lumber?). I'm thinking more about less tangible items, design, tooling expertise, whatever. But just supposing it incorporates genuine Canadian made rivets?
In such a case, do you stand by your statement "no duties"?

You can probably guess where I'm going with this already.

If we expand Short's input to the C-series program beyond just the wing, so that we have a situation where more Canadian parts are exported from Canada to Northern Ireland, assembled into larger sub-sections so that they represent a recognisably different product, and then re-exported from N.I to Mobile......

It's just a variation on taking rivets from Canada, and slipping them back into the US as part of another sub-assembly (the wing)

And yes, I am perfectly aware that US Customs isn't stupid and have rules to prevent circumvention just like this, which brings me back to; what if the Short Bros wing includes a handful of Canadian rivets? Or a thin smear of Maple Syrup holding two joints together somewhere?

p.s. thanks for your clarification on the European thing; I knew it had a sensible answer, and I knew you were the man to provide it.

Not an expert, but I'd guess they'd look at the wings as being substantially from the UK, not Canadian.

I don't know if any precedence for this exists, but seeing as these wings can only be used on the C Series and are specifically designed for that aircraft, a Canadian aircraft, and the wings are obviously of Canadian design, perhaps it can be argued that this is just another attempt at circumvention, which it obviously is. But this is likely stretching it too far, I think.

PPVRA · Thu Oct 19, 2017 4:28 pm

tommy1808 wrote:
Revelation wrote:
tommy1808 wrote:
You just have to cough up the cash first and get reimbursed by the tax payer when you are up and running.

No, you have to develop a property and/or produce and sell a product before you get a reduction in the tax rate you pay..

Boeing will have 8 Billion more in the bank at some point than they would otherwise have or will they not? Who would have that money if it isn´t in Boeing bank account? The Tax payer. Ergo: 8 Billion tax payer money are given to Boeing. Any additional tax coming from that 8 Billion are in no way different from an RLI, only that companies have to pay for that money, while Boeing in effect just has to carry an 8 Billion loan for a while, to have the tax payer pay that back for them.
You can spot the difference between a tax payer guaranteed loan, where the tax payer usually comes out on top (= investment) and a tax break, where the best outcome for the tax payer is Boeing never making a profit and hence never get the tax payer to repay the loan for them. In both cases job creation and tax revenue generating effects are the same.... only difference is that with an RLI the normal outcome is the taxpayer showing a profit, where as the tax payer can not win with a tax break.

But then again, Boeing´s government backed unfair competition practice is going to bite them in the ass in a big way. I do certainly hope that the EU considers a 100 mil tariff on each 777x for the first 80 Units , just to balance the playing field considering the shitload of free money Boeing is getting on top of that.

best regards
Thomas

That money was Boeing's to begin with. Tax cuts are not a commitment of a fixed amount of cash from an external source or a transfer of program financial risk to the government.

Regardless, Boeing's presence in Washington state is questionable if they can get tax breaks elsewhere. So frankly, taxpayers weren't going to get those $8 Bi anyways, which really means they lost nothing but gained Boeing's investments.

It's called bargaining. Don't assume you have anything.

speedbored · Thu Oct 19, 2017 4:29 pm

PPVRA wrote:
Not an expert, but I'd guess they'd look at the wings as being substantially Irish, not Canadian.

I doubt that very much - I'm pretty sure that there is almost no Irish content in the wings. They are manufactured in the UK, not the Irish Republic.

PPVRA · Thu Oct 19, 2017 4:31 pm

speedbored wrote:
PPVRA wrote:
Not an expert, but I'd guess they'd look at the wings as being substantially Irish, not Canadian.

I doubt that very much - I'm pretty sure that there is almost no Irish content in the wings. They are manufactured in the UK, not Ireland.

Oh that's right! My mistake. Just replace Irish with British then.

speedbored · Thu Oct 19, 2017 4:38 pm

PPVRA wrote:
Just replace Irish with British then.

Actually ......

No, I won't be that pedantic. Suffice to say our country is complicated.

PPVRA · Thu Oct 19, 2017 4:42 pm

speedbored wrote:
PPVRA wrote:
Just replace Irish with British then.

Actually ......

No, I won't be that pedantic. Suffice to say our country is complicated.

I'll be watching this again later today as a refresher. . .

https://www.youtube.com/watch?v=rNu8XDBSn10

keesje · Thu Oct 19, 2017 4:44 pm

Which genius advised Boeing to go the political way, get the COC in and rely on Trump Government support?

Didn't they get the "don't do what we do" only holds within the company and supportive local government?

What were they thinking?

tommy1808 · Thu Oct 19, 2017 5:04 pm

Revelation wrote:
Money you get at the point when you start an enterprise is more valuable than money you take out after the enterprise is up and running.

The whole reason we pay interest on loans is because there is a time value to money.

Which is exactly why RLI''s come with interest. Therfore there is no cash advantage for the company getting the RLI. And there are royalties to pay, so having an RLI actually increases your unit cost.

Tax breaks are just that, a reduction of the tax rate.

Exactly. They enable companies, that already have the money to develop a product and get it into production, to sell at a lower price while still getting the desired RoI from sales. Or increase profits if they don't have to lower prices.

In sum:
RLIs have no impact on sales prices, aside of maybe a slight up due to royalties to the benefit of the tax payers. They do impact if a product comes to the market at all however. Therefore RLIs lower market entry obstacles and lead to more competition. That drives down prices, which again is to the benefit of the tax payer.

Tax breaks: in principle only available to companies that are already large enough to stem market entry of a new product themselves. It also enables lower sales prices if the need shall arise, making market entry less attractive -> less competition.
Meanwhile the tax payer gets shafted all ways, he is a) allowed to help keep competition away, b) gets to increase company profits and c) gets to pay higher prices due to less competition.

Delta flying the C-series will improve their average cost and that will drive ticket prices down a fraction across the market. Unless of course that advantage gets stopped from being realised by something like tariffs for example.

You state that the taxpayer would get the full amount if it wasn't being given as a break, and that's just not true in the real world: the enterprise can and does shop for low tax opportunities so the choice is not between full and partial rate, it is between partial rate and zero.

RLIs are loans, they are repayable in full plus interest and royalties regardless of what tax loophole the company find. So tax breaks lose out in this one as well.
If a company can find loopholes getting around those 8 billion in taxes, the whole deal would be irrelevant for the tax payer, that is true, but then again Boeing wouldn't need to go through that bidding process.
The anti-competitive nature of tax breaks would still be in effect. Tax payer still loses.

Bombariers C-Series being the perfect example. Somehow actually getting cash into the bank isn't a subsidiary and helps Boeing, the dominant supplier, but getting competition on the road is somehow bad, and used to kill of that competition.

It is very clear which system makes more sense for the tax payer. The anti-competitive one ain't it.

Best regards
Thomas

WIederling · Thu Oct 19, 2017 5:05 pm

keesje wrote:
What were they thinking?

That BBD and Canada had no way to retaliate and would serve as a horrific bloodbath example.
or.
The over the top tariffs were designed to bring BBD to the talks table on all fours liking hands all around.
still the objective would have been to
a: get cheap access to BBD IP and/or
b: to furnish precedence for further attacks.

douwd20 · Thu Oct 19, 2017 5:09 pm

anfromme wrote:
It's hardly three days since the deal was announced and the first few myths are already forming, such as Airbus not paying anything. They are not paying cash today, but they will pay for the second FAL, they will put in marketing, sales, support, supply chain management - and they will pay cash in 2023.

When Boeing acquired McDonnell-Douglas they paid $13 billion in stock immediately not down the road. Airbus is getting the troubled aircraft for pennies. Further Airbus has structured the deal so that they entail no expenses until Bombardier has spent the $700 million in taxpayer dollars. Should that not happen deal over I'm sure. So it is no myth they got in for free.

anfromme wrote:
Even Aboulafia concedes this is a victory for both the CSeries and Airbus - and his firm, Teal, immediately see the value of the CSeries doubled after this, with potential to go even higher.

Success is never final. And this war is far from over. So hold the champagne toasts for awhile

Airbus got a slow-selling plane for pennies and now they're going to spin straw into gold? Keep dreaming.

DfwRevolution · Thu Oct 19, 2017 5:19 pm

tommy1808 wrote:
Revelation wrote:
tommy1808 wrote:
You just have to cough up the cash first and get reimbursed by the tax payer when you are up and running.

No, you have to develop a property and/or produce and sell a product before you get a reduction in the tax rate you pay..

Boeing will have 8 Billion more in the bank at some point than they would otherwise have or will they not? Who would have that money if it isn´t in Boeing bank account? The Tax payer. Ergo: 8 Billion tax payer money are given to Boeing.

No. No. No. Wrong. Wrong. Wrong. Stop. Stop. Stop.

Your premise is therefore that private property doesn't exist and everything belongs to the taxpayer until the government says otherwise. That might have been true in the Soviet Union, but not in the United States.

cumulushumilis · Thu Oct 19, 2017 5:20 pm

washingtonflyer wrote:
mjoelnir wrote:
douwd20 wrote:
[
"Rigged verdict"? So now the US government is in on it too?

A law purposely designed for that outcome by the USA congress and an US trade commission set up to look after USA interest. Of course it is rigged purposefully so.

As opposed to a law set up by Canadian parliament and enforced by the CITT and CBSA. You do realize, don't you, that Canada has plenty of trade cases going as well?

Aluminum Extrusions: Dumping & Countervailing (China)
Carbon and Alloy Steel Line Pipe: Dumping & Countervailing (China)
Carbon and Alloy Steel Line Pipe 2: Dumping (Republic of Korea)
Carbon Steel Welded Pipe (CSWP 1): Dumping & Countervailing (China)
Carbon Steel Welded Pipe 2 (CSWP 2): Dumping (Chinese Taipei, India, Oman, Republic of Korea, Thailand and United Arab Emirates); Countervailing (India)
Concrete Reinforcing Bar: Dumping (China, Republic of Korea, Turkey); Countervailing (China)
Concrete Reinforcing Bar 2: Dumping (Belarus, Chinese Taipei, Hong Kong, Japan, Portugal and Spain)
Copper Pipe Fittings: Dumping (China, Republic of Korea and United States); Countervailing (China)
Copper Tube: Dumping (Brazil, China, Greece, Mexico and Republic of Korea); Countervailing (China)
Fabricated Industrial Steel Components: Dumping (China, Korea and Spain) & Countervailing (China)
Fasteners: Dumping (China and Chinese Taipei); Countervailing (China)
Flat Hot-Rolled Carbon and Alloy Steel Sheet and Strips: Dumping (Brazil, China and Ukraine); Countervailing (India)
Gypsum Board: Dumping (United States of America)
Hollow Structural Sections: Dumping (Republic of Korea and Turkey)
Large Line Pipe: Dumping (China and Japan) & Countervailing (China)
Liquid Dielectric Transformers: Dumping (Republic of Korea)
Oil Country Tubular Goods (OCTG 1): Dumping & Countervailing (China)
Oil Country Tubular Goods 2 (OCTG 2): Dumping (Chinese Taipei, India, Indonesia, Philippines, Republic of Korea, Thailand, Turkey, Ukraine and Vietnam)
Photovoltaic Modules and Laminates: Dumping & Countervailing (China)
Piling Pipe: Dumping & Countervailing (China)
Pup Joints: Dumping & Countervailing (China)
Refined Sugar: Dumping (Denmark, Germany, Netherlands, United Kingdom and United States); Countervailing (European Union)
Seamless Casing: Dumping & Countervailing (China)
Silicon Metal: Dumping & Countervailing (China)
Silicon Metal 2: Dumping (Brazil, Kazakhstan, Laos, Malaysia, Norway and Thailand) & Countervailing (Brazil, Kazakhstan, Malaysia, Norway and Thailand)
Stainless Steel Sinks: Dumping & Countervailing (China)
Steel Grating: Dumping & Countervailing (China)
Steel Plate 3: Dumping (China)
Steel Plate 5: Dumping (Bulgaria, Czech Republic and Romania)
Steel Plate 6: Dumping (Ukraine)
Steel Plate 7: Dumping (Brazil, Denmark, Indonesia, Italy, Japan and the Republic of Korea)
Thermoelectric Coolers and Warmers: Dumping & Countervailing (China)
Unitized Wall Modules (UWM): Dumping & Countervailing (China)
Whole Potatoes: Dumping (United-States)

The gypsum board countervailing tariff is an interesting case, the duty was imposed at 277% reduced to 43% and in some regions it was reduced all to together, because of the negative impact it would have on the Canadian housing market in terms of increasing housing costs in an already overheated market. Sometimes governments (Canadian government included) do stupid things without realizing what might happen on the big picture. In terms of the Cseries, the same could be argued, you kill the aircraft by imposing a crazy larger tariff and along with might go all the US supplier jobs.

SomebodyInTLS · Thu Oct 19, 2017 5:21 pm

speedbored wrote:
PPVRA wrote:
Just replace Irish with British then.

Actually ......

No, I won't be that pedantic. Suffice to say our country is complicated.

Shouldn't that be "(sovereign) state" and not "country"...? (even WikiPedia seems to mix them up, but I always thought England, Scotland, Wales and Northern Ireland were *countries* within the sovereign state of the United Kingdom...)

mjoelnir · Thu Oct 19, 2017 5:24 pm

douwd20 wrote:
anfromme wrote:
It's hardly three days since the deal was announced and the first few myths are already forming, such as Airbus not paying anything. They are not paying cash today, but they will pay for the second FAL, they will put in marketing, sales, support, supply chain management - and they will pay cash in 2023.

When Boeing acquired McDonnell-Douglas they paid $13 billion in stock immediately not down the road. Airbus is getting the troubled aircraft for pennies. Further Airbus has structured the deal so that they entail no expenses until Bombardier has spent the $700 million in taxpayer dollars. Should that not happen deal over I'm sure. So it is no myth they got in for free.

anfromme wrote:
Even Aboulafia concedes this is a victory for both the CSeries and Airbus - and his firm, Teal, immediately see the value of the CSeries doubled after this, with potential to go even higher.

Success is never final. And this war is far from over. So hold the champagne toasts for awhile Airbus got a slow-selling plane for pennies and now they're going to spin straw into gold? Keep dreaming.

Boeing did not acquire McDonnell-Douglas, it was a merger.

LockheedBBD · Thu Oct 19, 2017 5:30 pm

yowza wrote:
It looks like Boeing is on a bit of a charm offensive. Canadian social media channels are seeing a lot of this kind of thing: https://postimg.org/image/2eg1e0ko6j/
YOWza

I don't really understand the point of the campaign. Ordinary citizens aren't the ones purchasing aircraft, maybe they should be sending gift baskets to airline CEOs and government officials instead. In their campaign, they have Vancouver, Canada as the backdrop, which is a bit odd. There isn't an aviation industry there (or any Boeing facilities), the backdrop should have been Mirabel! :hyper:

ytz · Thu Oct 19, 2017 5:36 pm

LockheedBBD wrote:
yowza wrote:
It looks like Boeing is on a bit of a charm offensive. Canadian social media channels are seeing a lot of this kind of thing: https://postimg.org/image/2eg1e0ko6j/
YOWza

I don't really understand the point of the campaign. Ordinary citizens aren't the ones purchasing aircraft, maybe they should be sending gift baskets to airline CEOs and government officials instead.

Because their actions have overnight turned the Super Hornet deal from an asset to a political liability for the government. They have to change public opinion or the government will face a political backlash for giving Boeing any defence deals for a long time.

It's not just the fighter. Future tanker and maritime patrol deals may also be at risk. Along with more recent considerations about attack helicopters (the Senate has suggested that the RCAF should acquire them and internal discussion is picking up).

Strato2 · Thu Oct 19, 2017 5:37 pm

Revelation wrote:
If you think this is a wonderful deal, you should set up an aviation enterprise in Washington State, they'd be glad to have you.

It does not matter what we think. The stock market has already decided that this is an very good deal for the participants.

ThePointblank · Thu Oct 19, 2017 5:40 pm

PPVRA wrote:
SheikhDjibouti wrote:
washingtonflyer wrote:
A Shorts brothers wing coming from the UK to the USA is a product of the UK - no duties.

What comes into play are those assemblies and sections manufactured or completed in Canada.

I'm guessing the Short Brothers wing had some input from Canada, originally at least. Not necessarily raw materials (unless it's made out of Canadian lumber?). I'm thinking more about less tangible items, design, tooling expertise, whatever. But just supposing it incorporates genuine Canadian made rivets?
In such a case, do you stand by your statement "no duties"?

You can probably guess where I'm going with this already.

If we expand Short's input to the C-series program beyond just the wing, so that we have a situation where more Canadian parts are exported from Canada to Northern Ireland, assembled into larger sub-sections so that they represent a recognisably different product, and then re-exported from N.I to Mobile......

It's just a variation on taking rivets from Canada, and slipping them back into the US as part of another sub-assembly (the wing)

And yes, I am perfectly aware that US Customs isn't stupid and have rules to prevent circumvention just like this, which brings me back to; what if the Short Bros wing includes a handful of Canadian rivets? Or a thin smear of Maple Syrup holding two joints together somewhere?

p.s. thanks for your clarification on the European thing; I knew it had a sensible answer, and I knew you were the man to provide it.

Not an expert, but I'd guess they'd look at the wings as being substantially from the UK, not Canadian.

I don't know if any precedence for this exists, but seeing as these wings can only be used on the C Series and are specifically designed for that aircraft, a Canadian aircraft, and the wings are obviously of Canadian design, perhaps it can be argued that this is just another attempt at circumvention, which it obviously is. But this is likely stretching it too far, I think.

In terms of trade, the item has to be substantially transformed in terms of its essence. I will point to the NAFTA Rules of Origin:
https://www.nafta-sec-alena.org/Home/Te ... 6a08a#A401

Article 401: Originating Goods

Except as otherwise provided in this Chapter, a good shall originate in the territory of a Party where:

a) the good is wholly obtained or produced entirely in the territory of one or more of the Parties, as defined in Article 415;

b) each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification set out in Annex 401 as a result of production occurring entirely in the territory of one or more of the Parties, or the good otherwise satisfies the applicable requirements of that Annex where no change in tariff classification is required, and the good satisfies all other applicable requirements of this Chapter;

c) the good is produced entirely in the territory of one or more of the Parties exclusively from originating materials; or

d) except for a good provided for in Chapters 61 through 63 of the Harmonized System, the good is produced entirely in the territory of one or more of the Parties but one or more of the non-originating materials provided for as parts under the Harmonized System that are used in the production of the good does not undergo a change in tariff classification because

(i) the good was imported into the territory of a Party in an unassembled or a disassembled form but was classified as an assembled good pursuant to General Rule of Interpretation 2(a) of the Harmonized System, or

(ii) the heading for the good provides for and specifically describes both the good itself and its parts and is not further subdivided into subheadings, or the subheading for the good provides for and specifically describes both the good itself and its parts,

provided that the regional value content of the good, determined in accordance with Article 402, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and that the good satisfies all other applicable requirements of this Chapter.

More on determining the rules of origin, and examples:
https://www.usitc.gov/elearning/hts/med ... rigina.pdf

Another point to look at is the General Rules of Interpretation for the Harmonized System; these rules dictate how something is to be classified. A brief explanation can be found here:
http://www.wcoomd.org/en/topics/nomencl ... 413CB.ashx
http://www.globaltariff.com/RulesofInterpretation.cfm

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