The move underscores the ferocity of the competition in the booming airlines industry.
On Thursday, Boeing asked the U.S. Commerce Department to investigate into alleged unfair pricing and subsidies received by Canadian airplane manufacturer Bombardier, thus adding to the growing trade dispute between the United States and Canada.
The move underlines the growing competition in the airlines industry and comes in the wake of the U.S. Commerce Department imposing on average a 20% duty on imports of Canadian softwood lumber.
In its petition against Bombardier, Boeing stated that the company had offered its planes at an “absurdly low” price of $19.6 million to Delta Air Lines Inc, for what it described the aircraft’s production cost of $33.2 million.
“Propelled by massive, supply creating and illegal government subsidies, Bombardier Inc has embarked on an aggressive campaign to dump its CSeries aircraft in the United States,” said Boeing in its petition.
For similarly sized aircrafts such as Boeing’s 737-700 model, the typical asking price is $83.4 million, with the new Boeing 737-MAX 7 commanding a price of $92.2 million. Sales discounts from listed prices are typically 40% to 50% in the industry.
In April 2016 Bombardier won an order from Delta order for 75 CS100 jets worth an estimated $5.6 billion based on the list price of about $71.8 million.
In its complaint, Boeing has alleged that the entire CSeries line of aircrafts would not exist without the hundreds of millions of dollars that are sunk in by the governments of Canada, Quebec and Britain in the form of aid.
The company has received an equity infusion of $2.5 billion from Quebec and its largest pension fund in 2015.
Dominique Anglade, Canada’s Economy Minister responded to the charges saying, Quebec would defend “the commercial partnership concluded with Bombardier” for a $1 billion injection in the CSeries.
Boeing has also taken a pot shot at its European rival, Airbus SE, which it alleged receives similar “unfair” government benefits in what is a long-running dispute between the two before the World Trade Organization.
In a statement, the Canadian government cast aside Boeing’s allegations saying the CSeries has many U.S. suppliers, including for engines, and supports thousands of U.S. jobs.
“The Government of Canada will mount a vigorous defense against these allegations and stand up for aerospace jobs on both sides of the border,” reads the statement.
Given the fierce competition in the airlines industry, Bombardier’s chief executive stated the company had adopted an “aggressive” pricing strategy so as to win more orders.
As per sources familiar with the deal from which these allegations stem, the discounts given by Bombardier to Delta Airlines come to around two-thirds off its nominal list price.