Boeing says Canada relationship will survive despite C Series trade action

Boeing’s relationships with Canada and Britain will survive even though the trade complaint launched against the C Series aircraft is having “ripple effects” on those bonds, the U.S. aircraft giant’s chairman and CEO said Wednesday.

“We’ve been together for 100 years in places like Canada and in the U.K. and we expect those long-term relationships to be sustained and we’re going to continue to work with our customers in both countries,” Dennis Muilenburg said during a conference call to discuss it’s third-quarter results.

He said the trade action is not targeted at customers or countries, but at fair trade. Boeing has 2,000 direct employees in Canada and hundreds of suppliers that allow it to contribute $4 billion a year to the Canadian economy.

Muilenburg added that it has a very good relationship with Delta Air Lines, which is eager to receive the C Series planes but is prepared to wait until they are produced in the United States.

He said Boeing (NYSE:BA) is happy to compete but that everyone needs to play by the same rules.

“That’s why we brought the trade case and we’re mindful that while we bring a trade case like this that there are ripple effects and implications to various customers and country relationships.”

Boeing’s complaint has prompted a heavy political reaction from the Canadian government and British Prime Minister Theresa May, who fears job losses at Bombardier’s wing assembly facility in Northern Ireland.

Canada has threatened to cancel the planned purchase of 18 Boeing F/A-18 Super Hornets to temporarily augment Canada’s aging fleet of CF-18 fighter jets.

Muilenburg insisted that Boeing doesn’t need to adjust its narrowbody aircraft strategy in light of the C Series partnership between Airbus and Bombardier Inc. (TSX:BBD.B).

“Recent actions that you see that Airbus and Bombardier have announced are not actions that change our gameplan.”

The Chicago-based manufacturer is increasing the number of 737 Max planes it will produce monthly to supply the record backlog of orders for its re-engined planes.

Demand is focused on the larger Max 8 and 9 planes with 162 to 220 seats. It foresees a market for 41,000 aircraft over the next 20 years, including 29,000 narrowbodies.

Bombardier has said it expects to capture half of the 6,000 orders for 100- to 150-seat aircraft it forecasts over the next two decades.

Muilenburg said Boeing isn’t surprised by the partnership announced last week that will see its large European rival take a majority stake in the C Series for no financial payment.

He declined to comment on reports that Boeing itself spoke with Bombardier about a strategic partnership before walking away from the table ahead of preliminary duties being announced by the Department of Commerce. Those tariffs would quadruple the C Series price on sales into the United States.

Boeing filed a trade complaint with the U.S. Department of Commerce in April against the C Series, arguing the plane was heavily subsidized by the Canadian and Quebec governments that allowed Bombardier to sell the planes to Delta at deep discounts.

Final countervailing and anti-dumping duty rates are slated to be announced in December. The U.S. International Trade Commission will decide in February if Boeing was harmed by the C Series.

Boeing raised its outlook for the year on Wednesday after reporting better-than-expected profits of US$1.85 billion in the third quarter on US$24.31 billion or revenues.

Bombardier and Airbus believe the C Series will avoid duties because the planes sold to U.S. customers will be supplied by Airbus’ plant in Mobile, Ala. Boeing said that won’t let it escape duties.

Muilenburg didn’t directly respond to a question about whether it would enter into a joint venture of its own to compete with the C Series, but said mergers and acquisitions are generally part of its available options.