WTO appoints panel to review Bombardier CSeries subsidies

MONTREAL _ Bombardier Inc. sustained another blow Friday as the World Trade Organization formally established a panel to review CSeries subsidies at the request of Brazil’s Embraer S.A., just days after the U.S. imposed massive duties after its American rival petitioned its government.

The establishment of a dispute settlement panel comes a month after consultations with Canada failed to resolve Brazil’s complaint that government subsidies for the CSeries are inconsistent with Canada’s WTO obligations.

It also comes the same week that the U.S. Department of Commerce announced a nearly 220 per cent countervailing duty against the controversial planes after Boeing Co. complained Bombardier benefited from improper government subsidies, giving it an unfair advantage when selling its CSeries jets south of the border.

“We believe that the decision of the Commerce Department reinforces the Brazilian government’s claim in the panel opened today at the WTO,” Embraer CEO Paulo Cesar Silva said in a news release.

He said the government subsidies have allowed Bombardier to sell the CSeries at artificially low prices that distort the global market and harm competitors.

None of the three WTO panel members have been appointed in what could be a lengthy review process. Boeing and Airbus have battled for 13 years over government subsidies.

Brazil’s Embraer said the WTO panel will examine more than US$3 billion in subsidies received from the governments of Canada and Quebec. The aerospace rival has eaten away at Bombardier’s leadership in regional jets and is developing an updated offering to partially compete with the CSeries.

Bombardier said the Canadian government plans to defend the interests of Bombardier and the Canadian aerospace industry at the WTO.

“We are confident that the investments and contribution programs mentioned in Brazil’s petition are in full compliance with all WTO and international trade rules,” said spokesman Simon Letendre.

Bombardier expects the U.S. to announce Wednesday it will also impose a large anti-dumping duty on CSeries planes. The preliminary duties, which far exceed what petitioner Boeing demanded, will be decided in the coming months.

Joseph Pickerill, a spokesman for International Trade Minister Francois-Philippe Champagne, said the government is very confident that its support of the aerospace industry fully respects international trade rules.

“All aircraft-producing countries provide some form of support to their aircraft industry. Brazil is no exception, and Canada will be examining closely Brazilian Government support to Embraer,” he stated.

Meanwhile, the company also announced a positive development Friday as it said it has secured an order for what could be Bombardier’s biggest-ever sale of Q400s.

The Montreal-based company said India’s SpiceJet will become the launch customer for its largest turboprop after placing a firm order for 25 high-density Q400s, with an option for 25 others. If all 50 planes are purchased by the Indian airline, it would be a record Q400 sale.

SpiceJet originally signed a letter of intent last summer to purchase 86-seat Q400s, but has agreed to buy the 90-seat aircraft, pending certification by regulatory authorities.

“This order confirms the airlines’ increased capacity needs on regional routes with high passenger demand and demonstrates the increased profitability potential that this unique turboprop configuration has to offer,” stated Fred Cromer, president of Bombardier Commercial Aircraft.

SpiceJet chairman Ajay Singh said the order will enhance service to smaller towns and cities in one of the world’s fastest-growing regional markets.

“We have worked hard over the years to put these smaller towns on the country’s aviation map and will strive to keep that momentum going in the times to come,” he said in a news release.

SpiceJet operates 20 78-seat Q400s for use on domestic and international routes.

Bombardier has received firm orders for 610 Q400 aircraft that are assembled in Toronto.

The full SpiceJet order would have a list-price value of US$1.7 billion, although it’s typical for purchasers to get discounts for large orders.

_ With files from Lee Berthiaume in Ottawa.