The Canadian Press recently reported that the Trudeau government has until the end of the year to decide on an offer for Super Hornet fighter jets.
There is a formal offer on the table to sell 18 Boeing Super Hornets. But that is in limbo because of Boeing’s complaint about the Canadian government and the support it has provided to Bombardier for the development of the C-Series passenger aircraft.
The Trudeau government can ask for an extension, but there is no guarantee it will be granted, Canadian Press noted.
But industry officials tell Defence Watch there the Liberals don’t have much to worry about. Boeing is not going to turn down $6 billion in business if the Trudeau government decides to buy the aircraft.
The Trump administration is also not going to turn down an offer that would secure well-paying U.S. jobs at Boeing’s production facility.
Would there be a price increase? There could be a slight one but that could be offset by tougher bargaining on the part of the Canadian government, officials say.
Boeing, which has seen its reputation undermined in Canada because of the whole Bombardier issue, might be in a mood to provide even more favourable terms, they add.
Whether the Liberal government buys Super Hornets or simply delays the acquisition of aircraft until after the next election remains to be seen.
Inside the Royal Canadian Air Force there is the view that it makes sense to just go into a competition for a full-fleet replacement instead of buying “interim” Super Hornets.
Another day and another article about Boeing’s dispute with Bombardier and the Canadian government.
As readers are well aware, Boeing complained earlier this year to the U.S. about what it has labelled as subsidies provided to Bombardier by Canadian governments. As a result, the Trump administration has hit the Canadian company with a penalty of almost 300 per cent in duties on its C-Series civilian passenger aircraft.
In an article today about the ongoing dispute I had this line near the end of the story: “Boeing’s critics point out it receives billions of dollars of subsidies from the U.S. government.”
That has prompted a rebuke from Boeing spokesman Scott Day, who accused me of “spreading false information.”
According to Boeing it hasn’t received any subsidies. Day noted that, “U.S. Export-Import Bank financing does not go to Boeing. Boeing doesn’t receive a single penny in funds or financing from the Export-Import Bank.”
He also added that “the World Trade Organization has dismissed the vast majority of subsidy claims against Boeing.”
For starters, reporting accurately what Boeing’s critics are saying isn’t “spreading false information.”
Boeing’s critics, both in Canada and around the world, have indeed repeatedly pointed out that the company receives billions of dollars of subsidies from U.S. governments at the federal, municipal and state levels.
The U.S. watchdog group Good Jobs First has continually reported on the billions of dollars that it says Boeing receives in government subsidies. In 2015, the St. Louis Business Journal, citing a Good Jobs First study, noted that Boeing is the nation’s largest winner of state and local tax incentives, receiving in excess of $13 billion U.S.. Most of that was related to Boeing’s commercial aircraft manufacturing, the newspaper noted.
In the article, I also quoted Marc Allen, Boeing’s president of international business, who stated the company took its action against Bombardier to ensure a level playing field in the aerospace industry and Boeing believes that global trade only works if everyone plays by the same rules.
Boeing’s critics say that isn’t true and Boeing is really out to destroy it competitor Bombardier and significantly hurt Canada’s aerospace industry. They too could accuse me of “spreading false information” by reporting on Boeing’s view, although they haven’t yet. Maybe that email is to come.
Interestingly, Day’s email arrived just as Bloomberg TV was reporting that the United Kingdom’s Labour Party has now labelled Boeing the “king of corporate welfare.”
Labour’s trade spokesman Barry Gardiner accused the U.S. aerospace giant of “egregious hypocrisy” in pursuing the illegal-subsidies claim against Bombardier Inc.
Boeing has been denounced by many in the UK government and opposition MPs for putting thousands of UK jobs at risk with its action (the wings for C-Series aircraft are built in Northern Ireland).
Gardiner told Bloomberg that “no aircraft these days comes to market without support from government,” including those produced by Boeing.
“Boeing has absolutely been sucking at the milk of corporate welfare in America for far too long,” Gardiner said on Bloomberg TV. “They need to understand that the way in which they are playing this does not sit well with U.K. parliamentarians.”
But according to Boeing executives the 300 per cent duty now tacked on to Bombardier aircraft being sold in the U.S. is about all about “following trade rules” and not about punishing its competitors. “This trade case is about fairness,” Day noted. “Taking government subsidies and using them to offer below-production-cost pricing on aircraft is a violation in the U.S., and the laws are well-known.”
Both sides have their view.
But it is becoming clearer now that Boeing’s actions could have serious consequences in its ability to sell defence related products to Canada and the United Kingdom.
Government officials in both countries have suggested that is the case.
Whether that comes about still has to be seen though.
Canada has taken the first official step to purchasing used fighter jets from Australia as it’s dispute with Boeing continues unresolved.
The Canadian government has now submitted a formal expression of interest to Australia to acquire the aircraft, Public Services and Procurement Canada confirmed.
Canada began discussions in late August with the Australian government to assess the potential purchase of used F/A-18 fighter aircraft from that country.
“On Sept. 29, 2017, Canada submitted an expression of interest, formally marking Canada’s interest in the Australian equipment,” Public Services and Procurement Canada announced in a new statement. “Canada expects to receive a response by the end of this year that will provide details regarding the availability and cost of the aircraft and associated parts that Canada is considering.”
The Australian jets are being considered as interim fighters. They would supplement Canada’s existing CF-18 fleet until a new aircraft could be acquired.
The move to try to acquire fighter jets from Australia coincides with the U.S. government’s decision, based on a Boeing complaint, to hit Bombardier with almost 300 per cent duties on its CSeries civilian passenger jet.
Prime Minister Justin Trudeau is expected to bring up the Boeing complaint and duties with U.S. President Donald Trump on Wednesday.
The Liberal government had wanted to buy 18 Super Hornet fighter jets but that plan was derailed when the jet’s manufacturer, Boeing, filed the trade complaint in April against Bombardier of Quebec over its civilian passenger jets.
Boeing complained to the U.S. government that Bombardier was receiving subsidies, which in turn allowed it to sell its C-Series civilian passenger aircraft at below-market prices.
The U.S. ruled in favour of the American aerospace giant and as a result, Bombardier will face duties of almost 300 per cent.
That move by Boeing, however, scuttled the Super Hornet deal and prompted Canada to look elsewhere for jets.
Defence Minister Harjit Sajjan recently said that Canada has looked at surplus fighter jets from Kuwait but those are not available at this time. He acknowledged Canada is now focused on the Australian jets.
“We are going to be moving ahead with filling that capability gap,” Sajjan noted. “We are pursuing other options.”
The Liberals have said they will eventually buy 88 new jets to replace the CF-18s.
Trudeau has said Boeing can forget about selling fighter jets to Canada as long as it tries to undercut thousands of Canadian jobs with its ongoing trade complaint against a Quebec aerospace firm.
“We won’t do business with a company that is busy trying to sue us and put our aerospace workers out of business,” Trudeau said.
Boeing’s complaint has also drawn the ire of the government in the United Kingdom.
Parts of the C-Series are built in Northern Ireland.
The U.K.’s prime minister, Theresa May, has raised the issue with Trump. She has also warned that Boeing’s actions are jeopardizing future defence contracts with the U.K.
Marc Allen, Boeing’s president of international business, has said the company wanted to ensure a level playing field in the aerospace industry. He said Boeing believes that global trade only works if everyone plays by the same rules. That wasn’t the case for Bombardier, he added.
Boeing on Tuesday launched an advertising campaign to raise awareness of the company’s presence and annual impact on the nation’s economy.
Boeing’s critics point out it receives billions of dollars of subsidies from the U.S. government. Boeing is trying to undercut Bombardier, a potential competitor, Canadian government and industry officials say.
Defence Minister Harjit Sajjan suggested Thursday that Canada would not consider a Boeing product for any future fighter jet and that the door on the company’s involvement in other future Canadian military procurements is close to being shut.
The move comes after the U.S. government hit Bombardier with duties of almost 220 per cent on its C-Series passenger jets. That penalty came as a result of Boeing’s complaint that Bombardier was selling the C-Series in the U.S. at a lower cost because it received subsidies from the Canadian government. Bombardier is selling the planes to Delta Airlines.
But the move is being seen in the Canadian government as an attempt by Boeing and the Trump administration to undercut Canada’s aerospace industry. Boeing receives significant subsidies in the U.S. In addition, Boeing does not make aircraft similar to those Bombardier sold Delta.
Canada has put on hold its planned purchase from Boeing of 18 Super Hornet jets to be used as an interim fighter for the RCAF.
Sajjan on Thursday suggested Boeing will not be considered for other Canadian defence procurements.
“Rest assured. We cannot do future business with a company that is threatening us,” he told reporters. “We have a lot to invest with our procurements. We work with trusted partners.”
Sajjan has said Boeing is not a trusted partner.
Will Boeing be banned from the competition for a full fleet of 88 fighter jets?
“Our government is not going to allow our aerospace sector to be attacked in this manner,” Sajjan responded. “We can’t do business with a company that treats us in this way.”
It would be legally difficult for Canada to freeze out Boeing from competing on the future fighter jet replacement. But requirements for a future fleet could be written in a way that could prevent the Boeing Super Hornet from being selected.
The British government has also warned that Boeing may face some difficulties on future defence contracts in the United Kingdom. “Boeing is a major partner of the defence and one of the big winners of our last review of defence contracts, so this is not the attitude we expect from a long-term partner,” the UK’s defence secretary Sir Michael Fallon warned.
He noted that it has won large contracts from the British government for new aircraft. Those include Apache helicopters and maritime reconnaissance aircraft. “They are going to apply for other defence contracts, and this type of attitude could clearly endanger our relationship “, Fallon pointed out.
Boeing officials say defence procurement should not be linked to other commercial actitivities.
Marc Allen, Boeing’s president of international business, said the company took its action to ensure a level playing field in the aerospace industry. He said Boeing believes that global trade only works if everyone plays by the same rules. That wasn’t the case for Bombardier, he added.
But Canadian government officials privately note that a duty of almost 220 per cent on Canadian aircraft is not a level playing field but protectionism by the Trump administration.
Prime Minister Justin Trudeau had some of his toughest language yet for Boeing in the ongoing trade dispute that has affected the purchase of Super Hornets as interim fighter jets.
“We have obviously been looking at the Super Hornet aircraft from Boeing as a potential significant procurement of our new fighter jets,” Trudeau said Monday. “”But we won’t do business with a company that’s busy trying to sue us and trying to put our aerospace workers out of business.”
“Boeing is not suing Canada. This is a commercial dispute with Bombardier, which has sold its C Series airplane in the United States at absurdly low prices, in violation of U.S. and global trade laws. Bombardier has sold airplanes in the U.S. for millions of dollars less than it has sold them in Canada, and millions of dollars less than it costs Bombardier to build them.
This is a classic case of dumping, made possible by a major injection of public funds. This violation of trade law is the only issue at stake at the US Department of Commerce. We like competition.
It makes us better. And Bombardier can sell its aircraft anywhere in the world. But competition and sales must respect globally-accepted trade law. We are simply using laws that have been on the books for decades and subjecting them to a fair hearing based on the facts.”
Bombardier added its voice to the debate in a statement on its website entitled, “Boeing’s Hypocrisy.”
“Bombardier shares Boeing’s commitment to a level playing field, but in this case, they were not even on the field. Delta ordered the C Series because Boeing stopped making an aircraft of the size Delta needed years ago.
Boeing’s self-serving actions threaten thousands of aerospace jobs around the world, including thousands of U.K. and U.S. jobs and billions of purchases from the many U.K. and U.S. suppliers who build components for the C Series.
The U.S. government should reject Boeing’s attempt to tilt the playing field in its favor and impose an indirect tax on the U.S. flying public through unjustified import tariffs.”
Reuters news service is now reporting an update on the ongoing interim Super Hornet issue. It reports that Canada last month attempted to end the dispute with Boeing Co. by suggesting it could withdraw a threat not to buy Super Hornet jets if the U.S. firm dropped a trade challenge against Bombardier Inc.
I don’t know if this is exactly a great revelation though. The position of the Liberal government since April/May – when it put the brakes on the Super Hornet deal – has been pretty much that. Drop the complaint about Bombardier or we won’t buy the Super Hornets.
Boeing has complained to the U.S. government that Bombardier is receiving subsidies, which in turn, allowed it to sell its C-Series civilisn aircraft at below-market prices. Boeing convinced the U.S. Commerce Department and International Trade Commission to launch an investigation into Bombardier.
The Trudeau government revealed Tuesday that it held talks last month with Boeing in hopes of convincing the U.S. aerospace giant to drop its case against Bombardier at the U.S. Commerce Department.
Those talks broke down when, according to Canada’s ambassador to the U.S., David MacNaughton, Boeing decided to stop negotiating. “We had some proposals back and forth and then they walked away,” MacNaughton said in St. John’s, where federal cabinet ministers were meeting to strategize before the return of Parliament next week.
“For whatever reason, they (Boeing) decided they weren’t going to continue to have discussions with us.”
Boeing has repeatedly argued that military purchases shouldn’t be linked to the commercial interests of a country’s aerospace firm.
On Sept. 25 we will get a better idea of the outcome of this dispute. That’s when the initial ruling on whether the U.S. will impose tarrifs on Bombardier for its civilian C-Series aircraft will be released.
(with files from the Canadian Press)
Here are more specific details about what Canada gets for $5.23 billion U.S.:
“The State Department has made a determination approving a possible Foreign Military Sale to the Government of Canada of ten (10) F/A-18E Super Hornet aircraft, with F414-GE-400 engines; eight (8) F/A-18F Super Hornet aircraft, with F414-GE-400 engines; eight (8) F414-GE-400 engine spares; twenty (20) AN/APG-79 Active Electronically Scanned Array (AESA) radars; twenty (20) M61A2 20MM gun systems; twenty-eight (28) AN/ALR-67(V)3 Electronic Warfare Countermeasures Receiving Sets; fifteen (15) AN/AAQ-33 Sniper Advanced Targeting Pods; twenty (20) Multifunctional Information Distribution Systems–Joint Tactical Radio System (MIDS-JTRS); thirty (30) Joint Helmet Mounted Cueing Systems (JHMCS); twenty-eight (28) AN/ALQ-214 Integrated Countermeasures Systems; one hundred thirty (130) LAU-127E/A and or F/A Guided Missile Launchers; twenty-two (22) AN/AYK-29 Distributed Targeting System (DTS); twenty-two (22) AN/AYK-29 Distributed Targeting Processor (DTP); one hundred (100) AIM-9X-2 Sidewinder Block II Tactical Missiles; thirty (30) AIM-9X-2 Sidewinder Block II Captive Air Training Missiles (CATM); eight (8) AIM-9X-2 Sidewinder Block II Special Air Training Missiles (NATM); twenty (20) AIM-9X-2 Sidewinder Block II Tactical Guidance Units; sixteen (16) AIM-9X-2 Sidewinder Block II CATM Guidance Units.
Also included in this sale are AN/AVS-9 Night Vision Goggles (NVG); AN/ALE-47 Electronic Warfare Countermeasures Systems; AN/ARC-210 Communication System; AN/APX-111 Combined Interrogator Transponder; AN/ALE-55 Towed Decoys; Joint Mission Planning System (JMPS); AN/PYQ-10C Simple Key Loader (SKL); Data Transfer Unit (DTU); Accurate Navigation (ANAV) Global Positioning System (GPS) Navigation; KIV-78 Duel Channel Encryptor, Identification Friend or Foe (IFF); CADS/PADS; Instrument Landing System (ILS); Aircraft Armament Equipment (AAE); High Speed Video Network (HSVN) Digital Video Recorder (HDVR); Launchers (LAU-115D/A, LAU-116B/A, LAU-118A); flight test services; site survey; aircraft ferry; auxiliary fuel tanks; aircraft spares; containers; storage and preservation; transportation; aircrew and maintenance training; training aids and equipment, devices and spares and repair parts; weapon system support and test equipment; technical data Engineering Change Proposals; technical publications and documentation; software; avionics software support; software development/integration; system integration and testing; U.S. Government and contractor engineering technical and logistics support; Repair of Repairable (RoR); repair and return warranties; other technical assistance and support equipment; and other related elements of logistics and program support. The estimated total case value is $5.23 billion.”
United Technologies is buying avionics and aircraft parts manufacturer Rockwell Collins in a deal considered one of the largest in aerospace history.
The total sale will cost United Technologies $30 billion U.S. The deal was announced Monday.
What’s the reason behind the purchase?
The transaction creates an aircraft-parts giant better positioned to withstand the squeeze from plane makers Boeing and Airbus for pricing discounts and higher output, Bloomberg News reports. It pointed out that the “resulting company will boast a broad suite of products for commercial aircraft, from Rockwell Collins’s touchscreen cockpit displays to jet engines made by the Pratt & Whitney division of United Technologies.”
Pratt & Whitney makes the engine for the F-35, among other aircraft.
“This acquisition adds tremendous capabilities to our aerospace businesses and strengthens our complementary offerings of technologically advanced aerospace systems,” UTC Chairman and Chief Executive Officer Greg Hayes said in a statement. “Together, Rockwell Collins and UTC Aerospace Systems will enhance customer value in a rapidly evolving aerospace industry by making aircraft more intelligent and more connected.”
Collins Aerospace Systems will be the name of the new unit, according to United Technologies.
Dutch air force officers are updating their Canadian counterparts about their progress on the acquisition of F-35 fighter jets as the aircraft’s manufacturer tries to convince the Liberal government of the plane’s suitability as an interim replacement for aging CF-18s.
Lt.-Gen. Dennis Luyt, the head of the Royal Netherlands Air Force, said his organization has been providing updates to Canada on its F-35 purchase and aircrew training. “They are very interested in our experiences,” Luyt said in a recent interview.
“We’re on track,” he added. “It’s looking very promising.”
The Netherlands is purchasing the F-35A as the replacement for its F-16 fighter jets. The Dutch parliament approved an initial order of eight aircraft in March 2015.
The first aircraft are to be delivered in 2019 and Dutch pilots and maintenance crews are currently undergoing training in the U.S. The Netherlands will purchase up to 37 F-35s.
A Dutch air force F-35 was recently on display at the international air show in Abbotsford, B.C.
Luyt said if Canada does eventually buy the F-35, that acquisition would further strengthen the user group of nations operating the plane. Having allied air forces capable of being interoperable with each other is important, he added. “If we operate the same platform it’s obviously a big thing,” Luyt explained.
In a June 1 letter, Lockheed Martin offered the Liberal government the F-35 as an “interim” fighter aircraft.
Last year, the Liberals announced a proposal to buy 18 interim fighter jets from Boeing to deal with a capability gap facing the Royal Canadian Air Force. But that multibillion dollar plan to acquire Super Hornet jets has been thrown into limbo after Boeing filed a trade complaint in the U.S. against Bombardier of Quebec. The Liberal government broke off discussions with Boeing on the Super Hornet deal.
Lockheed Martin has seen opportunity in the rift and has told the Liberals it can deliver F-35s on a similar schedule that was being considered for the Boeing planes. Lockheed Martin president Marillyn Hewson said in the June 1 letter to Defence Minister Harjit Sajjan and then procurement minister Judy Foote, that Canada could acquire the F-35 at a cost of between $80 million U.S. and $85 million U.S. per aircraft.
Sajjan’s office stated that no decisions have been made about the interim fighter jet and that various options are being looked at.
Luyt said the Netherlands conducted an extensive process to purchase a new fighter jet. “The biggest thing we needed (was) to make a technology leap to a 5th Generation aircraft” he pointed out.
Part of the consideration in selecting the F-35 was interoperability with U.S. forces. If the Dutch air force goes into combat it will likely be with the U.S. “That (interoperability) is an important consideration but not the only one,” Luyt explained.
Every F-35 contains components manufactured by Dutch companies, Lockheed Martin has noted. On Aug. 16, the U.S. Department of Defense announced the overseas warehouse and distribution centre for parts for F-35s in Europe would be located in the Netherlands.
Luyt said one of the other main attractions of the F-35 is that it will be constantly upgraded. “It will be state of the art for decades,” he added.