Aerospace subsidies in focus

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The latest news that Airbus is to take a majority stake in Bombardier's C-Series jet may mitigate the effect of the 300% tariff on imports of the planes sought by the US Department of Commerce, but there is still a serious threat to jobs at Bombardier in Northern Ireland.

Commenting on the tariff imposition Paul Adams, head of aerospace at management consultancy, Vendigital, said:

“It is not unusual for airframe manufacturers to use significant discounts to tempt customers away from traditional suppliers and gain access to a highly-competitive, large-volume marketplace. The main issue here is over the use of state subsidies and the fact that these may have given Bombardier an unfair competitive edge.

“Boeing’s legal challenge may in part be influenced by Trump’s ‘America First’ policy. The US manufacturer could be seeking to test the new administration’s resolve when it comes to protecting US jobs against foreign competitors selling to US customers. 

“As history shows, trade disputes in the aerospace sector can become protracted - the Boeing / Airbus dispute ultimately had to be resolved by the World Trade Organisation. It is likely that Bombardier will appeal the US court’s decision, before the final hearing in 2018.

Commenting on the future for state subsidies, Paul Adams, added:

“As Government’s around the world become more protectionist, state subsidies could increasingly be used to support bids for major global contracts. Access to such funding could become an essential part of competitiveness.”

Turning to the latest announcement, he said:

“This is a creative deal that will save jobs at Bombardier and give the business a new ally in its costly trade dispute with Boeing. Significantly, for Airbus, it is a move that underlines its global strength and opens up an opportunity to drive sales of the C Series aircraft in Asia and the Middle East.

“While the deal will solve some of the current problems with the C Series program, unfortunately there is no magic wand to take cost out of the manufacturing process and price competition will remain a factor.

“It is possible that Airbus is intending to manufacture the C Series aircraft at its assembly site in Alabama in an attempt to circumvent US import tariffs. However, this may not be a straightforward matter and Boeing and/or the US Government could intervene.

“There are likely to be winners and losers in the UK’s aerospace supply chain. Both Airbus and Bombardier currently design and manufacture wings in the UK and while both will benefit from merging their capabilities, it is possible that Airbus is also looking for synergies and opportunities to place parts with their best suppliers. Ultimately, this could lead to some component manufacturers losing out, whereas others gain.”

www.vendigital.com

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