Bombardier’s Steep Descent and the Geopolitics of Aerospace
Bombardier, the Montreal-based manufacturer of aircraft and trains, rose to popularity with its perception as the crown jewel of the Canadian engineering and manufacturing industry. From its inception in 1942 onwards, the manufacturer oversaw the diversification of its business portfolio from recreational products to rail transport in the 1970s, as well as taking it to the skies in 1986 with the purchase of troubled Crown corporation Canadair. However, 2003 marked a major shift in the firm’s corporate model. The economies of scope and the technical spillover effects of producing leisure products in addition to rail and aerospace products made little sense for the company, prompting Bombardier to sell its Recreational Products (BRP) division. By selling off these assets, Bombardier aimed to streamline its resources and expertise to favour growth in its operations with the greatest potential for profitability.
A mere year later, the firm began the development of a commercial aircraft programme under Gary R. Scott, who was hired to form and lead a multi-disciplinary team to evaluate the possibility of entering a very competitive market dominated by Airbus and Boeing. This resulted in a decade-long investment program that brought Bombardier’s 100-150 seat C-series aircraft to life. It was hailed as a major challenger to industry behemoths Airbus and Boeing with a plethora of technological innovations. However, the C-Series came to fruition through a billion-dollar support package from the government of Quebec, one of many contentious disbursements given out to the manufacturer by federal and provincial authorities over decades. By accepting public funds for the growth of their C-Series programme, Bombardier had entered the harsh and messy world of aerospace politics in a growing context of trade tensions and the rise of American protectionism.
As the Canadian manufacturer began successfully racking up orders for its new aircraft, most notably in 2016 to American carrier Delta Airlines, competitors began to panic. Forbes contributor Scott Hamilton reported at the time that Boeing had offered United Airlines a whopping 73% discount on an order of 737 aircrafts to guarantee its sale and to undercut new rival Bombardier’s offering. Indeed, Boeing thereafter appeared to be single-mindedly focused on wiping out its new rival. In April of 2017, Boeing filed a trade complaint with the US Department of Commerce, as well as with the International Trade Commission, alleging that the aforementioned billion-dollar investment granted to Bombardier by the Quebec government amounted to unfair competition in the American market. Albeit the conspicuous hypocrisy of Boeing receiving an estimated $23.3 billion in federal-contract funding for that same fiscal year, the Trump administration agreed with Boeing’s premise and imposed a nearly 300% tariff on Bombardier’s C-Series, a protectionist death blow that would in effect prevent the new aircraft from ever being purchased by American carriers - a market that no aircraft manufacturer can go without.
To curtail the newly imposed trade barriers that were bound to doom the C-Series, European rival Airbus and Bombardier entered a strategic partnership. This deal, struck in October of 2018 at the outstanding price of a single dollar, aimed to bring the Canadian manufacturer to sell 50.1% of the C-Series programme to Airbus, who would leverage its plant in Alabama to manufacture part of the plane, hence defeating the 300% tariff and granting the aircraft untethered access to the American market. Renamed the A220, the aircraft would still be largely built in its native Canada, albeit losing much of the national pride, initially leveraged to justify the investment of public funds into the project. As a result of the deal, Airbus essentially gained an innovative new product for free, without investing a single dime into the research and development that had brought the game-changing C-Series to life. Ultimately, while the US International Trade Commission struck down the 300% tariff, it came too late for the Canadian manufacturer, as the deal previously signed with Airbus all but formally ended Bombardier’s short-lived venture in the market to Airbus’ advantage.
Upon facing backlash in Canada regarding the undesirable outcome for both Bombardier and taxpayer money, Bombardier’s previous CEO Alain Bellemare admitted that the company was overwhelmed by the numerous development programmes it had on its plate. The Montreal-based manufacturer of aircraft and trains had failed at making the tough call of reconfiguring its operations around its core businesses when necessary, as it had previously done in 2003. More recently, Bombardier has continued offloading various aircraft programmes, as well as furloughing employees to mitigate its losses. These efforts, however, have yet to pay off. In June of 2020, Bombardier had lost its place in the S&P/TSX 60 index due to a $34.7 billion decrease in its market cap from its all-time high. A month later, the European Union approved the 6.2 billion euro sale of the Canadian firm’s rail-transport business to another French giant, Alstom SA. The European Commission’s conditional green light marked yet another step in what appears to be the gradual dismantling of Bombardier’s global operations, leaving the Canadian firm with only its business jet manufacturing unit.
Given Bombardier’s past status as the embodiment of Canadian engineering and manufacturing genius, many members of the government and of the public question whether poor corporate decisions alone can explain the downfall of the firm. The story of Bombardier can be regarded as one of economic miscalculations, certainly, but the weight of their political faux-pas in a world of growing international trade tensions and economic nationalism cannot be understated. For decades, Boeing had carved out a dominant position in the American aerospace market and had defended its standing there at all costs. As one of the world’s most notable private military contractors, Boeing Defence, Space & Security (BDS) grants the entire firm - including its commercial aerospace division - a permanent presence in Washington D.C, counting Cabinet secretaries, top military officials, and an army of lobbyists as its fiercest allies. Therefore, the case of Bombardier and the absurd 300% import tariffs on its aircrafts can only be understood in the context of the political hegemony of Boeing and the protectionist attitudes of the American administration. While the Trade Commission eventually reviewed and abolished the punitive taxes, Bombardier did not have the resources to ride out the American aerospace storm that it had weathered for too long.
The conclusion of the Bombardier chronicles signifies an ironic example of protectionist backfire, where the true beneficiary of the Canadian manufacturer’s demise would not end up being American interests, but rather Boeing’s most prominent rival, the European aerospace and defence firm Airbus. Finally, while the blowback of Bombardier’s downfall remains economically significant, not least because of the growing importance smaller aircraft may have in a post-COVID industry characterized by more restrictive travel, Airbus’ new plane represents most importantly a crucial stepping-stone in the European firm’s dominance of the skies and the geopolitics of aerospace. Looking forward, Bombardier is expected to remain a significant player of the private aircraft industry; however, the post-COVID economy brings with it numerous questions on the role that business travel may hold in the coming years, representing yet another potential headwind for the troubled private aircraft manufacturer and the industry as a whole.