The Little Plane War

The Little Plane War


This video was made possible by Squarespace. Build your website for 10% off by going to
squarespace.com/Wendover. The commercial airline industry is the classic
duopoly. In the US there’s Boeing—the long successful
manufacturer most known for its iconic 747—and in Europe there’s Airbus—the more recent
entrant formed as a consortium of various European manufacturers—and that’s pretty
much it. 2/3 of all airplanes currently flying commercially
are made by one of these two manufacturers. But there’s something these manufacturers
don’t do—they don’t make small planes, but that’s not for lack of trying. Airbus tried when they made the a318—a variant
of their successful a320—but only sold 80 of them. Boeing did as well with their 717 but it too
was a commercial failure with only 156 sales. But that doesn’t mean that there’s no
place for small planes. In fact, it’s a significant market that
the giants of the aviation industry have not been able to touch. If you step on a plane to a small airport
nowadays, there’s a good chance that it’s either made by Embraer or Bombardier. Embraer, the Brazilian manufacturer, launched
their E-Jet family just over 15 years ago and to date have sold nearly 1,500 of them. By all accounts its a fantastic airplane and
there are whole airports that rely on them. Nearly 70% of the more than a hundred daily
flights out of the small London City Airport operate using an Embraer E-Jet. Due to the noise restrictions, steep approach
angle, and short runway this is one of the few planes that can operate there and some
airlines, such as British Airways, own the E-Jet exclusively for use at this airport. The US, with its nearly 400 commercial airports
and vast size, has service to many more smaller airports than Europe or Asia thanks to government
subsidies so hundreds of airports in the US are served by non-Boeing or Airbus jets. There’s a serious place for small planes,
and Bombardier knows this. Bombardier, while still one of Canada’s
largest companies, is a small player in the commercial airplane market only making about
6% of the world’s commercial planes. The company has long made the successful CRJ
regional jets, but ten years ago Bombardier had an idea for something else. They were going to make a larger, more efficient
airplane to fit between the size of small regional jets and the larger planes of Boeing
and Airbus—the C Series. This plane was going to take advantage of
all the modern advancements in aircraft design—composite construction, advanced aerodynamics, and high-bypass
engines—to make one of the most efficient small airplanes on the market. From 2007 onwards the parts were selected,
the plane was developed, and sales were booked. Then, on September 16th, 2013, it took flight
for the first time. At this point the company was adamant that
the aircraft would enter into commercial service just one year later in 2014. But then the problems began. While doing routing testing on the ground
at the Mirabel airport manufacturing base, one of the test aircraft suffered an uncontained
engine failure. Not only did this strike a serious blow to
the aircraft development timeline, it also prevented the manufacturer from exhibiting
their new plane at the Farnborough Airshow—the largest and most important trade-show in the
industry where the company expected to secure crucial aircraft orders. The show only happens every two years so this
was a significant setback. Some questioned whether the program could
survive this blow, and it only barely did. The program was nearly out of money in 2015. Without the significant financial support
of the governments of Canada and Quebec, the program and company likely would not have
survived, but it did, and on June 15th, 2016, the aircraft entered service with Swiss Airlines
on its first ever commercial flight from Zurich to Paris. By all accounts the C Series is a fantastic
airplane. For airlines it’s efficient and versatile
while passengers praise its rare level of passenger comfort for a small plane. It even has a range of up to 3,800 miles meaning
it could hypothetically fly transatlantic into small airports like London and Belfast
City Airports. As of October 2017 there are 14 C series planes
currently flying—9 for Swiss Airlines and 5 for Air Baltic—but they have nearly 350
orders—enough to make the program profitable—but until recently, they lacked the most valuable
kind of order—American ones. With its tendency to use smaller planes, the
American market will make or break the program, and Bombardier knew this. They were desperate for an order from one
of the main three US airlines to prove its viability, so much so that they allegedly
sold 75 of them to Delta for only $20 million dollars each—a quarter of the $80 million
list price. That was an amazing price for Delta, but it
was low enough that it might have been illegal. This is a practice known as dumping. The cost for Bombardier to make a C Series
plane is about $30 million so it was selling these planes that they hadn’t even made
yet at a loss because they wanted to gain prevalence in the US market. Predatory pricing techniques like this are
against the law in the US and many other countries, so Boeing took action and filed a dumping
petition with the US department of commerce. But here’s the problem—Boeing doesn’t
make an equivalent airplane to the C Series. They say that the dumping will curtail the
sale of its smaller 737-700 planes, but Delta themselves has said that they didn’t want
the 737. Boeing couldn’t offer them a delivery slot
before 2020 and, the 737 is a fundamentally different plane. The C Series has better range, can take-off
from a shorter runway, is more efficient, and is empirically a smaller airplane. Boeing claims that Bombardier received subsidies
that allowed for the below-market pricing, but the money Bombardier received from the
governments of Quebec and Canada came in either exchange for ownership of the program or in
the form of interest-free loans that will be paid back. Boeing, on the other hand, has received over
$14 billion in subsidies in the last 20 years through tax breaks from US state and federal
governments. Nonetheless, Boeing asked the US Department
of Commerce to impose an 80% tariff on the plane to bring the price above the manufacturing
cost. The US Department of Commerce responded by
placing a 300% tariff on the plane. At this point it seemed like the end of the
line for the Bombardier plane. With a tariff that high, it could never be
both competitive and profitable in the crucial US market. But then Airbus stepped in. On October 16th, 2017 the two companies announced
that Airbus would be acquiring a 50.01% stake in the C Series program. Bombardier is just giving away this stake
for free, but the reason this is so great for them is, for one, Airbus is a marketing
and sales powerhouse. Their resources far outstrip those of Bombardier
and they will be able to sell more planes than Bombardier could ever have dreamt of. On the other side, since the C Series doesn’t
really overlap in size with any Airbus plane, Airbus gains a new, modern airplane in their
line up that will allow airlines to have truly all-Airbus fleets. But the real reason Bombardier partnered up
with Airbus is because of this—Airbus’ final assembly line in Mobile, Alabama. By assembling the C Series aircraft in the
US, they’ll essentially be American planes which means that they won’t be subject to
US import tariffs, at least according to Bombardier. Boeing believes that that they will still
be subject to the tariff since they’re still the same planes that received subsidies, while
some external observers have suggested that only the 48% of the plane manufactured outside
of the US will be subject to the 300% tariff. What will actually happen is up to the US
Department of Commerce. Independent analysts have estimated that over
the next 20 years, there will be demand for about 5,500 aircraft of the C Series’ size. Before the Airbus takeover, Bombardier was
expected to fulfill 40% of that demand—just over 2,000 planes. After the takeover, the C Series is expected
to capture up to 60% of that market—well over 3,000 planes. That’s tens of billions of dollars in additional
revenue and the C Series now has real potential to become an iconic airplane. Bombardier and Airbus are the big winners
with this outcome. While it would have been hard to predict this
turn of events, this takeover, directly brought on by Boeing’s actions, proves a hard-hitting
blow to the company. Without spending a cent on development, Airbus
now has a plane in a market segment that Boeing cannot compete with. The C Series will dominate this market segment
and every cent Airbus and Bombardier makes is money lost on Boeing’s part. Just as Boeing expected, the C Series will
hurt its business in the US but now it will happen with a fully-legal, American made plane. If you have a business, a youtube channel,
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100 comments

  1. F Boeing, farming out 787 parts to all over the world. Maybe they should be hit with 300% tariff on all foreign parts.

  2. I remember the Dash 800 development under DeHavilland in Toronto which was eventually evolved into Bombardier … so … I hope they stick it to Boeing.

  3. So basically airbus and bombardier are doing what Kawasaki and Bajaj has been doing for a couple of years. Interesting because in reality, customers are the winner of such joint venture.

  4. As an American… I am so disappointed in Boeing in so many ways… Between this ridiculous attack, and the 737 Max debacle, I have no respect for them I really no longer care if the fail.

  5. Bombardier : Hey Boeing you cannot compete with us in this market
    Boeing: Enjoy that 300% tax
    Bombardier: Have you met our new partner Airbus?
    Boeing: damn
    Bombardier: LOL
    Boeing: Have you met our new partner Embraer?
    Bombardier: damn

  6. Boeing went to DC to have them slap a 300% duty on the C-Series. Now Boeing is out BILLIONS due to their trash Max. Karma is a Bitch.

  7. News flash

    Boeing is being sued a lot
    Talk about irony
    They now have to worry about losing sales and going bankrupt due to the lawsuits and no sales YAY.

  8. Lol the Canadian government and American courts came to its ultimate rescue and shot that tariff down! If it had of been 80% they would have probably got it but 300% got thrown way out.

  9. They say the 737 is safe now…The problem that caused the catastrophe has been played on the simulator for captain
    Zellenberger ( the captain who safely landed a plane on the Hudson river)…his conclusion: he had great difficulty recovering
    the plane now considered to be 'safe'…so has been told in the press…thank you.

  10. In the early days, UK and US agreed to share R&D on jet planes and the issues of cabin pressurisation etc.. UK handed over it's research, US decided it was "military" and kept their knowledge to themselves, but gave it to their own aircraft industry. That's why many US military planes have suspiciously similar civilians variants, usually Boeings.

  11. Well crap. If the 737 MAX issues persist and the 777X magically just doesn't work like everything else, Seattle's gonna suck.

  12. What about when Boeing were giving away 707s for free and just charging for the spare parts in their attempt to beat the VC10?

  13. Too bad there is no Bombardier or C-Series branding but at least the buyers of planes know it's a joint project. Hopefully, this will allow the funding, grow the respect and the name of Bombardier to other plane enthusiasts.

  14. bombardier is a piece of shit back stabbing company. The canadian government steals money from the western provinces. And gives it to quebec. When the canadian government gave bombardier a bail out load, a huge chunk of that went to the CEO as a bonus cheque. Bombardier should have been left to go under.

  15. Flown on the A220/CS100 now. It's amazing. Also don't forget Irkutsk and COMAC are about to enter the field now as well.

  16. Cool to see Gunnison in your video at 1:43. That airport does get mainline service from American via an A319. That said, the A220 looks like a great plane and I can't wait to see it in use all over the place.

  17. If Bombardier could have still filled 40% of the small plane market with the CS100 after the tariff and the gifting of 50% of the program would mean at best, that would mean Bombardier would receive revenues equal to if it had 30% of the program, a large portion of that decision had to be wanting desperately to just throw the middle finger to Boeing

  18. just to clarify, BA is not embraraer exclusieve at LCY… as they have the very very will publised airbus 318 service to JFK

  19. I like how everyone thinks boeing is the bad guy in this. Because dumping is only evil when the bigger company does it? Boeing wasn't wrong to file a petition, they were wrong to rush development of their newest 737 variant and avoid additional regulatory requirements by ignoring safety concerns. The injustice here is that Bombardier's real competitor is Embraer, who under US trade law has no standing to defend itself against dumping

  20. I have to fly out of Charlottesville, Virginia which is a regional airport. The CS100 would be a game changer and would force Boeing to look at making small regional jets!!

  21. Meanwhile Canadian carriers Air Canada and West Jet are buying 100 of those garbage 737 Max planes.

    The UK can still make money from financial services, even with the industry destroyed. Where would be Airbus, PSA, Dassault, Renault, Alstom and others if the French government wouldn’t step up to protect their industry? What taxes would they collect with all that companies gone?

    The US also bailed out their main companies to protect jobs and prevent economic problems. Boeing, Chrysler, GM and many more received help.

    Even Brazil government helps a lot their industry.

    Canadian government should have given some support for a key tech firm like Bombardier. But the pathological hatred towards Quebec, is more prevalent, dreaming of some billions Canadian government supposedly gave to Bombardier, when effectively only Quebec government put money and will recoup everything from taxes.

    There’s no high speed train program between Quebec City, Montreal, Ottawa and Toronto.

    Air Canada buys much more expensive useless 737 Max’s, then has to fly other plains till the weeks fall off, literally. But who cares, just charge the poor bastards 100% more for tickets and risk their lives.

    The 300% tariffs were eventually removed after appeal, but Boeing already ruined Bombardier, that will have to be sold between Airbus, Alstom and Textron.

    That’s how Nortel is no more and 5G is bought from China, Blackberry almost disappeared and now Bombardier could soon be gone too.

    Meanwhile Trudeau “thinks” about his socks and establishes marijuana government monopoly to make up for lost income . . . but Canadians are so utterly crazed that that’s what they clamor for.

  22. Maybe Boeing should get on with actually designing and selling new planes of their own rather than whining to the courts about the competition while flogging an unsafe rehash of its 1960s product.

  23. 14 february 2020 update
    Bombardier has attempted to make new products at this point but failed and their stock have kept on being lower and lower to the point that
    They announced they were ceding the remaining stake of the C Series to Airbus, it will 100% no longer belong to the Canadian Corporation.

    It also sold other assets, like the CRJ program to Mitsubishi Heavy Industries Ltd. and the Q Series turbopop, which triggered a round of 3000 jobs lost over the course of 1 year and a half (this action was performed around November 2018).

    It's not going well for Bombardier as a Company, and the current Provincial Government less enthusiast in throwing it's money to the company, it's in downsize mode.

    As a happier touch, Mitsubishi announced plans to open a product-development centre in Montreal (with a $12 million nudge from Quebec).

  24. I love it when Boeing are such COWARDS they still cannot admit they made a fault by not even bothering to produce an airworthy plane. Still Donald Duck Trump will give them military contracts. Boeing should be split up and Donald can spend $500 Billion of tax payers money to buy the civil aviation side OR SELL to Airbus for MINUS $25 Billion. It is your tax and Boeing will be bankrupt when all the costs of the 737 Max is BANNED from ever flying again. The delay is NOT the enquiry it is how DD Trump will explain how under his Presidency Boeing fell apart.

  25. But they made the Q Series, that’s the only turboprop regional aircraft I can ever identify anymore. I’ve only seen Air Canada and Alaska Airlines Q-400’s nothing else…

  26. Prior to the misfortune of the 737Max, Boeing was involved in a trade war with Bombardier leading to Airbus taking over the control of the C series that became the A220 (See https://youtu.be/V1YMPk3XhCc) . With an expanded version, the A220 may fill the gap left open by the 737 Max.

  27. Swiss has 9 Bombardier planes of C series: Ha! Baltics has only 5
    Baltics buy's 5 the most ex Bombardier C series plane: Swiss ran out of money 😀

  28. I really enjoyed your video, and considered subscribing UNTIL you promoted squarespace's web building product. These sorts of ad campaigns just irritate and do NOT engage …

  29. Boeing tries to stop Bombardier.
    Airbus helps Bombardier.
    Boeing gets exposed and gets media angry.

    Now that's what i call

    Some good k a r m a

  30. Hi. My name is Boeing. I make planes that drop into the Indonesian ocean because of our excellent MCAS system.

    Hi. My name is Bombardier. And I have this guy.
    Airbus has entered the room

  31. Quick update for anyone watching now! Airbus bought out the C Series stake out entirely and Bombardier has exited commercial aviation entirely as well.

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