GLOBAL OUTLOOK

by David Bercuson

Frontline Defence
October 14, 2017

The plot thickens in the government’s plan to replace the CF-18s with a new fighter as the story becomes more entangled with the government’s reaction to the Boeing suit against Bombardier’s new “C” series, single aisle, passenger aircraft. In reaction to the U.S. government’s decision to place upwards of 220% tariffs on the C-series jets, due to Bombardier’s receipt of government subsidies, the Trudeau government has forsworn its previous decision to purchase 18 F/A-18 Super Hornets from Boeing as a stop-gap to fulfill Canadian commitments to both NORAD and NATO. The government has accused Boeing of, in effect, making war on Bombardier and the thousands of Canadian workers who produce Bombardier aircraft, and has declared that it won’t stand idly by while this happens. The fact that thousands of Canadian workers are employed by Boeing, in Canada, seems to have escaped the government along with the ongoing purchase by Air Canada and WestJet of Boeing airplanes.

Boeing is one of the world’s top aerospace companies. No one in the airplane business, military or civilian, can ignore Boeing. So what is actually happening here?

Bombardier’s decision to embark on production of the C-series aircraft does not seem to have been well thought out. As good an aircraft as it reportedly is, it is late and over budget. That is one reason why Bombardier wants and needs help from both the federal and Quebec provincial governments. No one seems to have thought about the consequences of a second rank aircraft manufacturer (second rank in that the two first rank manufacturers, Boeing and Airbus completely dominate current aircraft markets except for regional jets) blowing the budget while attempting to step out of its league.

For example, Boeing certainly blew through its own development budget in producing the 787 which was also both very late and very over budget. But Boeing, being as large and well-endowed as it is, could afford to take the losses while it continued to build all manner of other civil and military aircraft from the C-17 to the latest models of the 737.  Bombardier was in no such position and its management should have known that from the start.

Let’s all be honest about government subsidies to airplane manufacturers. Every government of a country that manufactures airplanes subsidizes the industry in one way or the other. Whether it is allowing cost over runs without penalty, pouring money into “development” projects, buying small numbers of highly specialized military aircraft at exorbitant prices or some other sort of back stop, it is a universal practice. In Boeing’s case it is also true that the U.S. government has long practiced a form of protectionism that has saved the U.S. military market almost exclusively for U.S. manufacturers.

Some time ago, when the U.S. Air Force needed to begin replacing it’s KC-135 tankers, a competition was held that was won by Airbus. But the result of the competition was somehow nullified and – surprise – Boeing was awarded the contract.

Now the government in Ottawa has threatened that when considering the real, actual, no pretense, replacement for the CF-18 fleet (excluding used FA-18s from Australia or wherever) it won’t accept bids from Boeing.

Wrong. The government can’t hold an “open” competition while refusing to consider bids from less favoured contractors. It would open itself up to one massive lawsuit leveled by Boeing – just as it would face another massive lawsuit from Lockheed-Martin if it follows through on the Prime Minister’s foolish vow never to buy the F-35 for the RCAF.

What we are seeing here is one more in a series of stumbles on the long road to replace the ever-aging CF-18s that could eventually make the Maritime Helicopter replacement project (now 25 years long and the clock is still running) seem like an easy ride. Once again, before our very eyes, a major procurement project is in the process of becoming a very long, very expensive joke.

– David Bercuson, Research Director, Canadian Global Affairs Institute