The Little Plane War

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E175 footage courtesy PDX Aviation
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Airbus footage courtesy Airbus
Bombardier footage courtesy Bombardier
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Caption: 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 . 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 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,. a podcast, an event, or anything else, you. need a website, and there’s nowhere better. to build it than squarespace. i make all my websites with squarespace because. their website builder and customizable templates. make it easy to set up a great looking website. they also handle all the set-up, hosting,. and maintenance of the website so you really. don’t have to worry about anything. if you ever have any issue, they have 24/ award-winning customer support to help you. out. what’s great is that they’re offering. wendover productions viewers 10% off their. already reasonable prices exclusively by going. to squarespace. com/wendover. they make this show possible and are truly. a great company so please do at least check. them out over squarespace. com/wendover. thanks for watching, and i’ll see you again. in two weeks for another wendover productions. video. 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