Delta Air Lines Inc. (NYSE:DAL) has announced that it has no intentions of paying the new tariffs levied on some jets it is contracted to buy. The U.S. Commerce Department wants to impose a 300 percent tariff on Canadian-built Bombardier CSeries jets. The proposed tariffs will not take effect unless affirmed by the U.S. International Trade Commission (ITC), which is planning to make a decision on the matter early next year.
How the extra tariffs levied on the planes would be covered remains unclear. On the airline’s recent third-quarter earnings call, Delta Chief Executive Ed Bastian said, “We’re not going to be forced to pay tariffs or anything of the ilk.” The jets’ maker has said it would not pick up the tab for the trade tariffs either.
The Atlanta-based airline acknowledged that the trade dispute over the aircraft may delay their delivery to Delta. Delta was scheduled to take delivery of its first in the spring of 2018. Bastian said Delta does still “intend to take the aircraft” and predicted that “Delta will get [the CS100s] at the agreed contractual price.”
Rival planemaker Boeing Co. claimed that Bombardier used subsidies from the Canadian government to sell 75 new jets to Delta at “absurdly low” prices. The Commerce Department agreed with Boeing’s contention that the Canadian company benefited from state support. A spokesman for Boeing said the U.S. action is about conforming with trade law.
The U.K. has been dragged into the fray as the spat threatens thousands of jobs in Northern Ireland. U.K. Prime Minister Theresa May wants to strike a trade deal with the U.S. as Britain leaves the European Union, but must also consider the 4,000 Bombardier jobs in Northern Ireland that would be in jeopardy if the tariffs are enacted.
Barry Gardiner, trade spokesman for the U.K.’s Labour Party, accused Boeing of bringing the Bombardier case to “crush a competitor.” Gardiner also said he plans to ask European authorities to investigate Boeing over its contract to sell 30 of the latest 737 Max 8 jetliners to Monarch Airlines Ltd. Gardiner suggests Boeing sold the 737s “at less than cost price into the European market.” Monarch abruptly filed for insolvency earlier this month, leaving thousands of passengers stranded.