Dear Fellow Free Trade Fans,
As industry analysts go I don't always share Mr. Aboulafias opinions or perspective and I find his April 2013 remarks regarding Porter's C series purchase somewhat odd. I'm not clear on how he became so wound up over a Canadian operator, airport and OEM or what motivated this commentary other than his consistent negativity toward the C series.
For example:
"It’s a lot like any other jet order, with the minor caveat that, if executed, it opens the gates of hell and permits Satan’s minions to wreak havoc on Earth. Thus, a new type has joined the jet order lexicon; we now have Firm, Option, and Faustian."
What??? Where'd that come from?
If Mr. Aboulafia is referring to Dr. Johann's deal with Mephistopheles I'd say he's picked a strained example. I don't think for a minute Mr. Deluce is necessarily after power but as a businessman it seems logical and reasonable that he'd be interested in the success of his airline. Unless Mr. Aboulafia is trying to be nothing more than controversial because as we all know this deal is nothing more than an every day deal here in Canada and certainly nothing surprising or out of the ordinary. Every home owner in this country is familiar with home sales and purchase agreements dependent upon or conditional upon the sale of ones present home before being committed to the purchase of another. So, why should Porter buy C series for the island if they aren't going to be allowed to operate them from there. Better yet, why not force the jet ban issue and have city council sh*t or get off the pot?
What Mr. Aboulafia conveniently failed to point out regarding Pam McConnell's comments, the Toronto City councillor whose ward is closest to the expansion, who said the announcement “demonstrates a breathtaking level of arrogance and disregard for the Toronto residents", is the positive economic impact Porter has had on those and other Toronto residents since it began operations. I understand incomplete statements like this are merely selective in trying to make a point. Sorry. I don't think it's as strong or controversial as you might expect from an 'industry analyst'.
Mr. Aboulqfia's free trade issues under the WTO are accurately pointed out for all to research. I don't have a problem with that. As a Canadian who's been around since long before NAFTA, GATT, and the WTO agreements, I for one, don't trust the Americans with any agreement involving Canada because as Canadians we always get the short end of the stick. Compare the price of ANY automobile under the Autopact or NAFTA while our dollar is at par and ask yourself why we're still paying more for the same vehicle here compared to what they pay there? Despite the Autopact or NAFTA. And it's not just cars.
I agree with Mr. Aboulafia's observations regarding C series sales. They aren't what they should be. However, i disagree with his comparing the CS100 with re-engined 60s or 80s technology competitors. This doesn't seem a reasonable comparison in my estimation. Airbus and Boeing are selling bandaid solutions to the industry and nothing more. More units sold of established airliners is a surprise to no one. Bombardier are offering a totally new clean sheet design with many improvements over A or B. Bombardier are offering the industry a 'game changer' at a time when the A380, A400 and A350 programs have practically bankrupt Airbus. At a time when the U.S. military have cost Boeing almost 2 billion in cost over run in the KC tanker program (B767) and. B747-800 program that is all but dead in the water. Now the B787 and the millions, if not billions it is likely to cost Boeing who can't be far themselves from bankruptcy. We are years away from determining whether or not those 3500 orders were or will have been worth it. We're probably just as far away from determining the level of success or failure of the C series.
Mr. Aboulafia's proclamation that the C series is a commercial failure (before the aircraft has even flown) smacks of American arrogance beyond description. Porter has probably been close to the source regarding the C series long before this recent purchase announcement and that Mr. Anselmo revelation is likely nothing more than old news. Those who know Canadian aviation know Mr. Deluce has a long history with deHavilland and Bombardier. Porter's use of Bombardier products comes as no surprise and in all likelihood they are close to the Bombardier sales team both as a customer and as a prospective C series customer. Maybe Mr. Aboulafia could ask Mr. Deluce if he is familiar with the BRJ-X? There may be more dots he could connect starting with Austin Airways or Air Ontario.
Where was Mr. Aboulafia's verbal tirade regarding Government favouritism/protectionism when our military, in support of his American troops in Afghanistan, got turfed out of the UAE when Emirates were denied further access to Canada? Our furry little spokesanimal, the beaver, didn't have much luck with the Dubai crowd, did it? Our NAFTA, NORAD, NATO trading partners were nowhere to be seen yet WE'RE protectionist? Okay.
I agree with Mr. Aboulafia's sentiments that jets meeting whatever new standards Toronto sets should also be allowed to operate there. This would also limit jets that meet the performance requirements of whatever runway length is accepted in that agreement which he may or may not see as fair.
The entrance of Embraer into the regional airline market trumpeted numerous legal battles at the WTO between Bombardier and Embraer. Jonathan P. Doh wrote a paper called The Bombardier-Embraer Dispute and its Implications for Western Hemisphere Integration.
In that document Mr. Doh writes, "Government subsidies are a pervasive problem for international trade and economic development. Subsidies distort investment decisions, generally squander scarce public resources, skew public expenditures toward unproductive uses, unfairly discriminate against efficient industries and firms, and prompt wasteful overconsumption of some products over others. Despite efforts to limit subsidies through trade and investment policy disciplines, subsidization remains a constant on the global trade policy and international business landscape.
The policy that it is acceptable for governments to match financial assistance provided by others leads to a bidding spiral. The policy by most governments that it is justifiable and necessary to “match” assistance provided by others leads to a process in which governments anticipate the next move of others. By doing so, contributes to an out-of-control spiral, as was demonstrated in the volleys between Canada and Brazil over Embraer. This race to the bottom constitutes a negative sum outcome, as governments spend precious taxpayer resources, crowd out private investment, and distort purchasing decisions. The precarious position of the global airline industry makes continued public financing likely. The weak financial condition of the major airline carriers in the post-9/11 environment suggests that private financing will be scarce as airlines carefully add new planes to their fleets.
The U.S. airline industry recorded operating losses of about $1.5 billion in 2002, and few of the major carriers are considered creditworthy customers. Hence, demand for government-sponsored financing will continue to be strong, and disputes over export financing and subsidization will likely recur.
Disputes such as the one described are likely to remain part of the international trade and investment terrain for the foreseeable future. Only through renewed momentum in trade agreements and negotiations generally, and greater willingness by countries to make painful commitments in subsidies and countervailing agreement in particular, is the region likely to reduce the number and intensity of disputes and disagreements over the role of government financing in industrial development and export promotion
One category of subsidy—export financing through export credit agencies (ECAs) to civilian aircraft companies—has generally fallen outside the purview of regional and global trade and investment agreements. This may be because aircraft companies are often involved in “dual-use” products that can be sold for both civilian and defense aerospace applications, creating a potentially legitimate national security justification for their exclusion from agreements that would otherwise impose limits on state support. In addition, the concentration of few firms within the industry and the “winner-take-all” aspect of contract awards invite politically motivated support by governments to ensure their national champions receive a fair share of contracts. Among the widely publicized disagreements in this area, the transatlantic dispute over subsidies to Airbus and Boeing has received considerable attention."
The success of the C series DOES NOT depend on any single order from Porter or any runway extension to Billy Bishop airport. To think otherwise is naive at best. Nor does it depend on Government funding of any description. For Porter, maybe. But the C series? No.
The USA wrote the book on protectionism. I don't think Canadians are likely to be duped by any American industry analyst who points an accusing finger at us over free trade, protectionism, the WTO, NAFTA or any other agreement we might be signatory to. And as far as what's fair, legal or illegal goes, whether it's our Government or a company like Bombardier, they're still entitled to their day in court whatever the accusation and Porter is certainly entitled to fight whatever battles it wishes.
No surprise there.
Gino Under
