Delta CEO says airline won’t pay jet tariffs, Alabama plant plays role

5:09 p.m Wednesday, Oct. 18, 2017 Business
Source: Bombardier

In the middle of a “Buy American” trade dispute over jets Delta Air Lines is buying from a Canadian manufacturer, Delta CEO Ed Bastian says the airline will not pay any of the massive tariffs proposed by the Trump administration.

And, he now expects Delta will take delivery of the jets from a final assembly facility in Mobile, Ala., thanks to a blockbuster deal announced this week.

“I can tell you Delta is not going to pay any tariffs,” Bastian said at a media event at the company’s headquarters Wednesday.

In wide-ranging remarks, Bastian voiced support of President Donald Trump’s tax reform plan and said Delta would continue to oppose “religious freedom” state legislation.

Delta, one of the largest employers in Georgia, has nearly $40 billion in operating revenue annually.

The Atlanta-based company’s deal to buy 75 Bombardier C Series CS100 jets has been in the cross-hairs of a Trump administration fight against the deal.

The low prices Delta negotiated in the deal prompted rival Boeing to allege that Bombardier was getting illegal subsidies and dumping its product into the U.S. market.

The Trump administration slapped Bombardier with proposed duties of nearly 300 percent that could quadruple the price of the jets and raise the cost of flying.

Then, Airbus this week announced it will buy a majority stake in Bombardier’s C Series business and add a final assembly line for the planes at the Airbus plant in Mobile, Ala.

Bastian said he was aware of the discussions on the Airbus-Bombardier deal over the last few weeks. If the deal goes through, “I would expect we’d be taking the C Series out of Mobile,” he said. “I’m optimistic that the Airbus-Bombardier investment will help minimize some of the political concerns.”

Bombardier’s CEO Alain Bellemare said during a press conference Monday evening that the U.S. assembly line will allow the aircraft to “become a domestic product, for which you have no import duty applied to a domestic product.” That would be a route for Delta to avoid paying tariffs.

Delta plans to use the planes to fly out of its hubs in Seattle or New York, or in Texas, where Delta would go up against rivals United, American and Southwest. The CS100 could replace regional jets.

Bastian said he could not understand why Boeing filed the complaint against the deal.

“I don’t get it. I’m mystified. And I’ve said that to Boeing many times,” Bastian said.

Still, he said Delta “will be taking more Boeing aircraft into the future.”

“Boeing has every opportunity to win us,” Bastian said. “However, Boeing is going to need to continue to earn the right to win that next decade of support.”

Bellemare said Bombardier will continue to fight the Boeing petition and the deal with Airbus is not driven by Boeing’s action.

“We’ve said we’re going to look at all options to protect our access to the U.S. market, so we can protect the overall value of the C Series aircraft, and that’s what we’re doing,” Bellemare said.

Bastian has said there may be a delay in when Delta gets its C Series jets “as we work through the issues,” beyond the schedule for the planes to begin arriving in spring 2018.

Airbus would acquire 50.01 percent interest in the C Series Aircraft Limited Partnership, based on an agreement subject to regulatory approvals. If approved, the deal is expected to close in the second half of 2018.

While Bastian called the U.S. Commerce Department’s proposed tariffs on Bombardier “absurd” on CNBC late last month, he is in favor of the president’s proposed tax reforms and reiterated his support on Wednesday.

“There’s no question we’re unabashedly in support of finding a better way to bring our corporate rates down to a competitive level on an international scale,” Bastian said. “It will allow us to create jobs, it will allow us to grow markets, it will allow us to reinvest.”

And amid the possibility of legislation on “religious freedom” being reintroduced in the next session of the Georgia Legislature, Bastian said Delta’s opposition to such measures will remain unchanged.

His predecessor Richard Anderson spoke passionately about Delta’s opposition to religious liberty measures. Such measures could limit the government from interfering with people who base their actions on religious beliefs. Opponents worry that could, for example, give business owners legal cover to refuse service to gay couples.

On Wednesday, Bastian said: “We will not tolerate discrimination of any variety, no matter how well people want to try to cloak it in protecting religious freedoms. We see it as discriminatory and our position will remain as strong as ever.”

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